Export Irish Food, Drink Performance & Prospects 2019-2020

Executive Summary10 Export Performance & Prospects 2019–2020ExecutiveSummaryALL MARKETSSECTORAL PERFORMANCEDairy 34%Meat & Livestock 30%Prepared Food 18%Alcohol 11%Seafood 5%Horticulture 2%DAIRY 4.4bnUp 11%In 2019pressures limiting production of keycommodities in many major productionhubs. According to EU data, droughtwas a significant contributor to theEU milk collection growing by just0.5% compared to 2018. In Ireland, theissue of climate proved more benign in2019 than 2018 as favourable weatherconditions prevailed, benefittingincreased output. However, with UNdata showing July to have been thehottest month ever recorded andclimate change expected to exertgrowing pressure on global agriculturalproductivity in the coming decades, itremains an issue of primary concern.The year’s events served as a reminderthat volatility in global agriculture ishere to stay, and set to be governed byincreasingly extreme and unpredictableevents. How such events impact onIrish food and drink production andexports may not always be immediateor obvious but will need to be factoredinto future planning.After an exceptionally difficult 2018,the better weather in 2019 delivereda welcome boost to Irish farming interms of better grass growth, yield andanimal thrive, and a reduction in therequirement for bought-in animal feed.Teagasc estimates that the averagefarm income increased by 7% in 2019,although the figure needs to be setagainst the 21% decline experienced in2018. Beef farmers recorded marginalincreases in income, largely the result ofthe exceptional aid provided by DAFMin the middle of the year and lower feedinputs. Farm gate prices were lowerin dairy, beef, and sheepmeat, as aconsequence of weakening commodityprices, while pigmeat and poultryexporters benefitted from robustexport demand. Ireland’s seafood andhorticulture exporters also benefittedfrom a shift in production to highervalue outputs.The ongoing diversification of Irishfood and drink exports was reflectedin an overall division of market sharethat saw the UK as the destination for34% of food and drink exports, Rest ofEU account for 35%, with Internationalmarkets accounting for 31% - higherthan 30% for the first time.This is also the first year that a largerproportion of Irish food and drinkexports went to continental EU thanthose that went to the UK.DAIRYIreland’s dairy sector maintained itsposition as a pillar of Irish food anddrink exports, growing in value by 11%in 2019 to 4.4bn in value. This wasthe third consecutive year in whichthe value of dairy exports exceededthe 4bn mark and was achieveddespite weakening prices for key dairycategories internationally.Driving this was exceptionalperformance in butter, cheese anddairy powders including skimmed milkpowder (SMP), whey and casein - withvalue growth well ahead of volume inall these dairy powder categories.In value terms, butter continued tolead the way with 13% growth liftingthe value of category exports to 1.1bnfor the year. This was despite a fallbackin prices, felt particularly in EU markets.The growth reflects some stockingforward in the US in anticipation ofthe tariffs that impacted the sector inQ4 2019. It was a strong year for Irishcheese exporters who saw increasingdiversification deliver promising resultsfor the sector. As a result of the clearingout of intervention stocks and thehighest commodity prices since 2014,SMP exports increased in value 55% to 332m. It is expected that the positivedemand dynamic will continue into atleast Q1 2020.Although the UK remains the primarymarket for Ireland’s cheese exports –and cheddar is the mainstay of this –there was a strong performance incontinental Europe, contributing toan overall increase in exports of 21%.The value of cheese exports to the USand China also grew strongly, albeitfrom a small base. The former linkedto growing consumer interest in nondomestic offerings and the latter todemand in the foodservice sector,where it is a key ingredient in pizza.

11 Export Performance & Prospects 2019–2020MARKET DISTRIBUTION OFIRISH FOOD AND DRINK EXPORTSGROWTH IN INTERNATIONAL MARKETS 2010 v 2019% INCREASE IN EXPORTSExecutive Summary201920182010

Executive Summary12 Export Performance & Prospects 2019–2020ExecutiveSummaryFY 2019 ESTIMATESCATEGORYFY 2018 FY 2019 CHANGE%Dairy3,991,660,6484,430,022,24211%Meat and Livestock4,041,982,7723,981,845,838-1%Beef inc ltry291,125,661305,681,9445%Live ,054,656,4597%Other MeatPrepared FoodTotalMEAT AND LIVESTOCKIt was a mixed year for Irish meat andlivestock exports, the second pillar ofindustry exports. A 1% decline in thevalue of meat and livestock exportsto 3.9bn reflects a challenging yearfor beef and sheepmeat which morethan offset a strong performancein pigmeat. Beef and sheepmeatcontinued to grapple with difficultiescreated in the previous year, asproduction volumes were down andthe issue of declining farmer returnscame to the fore.Beef production declined by 1.5%, witha 3% fall in throughput countered bya 1.5% increase in carcase weights,a result of better grazing conditionsover the year. Beef prices in the key UKmarket continued to tighten as a resultof weakening demand, and overall themarket fell back by 15% to be worth 990m. Exporters countered someof this by turning supply to the Restof EU, which grew by 1% and througha trebling of exports to Internationalmarkets, which were worth 147m.The mainland Chinese market, forwhich access was only gained in 2018,when combined with Hong Kong, nowrepresents the largest internationaloutlet for Irish beef, with China andHong Kong absorbing 31m and 27mrespectively.The sheepmeat sector alsoencountered a difficult year. This wasdriven by sustained pressure on pricesin continental Europe as a result ofaggressive supply from the UK, andby challenges in supply created by theblockade of key processing facilities inAugust and September.Pigmeat prices started the year underdownward pressure but reboundedstrongly as the year progressed,with record returns achieved insome instances as the year ended.The impact of ASF on supply acrosslarge swathes of Asia and reachinginto Central and Eastern Europe,contributed to this upward trend asexports for the year were valued at arecord 941m.Increased demand also benefittedpoultry producers who deliveredanother year of export growth, rising5% to 306m. The UK remained astrong primary outlet, where much ofthe supply is destined for processingand onward export. The Rest of EUalso saw strong growth on the backof a successful diversification effort,with the French market leading theway. Internationally, exports to SouthAfrica remained strong in spite ofexpectations of a significant fallbackthis year. Exports of live animals fell

Executive Summary13 Export Performance & Prospects 2019–2020DESTINATIONSOVER PAST 10 YEARS( VALUE)InternationalRest of EUUKback 3% to be worth 167m. The yearwas characterised by a strong increasein calf export numbers, which are oflower value than adult animals.PREPARED CONSUMER FOODS (PCF)AND PREPARED FOOD (PF)PCF represents a broad categoryof value-added convenience foods,and takes in elements of the meat,beverage and dairy categories. Thesector delivered a strong performancein 2019 with export growth of 2%delivering overall value of 2.66bn.The UK retains a central role in thesuccess of this sector absorbing 67% ofexport output. However, 2019 also sawgrowing traction for the sector in theRest of EU markets, which now accountfor 25% of PCF exports, worth 666m.Opportunities in the private label sectorhave influenced growth, with successesin the UK often key to unlocking this.Internationally, markets such as USand UAE also delivered growth for thesector. Recognising the value of strongcustomer relationship management inthe UK market at this critical time, BordBia has supported the more tailoredmarketing and supply strategies beingadvanced within the PCF sector, as wellas assisting in relationship buildingwith customers and supporting theinnovation pipeline through the workof The Bord Bia Thinking House.The PF sector, which is defined toinclude enriched dairy powders butexcludes some PCF categories suchas value-added meats, seafood, dairy,and juices, also delivered a strongperformance in 2019, with exports up12% to be worth 2.32bn in 2019. Theenriched powders category delivereda strong performance with a 9%value increase to 725m and its sixkey markets – Netherlands, Nigeria,Germany, Poland, Iraq and Senegal –encompass three continents.

Executive Summary14 Export Performance & Prospects 2019–2020ExecutiveSummaryALCOHOLIrish alcohol exports grew by 8% in2019 to be worth 1.45bn. Historically,a category with a broad globalfootprint, Irish whiskey continued tobe the pathfinder of new growth forthe entire sector, and of the 137m inbeverage export growth achieved in2019, some 50% was in this category.Strong demand in the US, driven byits positioning in the premium andsuper-premium segment has beeninstrumental to this. Overall, the valueof Irish whiskey exports grew by 11%in 2019 to 727m, with the industry’sbuoyancy reflected domestically ina pipeline of new distillery openingsand the strong emergence of whiskeyheritage tourism. For the cream liqueursector, the year brought less to cheerabout as the imposition of tariffs onEU dairy in the US and pressure fromdomestic suppliers in Canada impactedthe key North American market.However, the category held its own inEXPORTS TOINTERNATIONAL MARKETSDairy 44%Meat 4%Pigmeat 7%Prepared Food 15%Alcohol 22%Seafood 4%Other 2%terms of delivering overall export salesof 7.9m cases. Cider producers enjoyeda strong export performance in 2019 asa result of high demand and stockingforward in the key UK market, whilebeer production, increasingly diversein both range and markets, enjoyed 1%growth, with strengthening demand incontinental Europe. In the more nichecategories of gin and vodka, there werealso good export performances, theformer on the strength of sustainedpopularity of gin in the UK and thelatter accounted for by the positioningof Irish offerings in the premiumsegment.HORTICULTURE AND CEREALSSEAFOODIn the UK, the destination foreffectively all mushroom exports, theretail environment observed a declinein value of flat mushrooms, which carrylower profit margins, and strongerperformances in brown, buttonand Portobello mushrooms - moreprofitable varieties.Against sometimes difficult tradingcircumstances, and a reality of reducedquotas, Ireland’s seafood industrydelivered a story of growth in 2019 asoverall export values increased by 6%to 605m. Reduced quotas impactedon the ability to supply pelagic fish,including mackerel and horse mackerel,but was countered by strengtheningprices internationally. The threat ofa no-deal Brexit and its implicationsfor access to waters drove a largeproportion of the pelagic fleet to catchits quota in the early months of the year.Whitefish exports suffered bothreduced quotas and declininginternational demand. Meanwhile,a strong year for Irish farmedsalmon exports ended abruptly asenvironmental and animal healthissues forced the ceasing of supplyfor the final two months of the year.For Irish shellfish producers, it was ayear of challenges as langoustine andmussel suppliers competed in crowdedmarkets and prices for Irish brown crabfell on the back of weak demand in theChinese market. In contrast, oysterproducers had a strong year with arefocus on European markets includingthe UK.In December 2019, quotas for 2020were confirmed and those includeda significant (40%) uplift in mackerelquota for Irish fish, alongside a 15%decline for prawn.Mushroom exports constitute 42%of edible horticulture exports fromIreland. The value of mushroomexports in 2019 was 104m, a 4% riseon 2018’s value.It was a challenging year formushroom producers with continuedconsolidation of the sector and anincreased focus on productivity gainsto help insulate against currencyvolatility and other cost increases.Producers have been focusing on newand more profitable varieties includingbrown mushrooms.Exports of cereals from Ireland wereworth 94m in 2019, with 74m ofthat going to Northern Ireland. Grainproduction in Ireland was 2.37m tonnesin 2019, a 30% increase on 2018’sharvest, while the price environmentwas challenging.Amenity horticulture exports stayedflat in 2019 at 18.5m. The UK is theonly major destination for theseexports and work continues forproducers in diversifying away fromthat market. Hardy nursery stock hada strong year increasing the valueof exports to 8.3m - growth of 1mwhich was limited by strong domesticdemand.AGRI-FOOD INDUSTRYThe most recently available figures(2018) show that the agri-food sector inIreland employs over 173,000 people,which is 7.7% of the total workingpopulation and an increase of morethan 10,000 since 2010. OutsideDublin and the mid-east region, thesector provides between 10% and 14%of total employment.

Executive Summary15 Export Performance & Prospects 2019–2020DESTINATIONS2019 was a year when value growthreturned to Irish food, drink andhorticulture exports. It was also onewhere diversification confirmed itsrole in both driving future growth andbalancing risk. The UK remains the keydestination for Irish food and drinkexports. However, the total percentageof exports destined there was 34%,the lowest proportion since Bord Biabegan tracking export destinations.The Rest of EU accounted for 35% ofthe country’s 13bn in food and drinkexports. Difficulties encountered byexporters in the UK, which were largelythe result of weakening economicsentiment, were in many instancesmitigated by diversion of supply to theRest of EU and International markets.The latter accounted for some 31%,of all Irish food and drink exports.2019 was the first year that exports tomarkets outside of the UK and the EUaccounted for more than 30% ofthe total.INTERNATIONAL MARKET PERFORMANCECOUNTRIES VALUE% GROWTH YOYNorth America1,319m 21%Asia1,340m 18%Africa688m 10%MENA330m 2%Other219m-9%Central/South America83m 16%Oceania81m 18%COUNTRIES VALUE% GROWTH YOYNetherlands1,147m 19%France884m 11%Germany773m 5%Italy352m 5%MAJOR EU PRIORITY MARKET PERFORMANCEBrexit remained an issue of cardinalimportance in 2019 and broughtcontinued uncertainty to Irishexporters. However, it has undoubtedlyalso resulted in many food and drinksuppliers bringing a new focus on theircustomer relationship managementstrategy, which will play a role innavigating the post-Brexit terrain bothin the UK and in markets elsewhere.Bord Bia’s risk analysis tool - the BrexitBarometer – continued to supplyvaluable information on the industry’spreparedness for Brexit and at thestart of 2019 recorded a pronouncedacceleration in planning and mitigationactivities. Bord Bia also continued tooffer its customised support servicesin response to the knowledge gaps thatwere identified by the Barometer. Thishas left Irish companies more informedabout customs procedures, capableof managing a tighter supply chainand understanding the particulars ofsanitary and phytosanitary controls.way in delivering this growth althoughdeclines were seen in sheepmeat,pigmeat and prepared foods. Theindustry’s performance in InternationalMarkets added a sense of momentumto the increased diversification of Irishfood and drink exports. Impressivegrowth of 15% lifted the value ofexports to rest of world markets tojust over 4bn, a figure that nowrepresents some 31% of total food anddrink exports. This is a 131% increase on2010’s value, a year when just 24% ofIrish food and drink exports left the EU.Exports to continental Europe grewby 400m in value, to reach 4.5bn,representing 7% year-on-year growth.Dairy, poultry and seafood led theIn different sectors, and for differentreasons, the world’s two most powerfuleconomies, the US and China havebeen drivers of some key elementsof this growth. The 2019 growthhas also been aided by impressiveperformances in other prioritymarkets that hold significant potentialfor the future. While issues such astariffs, transfer pricing decisions, andplateaus in demand present distinctand significant challenges, there issignificant scope for continued exportvalue growth to be balanced betweenthe established markets and theemerging markets. Bord Bia’s ongoingmarket prioritisation work will fullysupport this.

16 Export Performance & Prospects 2019–2020OverviewTHE GLOBAL ECONOMYAND IRISH EXPORTSGLOBAL ECONOMYThe International Monetary Fund’s(IMF) most recent prediction is thatglobal growth for 2019 will be 3.2%,expecting to pick up in 2020 to 3.5%.While Brexit, US trade protectionmeasures, the increased use of tariffs,and heightening geopolitical tensionshave contributed to this performanceand outlook, emerging economiesas well as reasonable economicperformance in the US and EU havebuttressed performance. Notably,while business confidence has fallenand investment decisions are beingdeferred, concerted monetary policyaccommodation has to date providedsomething of buffer. Consumerspending and employment alsoremained resilient, largely as aresult of strong performances inthe services sector.UK OUTLOOKWhile the political uncertaintysurrounding Brexit on occasionreached crisis point in 2019, theworld’s fifth largest economy, andthe most important market for Irishfood and drink, remained resilient ifsubdued during the year. Overall GDPgrowth for the UK during the year ispredicted at 1.2-1.5%, with the Bankof England reporting in November2019 that ‘underlying UK GDP growthslowed materially in 2019 as weakerglobal growth and Brexit-relateduncertainties weighed on spending’.Following the UK elections ofDecember 2019 which returneda Conservative majority, ratificationof the proposed withdrawalagreement progressed in Parliamentbefore Christmas.An orderly departure from the EU in2020 is expected to see GDP growthmoderate to 1%, with predictions bythe IMF and the UK’s Office for BudgetResponsibility that GDP growthwill reach 2% by 2022 in the mostfavourable of circumstances.Although the UK economy appearedto come close to recession during2019, largely as a result of weakindustrial growth, resilience in theservices sector served to sustainit on the path of moderate growth.Unemployment rose during theyear but remained under the 4%threshold while wage growth at 3.8%ran ahead of the country’s inflationrate of 1.7%. Consumer spending inthe UK is forecast to grow by 1.6%in 2019, a figure appearing to showmore confidence in the economy atpersonal level than by business. It is,nevertheless, a modest expansion thathas come with some intense pressureon the UK retail sector.In terms of currency movements, anunderlying weakness in sterling sincethe 2016 Brexit Referendum result hasbeen punctuated by occasional ralliesthat have generally coincided withexpectations of progress on Brexit.In December 2019, sterling hit a 2.5year high against the euro based onthe return of a Conservative majorityin the December General Election,reaching above 85p to one euro. Ratesof 90p to one euro have been moretypical over the period since 2016.A slow growing UK economy presentsits own risks and threats to Irishexports quite apart from the ongoingchallenge of Brexit. This impactedon the performance of the industryduring 2019, with a 2% contraction inexport value. Ireland’s Economic andSocial Research Institute was amonga number of voices arguing that theimpact of a no-deal Brexit would befor such a contraction to spread to theentire Irish economy. However, thisscenario was avoided in 2019.In the event that the UK Houses ofParliament ratify the EU WithdrawalAgreement as now seems likely,debate will move to the futuretrading relationship. There is generalagreement that the current date setfor implementation of this, December2020, is highly ambitious. Agricultureand food may prove to be among themost contentious areas of negotiationas data from the UK governmentshows the country to be 60% self-sufficient in food production, a figurethat has declined from 75% in 1991. Inaddition, the UK retail sector has madeclear its concern about the risk to foodsecurity should current supply chainsbe disrupted.It is well to note that, in the midst ofthis uncertainty, Irish food and drinkexports to the UK have grown bysome 400m in the three years sincethe 2016 Referendum result. Morerecently, the industry has made greatstrides in preparation for post-Brexitscenarios, with strategies in place todefend market share and grow newbusiness. The industry’s world leadingpositions in the areas of sustainability,via the Origin Green programme, andfood safety and food quality throughthe Bord Bia’s Quality AssuranceScheme play important supportroles in this.

Overview17 Export Performance & Prospects 2019–2020The aggregate euro areaunemployment rate in 2019was 7.6% and is expected todecrease to 7.3% by 2021EURO AREAThe European Commission’s economicforecast for 2019 predicts the world’slargest trading bloc delivering itsseventh consecutive year of growth,with labour markets remainingstrong and unemployment declining.Nevertheless, it notes that both theEuropean and global economies haveweakened in the last year and expectseuro area GDP growth to slow to 1.1%in 2020 from 1.9% in 2019, and onlymarginally improving to 1.2% by 2022.The Commission also expresses thehope t

The estimated value of food, drink and horticulture exports from Ireland for 2019 is 13bn - capping a decade of extraordinary growth where the value of Irish food and drink exports increased 67%. This has been achieved through sustained, incremental increases in value and volume across Ireland's food and drink categories,