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Northern Ireland is a successful location for food production, based on temperate grass-based farming specialising in red meat and dairy products which contribute nearly 50% of the combined output of all the food and drink sectors.
The important poultry and pork sectors also have an established place within the local food processing sectors although, relatively, their combined output, at nearly 25% of all food and drink output, is much lower than from red meat and dairying. The poultry and pork businesses have a more constrained competitive base since they rely on intensive farming methods using large quantities of imported animal feed.
In each of the main food sectors a larger proportion of output now comes from the larger businesses, often after mergers and consolidation. The official statistics show an average rate of return on capital which has been higher for beef and sheepmeat processors at nearly 10% (in 2007) than in the milk products sector where the average was over 7%. Both these sectors reported better average returns on capital than pigmeat, under 4%, and poultry at a worrying 0.2%.
The pig rearing sector is now only a fraction of its size 20-30 years ago. In the poultry sector, the takeover by Moy Park of the O’Kane business is the most recent local rationalisation.
If the poultry industry is to survive in Northern Ireland, the narrow trading margins. alongside the environmental requirements of the nitrates directive, mean that either there needs to be full planning permission for the Rose Energy project or an alternative acceptable site for an energy from waste incinerator must be found with no further delay. The development plans for Marfrig (the new owners of Moy Park) are an important unknown.
In contrast, the surviving larger red meat and dairy processors have successfully expanded.
Following a professional analysis of the current trends in the food processing sector, the Northern Ireland Food and Drink Association [NIFDA] has taken the initiative to set an agenda for the sector in the years to 2020. The headline ambition is that there should be an increase in employment of 15,000 over the next decade to supplement the current 20,000 direct employees and 72,000 in farming and indirect services.
This ambition could mean that the value of output rose from £3bn per annum to nearer £4bn.
NIFDA does not identify which farm and food products have the best potential for increased production. The manifesto outlines a wide range of widely based supportive actions that NIFDA would wish to have from Government.
The NIFDA manifesto forcefully confirms the significance of the food and drink sectors. However, its agenda reads too much as a ‘blank cheque’ for support without explicit operational outcomes.
The first manifesto ambition is that the Northern Ireland Executive should prioritise agri-food with a ‘roadmap’ for future growth. The content of that roadmap and the implications for extra public funding would be critical issues. The second is a series of steps to support sustainable jobs.
This starts with a plea for ring-fenced funding to accelerate production increases and extends to add risk sharing mechanisms to provide security for funds borrowed from the banks. A bid to retain the cap on industrial rates, alongside lower corporation tax as well as export marketing support is very ambitious.
The other ambitions, to remove barriers to growth and encourage green competitiveness, are less controversial but NIFDA (along with other business organisations) needs to assess more carefully the balance between the higher costs of green energy and a plea for lower electricity costs. If these ambitions clash, which should prevail?
NIFDA has opened an important debate. What is now needed is a careful assessment of how the sector would be expected to develop without any change in existing policies and then, in addition, a targeted programme to incentivise developments where market forces would not deliver the best outcome.
