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Ireland is particularly dependent on export markets for selling its agricultural produce, with 90% of our dairy and beef production exported. We are less dependent on exports for pork and sheep meat because more is consumed in the home market, while with poultry we consume white breast meat and export the brown leg meat.
Being so exposed to international markets has advantages and disadvantages. When markets are flat, countries that have a strong domestic market perform better for farmers. Where there is a strong domestic market, this creates an opportunity to build a consumer brand for a national product, with Scotch beef being a particularly good example.
Pigmeat
The farmgate price of Irish pigmeat illustrates this particularly well. Pig producers are riding the crest of the wave at present but prolonged periods of good pig prices have been the exception rather than the rule. It has also been the rule that UK pig prices trade significantly higher than Irish prices on the basis that they have a huge domestic market.
However, that has all changed in recent weeks compared with last year. In February 2018 , Irish E grade pig price was 138c/kg, just below the EU average of 141c/kg as reported by the European Commission. At this time, the UK pig price was well ahead at 163c/kg.
Demand
Throughout 2019, both Irish and UK prices have been rising as international demand, fuelled by African swine fever in China, has had an impact. By last week, Irish E grading pig prices had risen to 189c/kg, a massive 37% better than this time last year.
Prices in the UK have risen too but at a much slower rate. Their price last week was the equivalent of 184c/kg for E grade pigs, a healthy 13% increase on the same time last year but not as fast as Ireland. It is also notable that over the past few weeks the Irish price has caught the UK price and is now pulling ahead.
Domestic versus international
The relative performance of Irish and UK pig prices reflect the role of a strong domestic market and exposure to the international trade. When markets are flat, a strong domestic market provides the base for farmgate price but when there are stronger external markets, it is difficult to achieve the price increases that are available on the open market.
The Irish pig industry has demonstrated an ability to avail of the opportunities created by the demand from China
Relationships between factories and supermarkets may serve farmers well when prices are flat but they stifle the opportunity of fully exploiting international opportunities when they arise.
The Irish pig industry has demonstrated an ability to avail of the opportunities created by the demand from China and while English prices have also gone up, they haven’t increased to the same extent.
Beef
It will be interesting to observe developments in the beef trade in coming weeks and months. Currently, Ireland is well down the international beef price league while the UK and most of the EU is ahead. It is non-EU beef exporters that are returning the most impressive prices to farmers.
Ireland is hugely exposed to the export trade and in a world of rising prices this should be a good thing. However, the note of caution is that Irish companies are major suppliers to the UK retail and food service sector, particularly the large burger chains. So far, Irish farmers haven’t had an increase in beef price to reflect the increases in the UK and elsewhere.
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