Contact: Mr Michael Moloney, Chief Executive
Introduction
This submission provides an overview of the horticultural industry (with particular reference to food) and the challenges facing its future development. The submission considers a range of macro issues currently affecting the industry, before outlining an overview of the domestic production base for horticultural food products. The dynamics of the main markets for horticultural produce are briefly considered and finally the key future challenges for the industry are presented.
An Bord Glas is currently preparing a Development Plan for the 2000-2006 period. This Plan will include a range of Bord Glas initiatives for the development of the horticultural industry. It will also seek to develop and co-ordinate policies with other associated State agencies in order to foster the future competitiveness and development of the industry.
An Bord Glas
The statutory remit of An Bord Glas seeks to develop, promote, facilitate, encourage, co-ordinate and assist the production, marketing and consumption of horticultural produce.
Horticultural products include both food and amenity products. The former is categorised in terms of key product sectors i.e. potatoes, mushrooms, field vegetables, protected food crops and fruit and the latter in terms of hardy nursery stock, protected flowers, outdoor flowers and bulbs, and Christmas trees.
Macro Overview
Background
Current National economic buoyancy has been paralleled with a rapidly changing marketplace for horticultural produce. While the Tiger economy has created very positive growth conditions for the country, it has also cultured some economic pressures especially in terms of labour shortages and escalating house prices rises. Strong growth is being projected for the period 2000-2006 with GDP growth projections ranging from 6.7% in 1999 to 4% by 20061.
The ESRI notes with specific reference to agriculture, forestry and fishing, that ‘the 2000-2006 NDP might be the last opportunity to prepare the agri-food sector to adapt to the very competitive environment which lies ahead and thus the emphasis should be on adaptation and modernisation.’2 While the horticultural industry has been undergoing radical adaptation to changing market and supply chain initiatives in recent years, the need for ongoing modernisation will remain a key priority for the industry.
The increasing environmental constraints facing the country have also highlighted the need to ensure that economic expansion activities are complimentary to environmental standards and obligations.
Horticultural Industry
Horticulture has traditionally been the subject of free market forces and is currently increasingly being viewed as a possible area for diversification from mainstream agriculture. The Western Development Commission notes that, ‘In view of the constraints on traditional agriculture in the West it is useful to consider the existing and potential role of niche diversification sectors such as organic farming and horticulture.’3
While the free market nature for horticultural production has exerted ongoing forces for rationalisation and development in the industry, the introduction of the Single European Market brought about additional competitive pressures in terms of globalisation. The prospect of competing in an enlarged EU market in the next century will create new competitive challenges for the Irish horticultural industry. While the scale of horticultural enterprises has been growing in line with market needs in recent years, the trend towards ongoing rationalisation will continue for the foreseeable future.
Challenges and Opportunities for the Horticultural Industry
The following is a summary of the key economic, demographic and social issues facing the industry.
Labour shortages will curtail growth prospects unless adequately addressed for the horticultural industry.
Reduced EU structural funding will increase competition for development funds.
International competition will drive an ongoing process of rationalisation for the industry.
Regionalisation will provide a shift of focus for horticultural initiatives to the Objective 1 region.
The future expansion of the EU will provide additional competitive pressures for the Irish horticultural industry due to the relatively small scale of the industry in a European context.
National housing supply expansion is permanently depleting the stock of available land in key horticultural areas. This incremental loss of this natural resource will have long term negative impact on the horticultural competitiveness of such areas.
The shift towards prepared consumer foods will bring about significant opportunities and threats for the value added development of the industry.
Increasing environmental pressures and concerns must be provided for in the future development and expansion of the industry.
Increasing food substitutes; Ireland’s large young population are more experimental with food. Traditional fruit and vegetable products are subject to increasing competition.
Changing lifestyles; The trend towards smaller and non-family households indicates the decline in the traditional family unit and, as a result, traditional family mealtimes.
Increasing number of women in workforce; The continuing rise in the number of working women has increased the demand for convenient and healthy foods. This, in turn, indicates the growing market potential for pre-prepared and value-added fruit and vegetables.
Organic growth; There is increased consumer demand for organic fresh produce which is stretching the small existing supply base which cannot keep pace.
Domestic Production
Industry profile
In 1998 the horticultural food sector was valued at circa £215 million farmgate output, with mushrooms and potatoes being the dominant crops. Other key product groups i.e. field vegetables, protected crops as well as soft and top fruit, make an important contribution to the size and structure of the industry.
|
Sector |
1998 Output (£m) |
No. of Enterprises 1998 |
|
Mushrooms |
84.0 |
554 |
|
Potatoes |
75.0 |
1,263 |
|
Field Vegetables |
34.0 |
810 |
|
Protected Crops |
11.4 |
163 |
|
Fruit Crops/Honey |
10.4 |
285 |
|
TOTAL VALUE |
215 m |
3,075 |
Source: An Bord Glas/Department of Agriculture & Food
Growth in the food sector is principally derived from significant increases in the output value of mushrooms and potatoes, whereas field vegetables and fruit have only experienced marginal growth. The development of the protected crops sector is hampered by the high cost of capital investment and high energy costs associated with glasshouse developments.
The following Table provides a breakdown of the main fresh produce groupings in value % terms.
There are approximately 3,075 commercial growers of fresh produce in Ireland with mushrooms, field vegetables and potatoes accounting for 86% of these production units. In 1998 this represented 8,616 ha of commercial fresh produce production. Horticultural enterprises have been traditionally small, intensively run owner managed growing units. Capital intensity and labour unit requirements have dictated both the smaller size, scale and nature of horticultural operations.
Organic production
There are approximately 320 producers of organic fruit and vegetables in Ireland of which the majority of farm holdings are less than 3ha. In 1998 output from the organic sector was valued at £0.525m from a production base of c.200 ha. The sector continues to grow in line with increased consumer demand for organically farmed produce.
Domestic production for organic produce is focused exclusively on serving the domestic market. Ireland imports significant quantities of organic produce as demand greatly exceeds supply. As such, an opportunity exists for Irish producers to displace imported organic produce.
Investment in Horticulture
A range of ongoing investments is required in the horticultural industry in order to secure its future competitiveness. Investments must build on and expand the capabilities and capacities of horticultural enterprises, from start-up to large-scale production enterprises, in line with market demands.
Future capital investments must target both efficiency and/or capacity measures in line with sectoral requirements. These capital investments must also be complimented with human resource, systems and marketing investments in order to ensure a balanced approach to enterprise growth and development.
The following range of priority objectives have been identified by Bord Glas for investing in the horticultural industry.
Horticultural Markets
Supply Chain Overview
The supply chain for horticultural produce includes the following links;
Main markets include the:
Each of the above supply chain links are undergoing radical changes in line with market demands. Increasing the throughput and value of horticultural produce via the main markets is central to the growth and expansion of the horticultural production base.
Market Dynamics
The following outlines a number of critical trends and developments currently impacting the main markets for horticultural produce:
Key challenges for domestic production
The following listing outlines a range of challenges for the
horticultural industry:
Improving business efficiencies;
developing economies of scale and efficient working practices are key
determinants of competitiveness and profitability.
Providing
a premium quality product has now become the norm and is
consistently demanded by the trade and end consumers. Ensuring that
enterprises have the appropriate systems in place to deliver quality
products is essential.
Ensuring food safety and
traceability of produce have become central to maintaining and developing
consumer confidence.
Greater cohesion throughout the supply
chain will be required and mechanisms of promoting partnership
must be pursued with a view to reducing cost and enabling the production
base meet consumer requirements.
Ongoing capital investment
is essential for the industry to develop. In addition, efforts must be
made to maximise the number and variety of financial mechanisms available
for investment.
Addressing the current labour force
shortages is an essential constituent of future growth.
Opportunities
for value added products will increase to meet changing consumer
tastes and lifestyle patterns.
Displacing imported product
is an important element of increasing production within the sector and
will become more important as the production capacity of the industry
expands.
Identifying export opportunities will
become increasingly important if the domestic production base is to
continue to expand.
Developing niche markets will
become more relevant as consumer tastes change, both in terms of the
variety of product on offer and how it is presented to the consumer.
Ongoing
Research and Development will continue to impact dramatically on
the industry especially in terms of yields, varieties and growing
techniques.
The uptake of new technology will be
critical to the future development of the industry in terms of
efficiencies and increasing capacity.
1 Eurovision 2006; Goodbody Stockbrokers;1999
2
National Investment Priorities for the Period 2000-2006; Economic and
Social Research Institute.
3 Blueprint for Success, A
Development Plan For the West 2000-2006; April 1999; Western Development
Commission.