Food and Agriculture: A Value Chain Analysis

Ireland produced €8.7 billion worth of agricultural products in 2018. Figure 2.1 shows output by product in the period. Ireland produced €6.1 billion worth of live animals and animal products. Most (€3.5 billion) of this consisted of animals (mainly cattle) while €2.6 billion of this was animal products (mainly milk).

The second largest category of Irish agricultural output was non-perennial crops (€2 billion). Forage crops made up €1.3 billion of non-perennial crops. This mainly consisted of silage and hay and was often consumed on the same farm. Vegetables also fall into the category of non-perennial crops and were worth €440m. At €240m, barley was the most produced cereal crop in Ireland. Irish barley is mostly used as an input into animal feed although it is also used in beer and whiskey production.

The Irish economy produced €71m worth of planting material (including nursery plants and Christmas trees). Ireland produced €51m worth of perennial crops. These are the fruit of plants and trees and consist mostly of strawberries. Note that these values are in basic prices, meaning that the price does not include product taxes and subsidies and margins charged by wholesalers and retailers such as supermarkets.

Ireland had the tenth largest output of agricultural products in the EU 27 in 2018. Figure 2.2 shows agricultural output for the 27 EU member states and the United Kingdom in 2018.

Ireland was the eighth largest producer of live animals and animal products in the EU, with output only lower than Germany, France, Spain, Italy, Poland, the Netherlands and Denmark.

Of these countries with larger output, the Netherlands and Denmark have the distinction of having a smaller land area than Ireland. Both have less than two thirds of the land area of Ireland. Most of the Netherlands’ €10.9 billion output in this product category was made up of milk (€5 billion) and pigs (€2.2 billion) while Denmark’s €6.3 billion output was mainly made up of pigs (€2.8 billion) and milk (€2.2 billion). Ireland’s €6.1 billion output contained €2.5 billion worth of milk and €0.5 billion worth of pigs. Ireland’s second largest output in this product category was €2.3 billion worth of cattle. In comparison Netherlands and Denmark produced €1.5 billion and €0.5 billion worth of cattle respectively.

Figure 2.4 indicates that Ireland’s output of its second largest product type (non-perennial crops) was the twelfth lowest in the EU.

Ireland’s output of perennial crops was the sixth lowest in the EU, only larger than Luxembourg, Lithuania, Latvia, Estonia and Malta.

Irish agricultural exports were worth €640m in 2018. This mostly consisted of live animals and animal products (€460m). The largest share of this product category was horses although it also included pigs and cattle. In addition, Ireland exported nearly €130m of non-perennial crops such as vegetables and mushrooms.

Irish agricultural products were exported to 92 countries. Most of Irish agricultural product exports in 2018 were to the United Kingdom. Exports to Great Britain were €367m while exports to Northern Ireland were €82m. Irish agricultural exports to our next largest market, Spain, were valued at €22m. Irish agricultural exports went to 90 other countries. These were worth €169m. Figure 2.7 displays exports for the largest export destinations while Map 2.1 displays exports by country.

The agricultural industry consumed €6 billion worth of intermediate inputs for producing agricultural products in 2018. The largest share was on processed animal feed, worth €1.7 billion. Most of this was from domestic producers. The second largest input was non-perennial crops (mostly silage and hay for animal feed), worth €1.4 billion. The third largest input was non-veterinary agricultural services (farm contracting), worth €613m. The agricultural industry spent €582m on fertilisers, pesticides and herbicides.

While agricultural output was €8.7 billion, the output of the agricultural industry was €9.1 billion. The difference between the two numbers is explained by output of non-agricultural products by the agricultural industry such as construction services and accommodation. Similarly, while the agricultural industry consumed €6 billion worth of intermediate inputs for producing agricultural products, it used €6.3 billion worth of intermediate inputs overall.

Of the €9.1 billion output of the agriculture industry in 2018, €6.3 billion was intermediate consumption, and the remaining €2.7 billion was GVA. Wages to workers (compensation of employees) in agriculture accounts for around a fifth of the GVA in the sector, the remainder going to the owners of agricultural enterprises. Most agricultural activity in Ireland is carried out by the 79,252 self-employed farmers, rather than by corporations. Their return is called 'mixed income' because it is a return on both their capital investment and on their labour. The corporations are smaller in number (4,406) and have lower output overall.

The agricultural workers (owners and employees), appear to be the least globalised element of agriculture and food activities. They account for the lowest share of other nationalities in the labour force of any sector in the economy in 2018.

Farm profits (operating surplus and mixed income) also include significant subsidies: less than half of these profits are generated by agricultural activities themselves with the remainder coming from subsidies. Most of these subsidies come from the European Union and are paid to influence production in line with policy that is determined at European level.

After tax, interest and rent on land, the sector had gross saving of €3.2 billion in 2018. Capital investment in assets such as buildings and machinery was €0.9 billion in the year. This left the agriculture sector a net lender of €2.4 billion to other sectors of the economy.

As the agriculture sector is dominated by the self-employed, the financial accounts and balance sheet of this sector are intertwined with the household accounts. For example, a farmer's house is not counted as an asset of the agricultural sector, but undoubtedly some net lending of the sector goes to paying off mortgages on such dwellings. For this reason, the balance sheet presented here is merely indicative of the asset and liability positions of the sector.

The value of agricultural land is several multiples of all other assets on the balance sheet combined, and over thirty times the value added from production. This is a low return compared to that on other types of investment. However, land differs from other kinds of assets used in production in several ways. It is not subject to depreciation (consumption of fixed capital). That is, it does not decline in value over time unlike how buildings or machinery do. For this reason, people may invest in land as a store of value. Furthermore, the subsidies on production mean that the overall profit is higher than sales-less-costs. There are also cultural and environmental factors affecting land value outside the scope of national accounts.

Go to next chapter:  Food and Drink