Time is right to start tapping into massive Chinese markets
Farm Minister Simon Coveney is off to China next month. Hopefully he will come back with a bagful of business for Ireland. It will be of interest to find out the real targets behind the recent Irish visit by the Chinese deputy leader Xi Jinping. Was it food? Are the Chinese eyeing up an Irish airport or shipping port -- say Shannon or Foynes? Already there is the massive Europe/US/China trading hub project being touted for Athlone.
As a cash-rich buyer, China could pick up any amount of bargains in today's financially distressed Ireland. We are so crisis-intimidated at the moment that we cannot see opportunities but the inscrutable Chinese can see the openings.
Luckily, as far as our food products are concerned, Mr Coveney need not travel to Beijing with cap in hand. We have alternative customers and, while the Chinese market is growing for the core Western milk and meat dishes, in reality China is too big for bulk Irish business.
For example, there is talk of China lifting the ban on EU and Irish beef. If Ireland were to commit our total beef output to China next month, this would only amount to one-third of 1kg of beef for each Chinese citizen. In that context, a closure of the market in the event of a perceived food scare, which would be a mere irritant to China, could shut Ireland down.
Ireland has a growing trade in infant baby foods with China but, for the high volume milk powders, New Zealand has gazumped the competition by arranging bilateral deals phasing out the heavy Chinese tariffs.
Our best prospects lie in getting freer access to China for meat offal products. Items which we wouldn't throw to the cat in Ireland are considered delicacies in China. Once in Beijing, at a pre-world beef symposium banquet, we were served an hors d'oeuvre that included a ram's penis, hens' legs and what looked like a semi-hatched duckling embryo. I suggested to the former CEO of Bord Bia beside me that it was his patriotic duty to please our hosts by cleaning his plate.
Some Irish offal products may have got into China proper via Hong Kong, and this has boosted the so-called fifth quarter for beef and lamb in the past 12-18 months. Full entry for Irish offal into mainland China would give a major boost to the fifth quarter value and help sustain the current prices for our cattle and sheep. I'm sure that Mr Coveney is well versed on this.
Nevertheless, the emergence of the 'middle class' phenomenon in China (and India, South Korea, Russia, Mexico, etc), coupled with the explosion in global population, is highly significant for the world's farmers.
Just as we in the West got a taste for curries and Chinese dishes, the new middle classes of Asia and Africa now have a thing for steaks, cheeses and cream liqueurs. This, alongside the growth in the globe's population, is the major factor in the closing of the gap between the world and EU prices for milk, beef and sheepmeat.
In the West, we have tended to regard the African continent as almost one big basket case, but here too we have an emerging middle class that is a potential market for Irish farmers.
The IMF predicts that seven of the world's 10 fastest growing economies for the next five years will be in Africa. They are Ethiopia (8.1pc predicted annual growth), Mozambique (7.7pc), Tanzania (7.7pc), Congo (7pc), Ghana (7pc), Zambia (6.9pc) and Nigeria (6.8pc).
Africa has a huge share of the world's critical mineral supplies. All it needs is some reform of the political corruption for their economies to take off. Who has recognised this potential? China. It is the Chinese investment in African resources and infrastructure which is turning their economies around.
The African growth is having a direct impact on the euro in the Irish farmer's pocket. Even in the absence of the long cherished EU export refunds, Irish live cattle are going to Morocco. There is a very strong chance of a resumption of a refund-free beef and/or live cattle trade to Egypt and Libya. Irish lamb is already going to Tunisia.
The Irish Dairy Board (IDB) is making major progress in selling both branded and non-branded dairy products to Nigeria and sub-Saharan Africa. Alongside the Kerrygold label, the IDB is also successfully marketing Irish milk products across Africa under the Beo brand.
World demand for dairy products is growing at 1.8pc a year, but, because world production grew at 2.7pc in the last year, Irish milk prices could suffer a little wobble this year. However, because of the work already done in markets other than China, Irish dairy-product exporters should be able to minimise any price fall.
In the past 40 years, the world's population has doubled to 7bn and this is new territory for farmers and food producers in terms of the food supply/demand balance. What is going to stop this explosion?
Interestingly, experts predict that as nations switch into middle-class mode, the birthrate will fall and put a lid on the global population at about 10bn. For example, the Germans, French and Italians, with a birthrate of about 10 per 1,000, are not reproducing at a sufficient rate to maintain their populations. In contrast, Zambians and Ugandans are at an active 45 births per 1,000. The Chinese, with their middle-class aspirations, are now down to about 12 births per 1,000, while Ireland is rated at 15.6 per 1,000.
In terms of the demographics in the poorer countries, people have big families so that they will be looked after in their old age.
When middle classes emerge, children are considered a huge expense. Offspring are curtailed. The upshot of this is that the elderly parents of the small clutches will be destined for the nursing homes.
This reminds me of President Michael D's visit to one such home. After visiting all on the ground floor, he met a resident on the stairs to the first floor.
"Do you know who I am," he asked the elderly lady? "No" said she, "but if you ask the matron she will tell you."
China here we come.
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