by Richard Buckley, Editor, Business Eye

  2017 will go down as a strong year for the local agri-industry with the Total Income from Farming (TIFF) projected to be 28% higher than 2016. It has been buoyed by the continued financial windfall, driven by weakened sterling since the Brexit decision, which has resulted in a sustained increase in beef, lamb, pork and dairy prices, as well as an increase in Single Farm Payment subsidies – estimated to be up £15-£20million this year.



“The year hasn’t been without its challenges however, with input prices across feed and energy also creeping up. Straw and silage have almost doubled in price since last year for example and when you add the effects of the inclement weather since July on harvests, farmers certainly haven’t had it all their own way. Brexit continues to dominate the headlines at every turn and undoubtedly the impact of this on the local agri-food industry cannot be underestimated. The real concerns for the industry are the longer-term implications and the ongoing economic uncertainty that seems inevitable. The key issue of what future agricultural support will be in place post EU common agricultural policy (CAP) is critical, when you consider that the scale of support in NI last year was £318m whereas total farm income was £244m. In other words, farming here operates on a deficit and currently needs a strong subsidy beyond Brexit. There is no commitment or guarantee that the British government will put in place similar subsidies and the belief in many quarters is that any subsidy will be dependent on delivering increased farm efficiencies as well as meeting new commitments on health, environmental and animal welfare standards. All this will come at an additional cost to the farmer. Of course, the eventual trade deals with the EU and the rest of the world that may come after Brexit are also critically important. The implications of any resulting tariffs will directly impact our competitiveness in export markets as will the relationships with other countries who may have different standards when it comes to food provenance and quality processes. Brexit is for now a waiting game – albeit a high stake one – and while we welcome the recognition of the importance of the all-island agri-food sector in the negotiations, we will just have to see how the negotiations progress. It is important to say that Brexit should not become a distraction for the local agri-industry however. The changing dynamics in the food chain are equally if not more important and local farmers, primary producers and processors should not lose sight of that. Changing consumer habits when it comes to food are fundamental. We know that shopping habits have shifted significantly with a move towards multiple smaller shops and a desire for convenience formats. We also see a much more food aware consumer who is seeking greater transparency about where their food comes from, what goes into it and even wanting food to bring added health benefits. Against this backdrop, it is through a customer and market focused approach that future opportunities in the sector will lie, whether at home and abroad. We need a more innovative, adaptable and forward-thinking industry, where closer collaboration and shared learning across the food chain is the norm. At the primary producer end, farmers need more than ever to be tuned into the changing trends from consumers and how those are being interpreted and met by retailers and processors. They also need to work this back to gain a thorough understanding of their cost of production – which should better equip them to have more influence and control over future price setting. The move towards fixed price contracts and specialist growing is also set to continue, not least given the lack of surety around Brexit – but in the right circumstances this can be a good thing for farmers who wish to invest for the future, while also giving processors guarantee of supply in uncertain times. We have seen some consolidation within the all-island producer sector as well, such as the recent deal between Dunbia and Dawn Meats and we expect this trend to continue. Such moves should help deliver economies of scale and put us in a better place compete internationally – especially in a post Brexit world. The continued integration across the food chain is important, but going forward the ability to promote NI’s strong credentials in food security, traceability and provenance is all the more important and the efforts to introduce a NI marketing body with appropriate resources remains a vital requirement. Against all of this change, First Trust Bank remains committed to supporting our customers through any short-term pressures which may arise, but also in helping them gear up to take advantage of new opportunities presented. Our relationship managers have many years of experience in the agri-food sector and we put a lot of store in listening to and learning from our customers. Here we hear the views of three customers as to their views on the sector and its future.“

 

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Eoin Donnelly, Agri Business Manager, First Trust Bank

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