Opinion: Irish agri-food sector needs credit and export credit insurance

Ireland exports 80% on average of its agricultural output and indeed over 90% of its beef and dairy output.

As the COVID-19 pandemic evolves, notwithstanding the continued focus on public health, a significant recognition of the critical role of sectors like food supply and medicine is emerging in Government planning.

Looking at the economic impact of the virus on supply and demand for food products, the key priority continues to be to ensure compliance with isolation and health measures to secure supplies from farms and thereafter to support processing and transport/distribution to consumers.

To underpin business continuity, the Irish food sector needs a range of supply supports, ranging from the availability of containers through to private storage aid and finally, and probably most importantly, extended credit.

From an Irish perspective, the reality of our production profile means that only around 10% of milk or livestock coming off farms is destined for the Irish market at any given time.

Within that 10%, there has been a notable shift from foodservice to supermarket shopping, with restaurants, bars and hotels shutting down.

This shift to food retail is mirrored across Europe very clearly.

Unfortunately, demand for Irish dairy in export markets is heavily weighted toward foodservice and dairy ingredients and so is more affected than demand from local dairy suppliers for fresh products in these countries.

Only 10% of milk or livestock coming off farms is destined for the Irish market

In the beef sector, the fall-off in demand in the foodservice sector is resulting in a shrinking in demand for manufacturing beef.

So up to 40%-50% of output currently being taken off farms and processed has an uncertain market outlook.

As we run into peak milk production season and summer beef grazing, this percentage is likely to increase.

A further complication here is that dairy demand from countries outside the EU is being further affected by low oil prices, which is reducing the purchasing power of many third countries.

Similarly, where demand for Irish manufacturing beef falls and the EU decides it will still import manufacturing beef from South America, the need for third-country market outlets increases.

Unfortunately, in 2005, the EU abolished export subsidies and, despite the unique nature of the current pandemic, it is unlikely to reinstate them.

So to be very clear, in practical/continuity terms, export market output constituting up to 90% of off-farm supplies cannot be left on farm.

Plus, in reality, processors can’t continue to pay for product when sales outlets are increasingly uncertain.

So for Irish food processors to continue to provide vital food supplies for our own population, while also ensuring that the full 260,000 jobs across our agri-food sector are maintained, extended credit and, more specifically, export credit insurance must be provided.

Export credit insurance

Back in 2008-2009, the case for export credit insurance was examined and turned down.

The usual statements about state aids prohibiting export credit were proffered by the Department of Enterprise at the time, as was the case that export credit was not sought in the UK and that Irish multinationals, when surveyed, did not require it.

Let’s be clear:

Economic and business health and continuity is being recognised as a fundamental pillar of public health by Government in regard to the pandemic.

Extended credit facilities and export credit insurance is required, very clearly, if business continuity is to be maintained in the agri-food sector.

This is particularly so when alternative measures such as export subsidies are not available at EU level.

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