Food and Agriculture: A Value Chain Analysis

Agriculture and food and drink are important parts of Ireland’s economy, adding €12 billion in GVA in 2018. Our agricultural output, particularly cattle and dairy, is large for the land area of the country when compared to our European partners. This agricultural output is the foundation for a large domestic food and drink industry that exports 73% of its produce. On top of these domestically-owned firms, there are also foreign-owned MNEs with significant employment here which are also reliant on exports. Altogether, over 150,000 people work in agriculture, food and drink production in Ireland.

Irish food went to 159 different countries in 2018, but Great Britain was by far our largest export market for agriculture, food and drink products. In January 2021, after Great Britain left our free trade area, it remained our largest export market, but the growth of exports from the sector has been mostly to other countries.

While we produce more food than we consume, Ireland still imports just over half (51%) of the food and drink bought by households. This makes household consumption highly reliant on cross border trade. In January-February 2018, the majority of our food and drink imports came from Great Britain, a country that was about to leave the EU. In January-February 2021, these imports across the Irish Sea were at around a third of the level they had been in the first two months of 2018. While there is likely some pandemic-related effect in this change, the decline in trade with Great Britain is far more pronounced than for other countries.

A value chain analysis follows economic transactions from output, imports, and exports, through value added, to dividends and assets. In this publication, the highly globalised nature of the value chain in agriculture, food and drink has been illustrated. There is large investment in this country by foreign-owned food and drink producers. There are also notable inflows of earnings from exports and from dividends from foreign subsidiaries of Irish-owned MNEs. The food and drink value chain is correspondingly highly exposed to outflows: it relies on markets in other countries for exports of goods. On the other hand a large proportion of household consumption of food and drink is imported. Ultimately households, as farmers, as employees, and as consumers, are affected by the agriculture and food value chain.

The change in trading conditions with our largest partner Great Britain is bound to have a significant impact on this value chain and hence on households here. While it is too early to say what the impact will be, the provision of value chain analysis can enhance our understanding of, and response to this shift.