Harnessing the opportunity Justin McCarthy Editor, Irish Farmers Journal

SWOT analysis of Irish Agriculture

• Strengths

• Opportunities

• Weaknesses

• Threats

What are our strengths?

• Dairy cows grazing quality grass

Ireland’s Grass Advantage

Grassland Area

Ireland Europe

80% 40%

Production (t DM/Ha)

Ireland Europe

15 11

Ireland’s sustainable production system

A myth or a reality

• Inset slide showing how much food we produce compared to population

Where dairy Ireland ranks globally

• 28 in global milk output league

• Rank 10th globally in dairy exports value

• Value 2012 €2.66 billion

• Top 5 achievable post quota abolition with volume and value growth

An expanding portfolio of high-end retail and foodservice

businesses

Premium market penetration across Europe

World leading food processors and marketing bodies

• Glanbia, Kerry, Dairygold, Lakeland, Aurivo, ABP Dawn Meats, Kepak, Bord Bia, Irish Dairy Board

• Teagasc / UCD

Independent research and advisory function

Independent research & advisory function

• Glanbia, Kerry, Dairygold, Lakeland, Aurivo, ABP Dawn Meats, Kepak, Bord Bia, Irish Dairy Board

What are our weaknesses?

• Large cohort of farms not financially viable – particularly in the beef sector

Gross margins €/ha

What are our weaknesses?

• Large cohort of farms not financially viable – particularly in the beef sector

• Land fragmentation

• Age profile of farmers

• Concentrated network of suppliers and buyers

Weaknesses at processing level

1. Lack of scale reducing efficiency

2. Competing against ourselves

3. Losing the value added

4. Duplication eg transport, 15 milk testing laboratories

5. Low R & D/NPD investment

Opportunities for Irish Agriculture?

• We are in the business of producing premium proteins

• Demand for these proteins is set to rise

• Our consumer is no longer European

Irish farmers are now producing premium proteins for a global market place

Projected Population Growth (U.N. medium projections)

Region 2012 2050 • World 7,053 9,150 + 30% • Africa 1,072 1,998 + 86% • Asia 4,216 5,231 + 24% • Latin America 596 729 + 22% • North America 346 448 + 29% • Europe 740 691 - 7%

The Global Market

• The Global market as a village of 100 people – 12 EU

– 60 Cities

– 67 illiterate

– 50 malnourished

– 16 live on less than $1 per day

– 80 Live in standard housing

– 33 do not have access to safe water

– 1 in higher education

Opportunities will be outside of Europe

• 25% of Indian population with the highest IQ

• Higher than the total population of US

• China is now the largest English speaking country in the world

Population growth & economic growth to drive demand

• 25-30% demand growth from increased population

• 70-75% driven by economic growth

• 40% of the worlds population living in countries that are recoding economic growth of 8% per annum.

• The number of middle class in China and India forecast to increase by 1.2 billion over next 20 years

Economic growth effects

Income level per capita

Effect of economic growth on food consumption

<$2 per day Eat more (increase calorie intake)

$2-$10 per day Switch from grains to meat and dairy

>$10 per day Increase spending on services/quality (convenience, brands, fresh/cooled)

Economic growth effects

• Increase demand for dairy products will require a New Zealand every 10 years

• 10% increase in income equates to a 5% increase in beef consumption

W O R L D

B E E F M A R K E T

E.U. E X P O R T S

BEEF MAIN EXPORTERS

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2012 (up to February) 2013 (up to February)

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Main Importers of BEEF Products (up to February)

No 2103 figures available for : Mexico, Taiwan, Chile, ...

* Excluding live animals (0102), fats, preparations of several types of meat (0209, 0210 99 and 1602 90)

Economic growth effects

• 50% of population in China now in Urban areas

– Growing at a rate of 10 million per year

– High level of disposable income

• Relaxation of the one child policy

Opportunities at farm level

• Abolition of milk quotas post 2015

– Opportunity to increase efficient production bases

Opportunities at farm level

• Improved efficiency at farm level

– Increased global competiveness

• Shift in land use policies

Potential threats to future profitability

• Availability of shale gas in the US

– Lower the base line protein price

– Increased global production of premium protein at a lower cost

Potential threats to future profitability

• Price volatility

– Global market much more volatile

• Weather

• Food scares

• Government policies

– Limited range of cushioning measures applicable for family farms

– Government intervention logical – Australian model

Potential threats to future profitability

• Farmers failing to respond to the new challenges

– Debt management

– Risk management

– People management

• Increased costs of NZ dairy production

Conclusions

• Ireland is ideally positioned to continue to grow agri-food exports from a profitable production base

• Irish farmers are in the business of producing luxury proteins for a global consumer

• Population growth and economic growth will drive demand for luxury food proteins

• At farm level focus must remain on cost competiveness

• All stakeholders must engage to address the issue of price volatility