Food Wise 2025

Chapter 6 – Delivering Growth

Competitiveness

Given the focus of the Irish Agri-food sector on global markets and exporting high quality sustainable food, maintaining the sector’s competitiveness internationally is crucial if market growth opportunities are to be realised. Given that over 80% of Irish food production is exported, and therefore exposed to international price and exchange rate volatility, managing and maintaining our international competitiveness is a key fundamental for the future development of the sector

While Ireland’s economy ranks quite highly in global competitiveness tables it is still considered to be less competitive than some of our main competitors on global agri-food export markets such as Netherlands and New Zealand or Norway and Scotland for seafood products. This presents challenges for the sector and requires a clear focus on measures to mitigate and address the relatively high cost base (labour and utilities), development and attraction of new skills and talent, development of scale at producer level to drive viability and at processor level to drive the ability to compete on global markets, increased investment in innovation, increased access to finance and the application of latest innovative processes and technologies to drive sustainable productivity gains.

Ireland has comparative advantages in terms of our sustainable, grass-fed production system (which results in low feed costs for cattle, dairy and sheep farmers), our positive business environment including the level of corporation tax, a strong foundation and reputation in science based innovation and product development and access to a young educated population. These advantages must be enhanced and used to ensure the international competitiveness of the sector is maintained and improved.

At farm level, challenges associated with price and income volatility require farmers to focus on improving profitability for their enterprises by managing input costs and maximising the price received from the market.  This margin maximising approach will support continued improvements in the economic viability of full and part time family farm enterprises into the future and the development of vibrant rural economies.  Farmers must adopt, and be encouraged to adopt, the latest technologies and processes to increase sustainable productivity which will result in increases farm level profitability. Increases in productivity will drive the continued development of Irish farm business enterprises, making them more sustainable and maximising their contribution to regional and local rural economies. 

Irish family farms are facing particular challenges related to the scale of their operations and the fragmentation and structure at farm level which are limiting the capacity of the sector to develop sustainable and viable business enterprises.  The age profile at farm level, while lower than the EU average, is still heavily skewed towards older male farmers. More young, well educated people than ever before are interested in farming, but these structural issues make it difficult for new entrants to access farmland.  This strategy will promote measures to address these problems, including measures to improve the scale of farm businesses, encourage succession planning, promote collaborative arrangements and increase women’s involvement in farm decision making. Collaborative farming arrangements, which refer to newer models of farming such as farm partnerships, share farming and contract rearing, should become the norm to aid succession management, improve land mobility and encourage optimum use of land. Recent changes of the income tax measure to encourage more longer-term leasing are welcome, and now the focus must be on achieving a greater shift from the dependence on conacre letting to longer term lease arrangements which will encourage greater investment in improving the productivity of rented land.

There is a need to achieve better integration of family farms into local economies by increasing their diversification by creating more open farms, developing agri-tourism opportunities and increasing the range of goods and services provided to local communities.  This will allow many family farm enterprises to improve their profitability and provide on-farm employment opportunities for the next generation of farmers.

EU CAP direct payments provide vital income support for farmers, and act as an important cushion against commodity price volatility. While CAP payments are secure until 2020, there will be further EU budget negotiations and another round of CAP reform for the period starting in 2021.  There will be increasing pressure on the CAP Budget from within the EU. If past trends continue, payments are likely to be more strongly linked to the provision of public goods such as environmental protection and biodiversity.   The realities of an increasingly globalised market, a market which will continue to be liberalised as new international trade agreements are concluded, will be that Irish producers are increasingly in direct competition for global market share with their counterparts in other leading agri-food producing countries. In this environment Irish farmers will therefore need to concentrate on ensuring that they control costs, improve sustainable productivity and diversify where possible to maximise their profit margins and build strong sustainable farm business enterprises.

At processing level the sector also faces a number of competitiveness challenges in particular labour and utility costs, access to finance, lack of scale, insurance and legal costs, regulatory costs and lack of investment in innovation and research.  The sector’s ongoing ability to grow and develop both on domestic and international markets requires a clear focus on maintaining and improving competitiveness.  Ireland has relatively high labour, energy and other utility costs and the Irish agri-food sector is particularly affected by these higher costs as it is a labour and energy intensive sector.  As the overall economy continues its steady renewal it is important that the competitiveness gains and corrections achieved in recent years are not undermined. The focus in the agri-food sector in particular should be on improving productivity, investing in innovation and human capital and on controlling regulatory, input and production costs. Lean tools and techniques are very important in the context of this agenda helping companies to address competitiveness issues within their businesses by building the capability of their people to identify problems and improve operations.

Growth in the agri-food sector requires the commitment of the sector to develop new processes which will deliver productivity gains and innovative new high value-added products which will increase market share both domestically and on global markets. This will require industry, Government and state agencies to maintain a focus on addressing competitiveness issues across the economy and in particular across the agri-food sector.

The development of innovation, research and human capital are important tools which will allow the Irish agri-food sector to remain competitive and this strategy includes a series of measures to support improvements in these areas. Education and knowledge transfer mechanisms provide critical paths for ensuring that farm and agri-food business enterprises are using the latest technologies and production methods to maximise their productivity and margins, and have access to financial management skills to allow them drive their enterprises on a viable basis.

Recommendations/Actions

At Producer Level

Development of measures to manage impacts of price/income volatility

Recommendation

Actions

  • Processors should prioritise the development of fixed price contract arrangements and other volatility management tools for their suppliers to mitigate against the impacts of price volatility on both producers and processors.

  • DAFM to continue to support and pursue an adequately funded Common Agriculture Policy post 2020 and seek to maintain income supports at least at current levels.

  • DAFM and industry to progress development of producer organisations in beef and horticulture sectors.

  • DAFM and industry to explore mechanisms to improve transparency around pricing and costs.

  • DAFM to review the possibility of developing a mechanism to minimise risk for processors and give farmers confidence regarding price including possible mutual funds such as a reinsurance scheme.

 

Recommendation

Ongoing review and updating of Agri-Taxation measures to address competitiveness issues

Actions

  • The Agri-taxation Working Group to continue to examine and consider new actions which will help deliver:

    • Increased land mobility and productive use of land.
    • Improved farm succession including intergenerational partnerships.
    • On wider agriculture policies and schemes, such as supporting investment to assist new entrant young trained farmers, environmental sustainability, on-farm renewables, alternative farming models such as farm partnerships, leasing, contract farming and responses to increasing income volatility.
    • Scope for an energy efficient SEAI scheme for non-incorporated farm businesses.
    • Assistance to farmers to deal with the consequences of price volatility such as income averaging.

 

  • Department of Finance and DAFM to improve dissemination of information on taxation incentives including engagement with advisors, tax consultants and accountants.

  • DAFM and Department of Finance  to undertake a review of capital, taxation and other incentives available to the seafood sector and to make initial recommendations by end 2015.

 

Recommendation

Aid farm restructuring and land mobility

Actions

  • DAFM should ensure that any future schemes and supports do not accentuate land mobility challenges and instead target those producers with best potential for growth and competitiveness, and in particular younger farmers with relevant qualifications and sound business plans.

  • DAFM should continue to take account of formally recognised collaborative farming arrangements in the design and implementation of its schemes and supports to ensure individuals are not disadvantaged by participating in these models of farming.

  • Explore greater use of joint approaches with DAFM, Teagasc, industry and professional stakeholders in engaging with the farming community to embrace longer-term leasing and collaborative farming arrangements to help resolve land mobility challenges.

 

Recommendation

Prioritisation of sustainable productivity improvements at producer level

Actions

  • Improve the use of genomic technologies and better breeding to improve the sustainability of the National herd, including by:

    • Increasing the level of data recording at farm level.
    • Increasing the use of breeding indices in purchase decisions.
    • Increasing the level of genotyping across the national herd to allow for robust, genomics based breeding indexes.
    • Application of commercially focused breeding indices and sexed semen to increase the beef characteristics of the increased output from the dairy herd and thereby ensuring these animals best meet market specifications.

 

  • Teagasc and other research providers to develop measures such as improved grazing management practices, increase soil fertility and sward renewal to increase grass utilisation by 2t/ha on livestock farms.

  • Teagasc, other research bodies and industry to develop the use of precision technologies applicable to pasture based production.

  • BIM to bring forward strategies/programmes to address irregularity in the supply of seed mussels into the bottom grown mussel sector. Continued research into the development of indicators for HNV farming that would allow targeted support for such farming systems.

 

Recommendation

Improve access to finance for agriculture, forestry and seafood producers and Agri-food companies

Actions

  • DAFM will continue to explore additional innovative funding mechanisms and financial instruments, specific to the Agri-food sector, to complement existing mechanisms such as ISIF, SBCI and EIB, with a view to improving further competition in relation to credit provision. Appropriate delivery and distribution mechanisms will be considered including the potential for a dedicated Agri-food sector fund.

  • DAFM to encourage the EU Commission to review State Aid Regulations in the context of the development potential of the Irish agri-food sector and the sector’s strategic importance to the Irish economy.

  • In the light of its current fragmented structure and low financial capacity, EI and BIM to develop a financial model for seafood sector which provides funding opportunities that both increase scale and deliver commercial return. These will be tailored to meet the specific needs of the seafood sector.

 

Recommendation

Development of scale at processing level

Actions

  • Industry to consider how best to optimise use of the processor asset base and all forms of rationalisation including possibilities for collaboration in processing, joint ventures, product specialisation.

  • To drive entrepreneurship, Enterprise Ireland will create a new funding offer to incentivize a small number of scalable food and beverage start-ups.

  • To develop scale Enterprise Ireland will develop a new client engagement model that is focussed on scaling ambitious companies. This model will be: company-led, focussed on the leadership team, benchmarked against best-practice, to indicate key areas of focus, and will be implementation focussed, with advisers, mentors and peers working together.

  • Enterprise Ireland will continue to develop customised management development programmes to develop in-company capability to ensure that they have the Leadership, Management and operational skills to capitalise on growth opportunities and scale internationally.

  • EI will continue to work with Development Capital Funds/Banks/Alternative sources of finance to ensure that scaling businesses are adequately funded.

  • To develop scale and export capability in the seafood processing sector,  BIM, Bord Bia and EI to work collaboratively to scale up companies in the pelagic, whitefish and shellfish sectors and to bring a number of companies to PLC  level.

 

Recommendation

Influence national initiatives targeted at addressing cost competitiveness in Irish economy

Actions

  • DAFM and industry to pursue solutions to cost competitiveness issues for Irish Agri-food sector specifically energy, waste, regulatory costs, in National Competitiveness Council.

  • To build competitiveness Enterprise Ireland will continue to promote and develop the Lean Business offer to help agri-food companies to adopt world class manufacturing standards and to drive productivity growth through skill development and Lean re- engineering.

  • Enterprise Ireland to promote its competitive fund for SMEs to support a strategic initiative focusing on capital and technology acquisition leading to productivity and competitiveness.

 

Recommendation

Encourage Foreign Direct Investment(FDI) in Agri-food sector to locate in Ireland

Actions

  • EI and IDA will cooperate to target a select number of multinational clients for large mobile investments.

  • EI to explore FDI opportunities via partnerships and Joint Venture approaches between Irish processors and MNCs in particular in areas such as life-stage nutrition

 

Recommendation

Develop communications, transport and logistics infrastructure to improve competitiveness

Actions

  • DAFM, as part of interdepartmental and stakeholder initiatives such as the National Competiveness Council, to promote the need to develop rural broadband, port, road and airport infrastructure development.

  • Industry to conduct a study into improving transportation and logistics links with the UK market for Irish Agri-Food and beverage companies to identify opportunities to increase supply chain efficiency and reduce costs.

 

Recommendation

Develop on-farm diversification

Actions

  • Teagasc ‘Options’ programme to continue to support on-farm diversification measures and programme impacts to be monitored and measured.

  • DAFM to roll out emale entrepreneur development programme.

  • To complement the current Marine Leisure and Tourism schemes, DAFM in conjunction with stakeholders to develop an agri-food tourism measure with an emphasis on food, beverage and eco-trails pairings.