Where have all the vegetables gone?
In the last few weeks figures that have been released by the CSO have confirmed suspicions that the Fruit and vegetable industry in Ireland has become a hedge against bad weather in the UK. CSO figures have shown that in 2011, the Republic of Ireland imported €324 million of fruit and vegetables from the UK. This is in the context of Bord Bia placing a farmgate value of Irish horticulture (including potatoes, protected crops, amenity, nursery cut foliage etc) of €380 million. It can be argued that one price is wholesale, the other is farmgate and there is a level of transhipping from other countries through the UK to Ireland. However, these figures show the strong position that UK fruit and vegetables have attained in Ireland.
With a generally similar climate and product mix, ‘Ireland the food island’ etc, how is this the case?
The UK fruit and vegetable industry is a highly controlled industry with minimal margins. Producers are dictated to by supermarkets and their procurement supply chains, and one of the primary concerns of these supply chains is to ensure continuity of supply. In order to ensure continuity of supply of produce every day, a reserve amount of produce must always be available to take into account periods of bad weather, low yields etc etc. However, if things go according to plan, which they generally do in an industry that is so highly efficient, this reserve remains after the contract has been supplied, so the grower has excess produce on his hands. To get some money for this produce and ideally take it away from the home market, this reserve produce is offloaded to anyone that will take it. It can be sold at low prices as the production cost has already been met as part of the main supply contract.
So in arrives a significant group of Irish procurement companies who are ever eager for cheap loads of produce. Moving this produce to Ireland has the added benefit of readily available refrigerated containers looking for backloads home after bringing over meat and dairy produce, so transportation is never a problem. So this produce arrives in Ireland free of the full production cost and the full transportation costs, and obliterates Irish produce which has to bear the complete growing and transport costs. A strong euro against sterling in recent times and lower labour costs in the UK don’t help the situation. Cheap loads of materials are always part of the cut and thrust of commercial business. However, the UK has a primary production industry developed to meet the needs of 60 million people. If the reserve amount is 10% of production, its enough to meet the needs of 6 million people, so this cheap produce is available at levels that can easily meet the full needs of a country of 4 million people at particular times. With the same seasons and the same product mix in both countries, these periods of excess production in the UK coincide with periods of high production in Ireland. So why do these Irish procurement companies bother with Irish producers at all? Well over the last few years, that’s exactly the question they have been asking themselves and hence the treatment Irish producers have been getting. However, the reason they persist with the ever irksome Irish growers is for marketing purposes and more importantly to supply produce during times when the reserve of cheap produce is not available, as is happening for most of this season. Its not a very sustainable model but it works for some and has done for years.
The Irish fruit and vegetable industry has no competitive advantage over other Northern European producers, but equally there is no inherent competitive disadvantage either. If an approach was made to a UK grower to grow and supply produce for a season, the price quoted would be similar to what an Irish grower would be looking for. Take into account transportation costs and it doesn’t stack up, so it’s not a fundamental lack of competitiveness that is the issue. Its more a matter of the drop from one big market becoming a torrent in the adjacent small market.
So is there a future for fruit and vegetable production in this environment? Only if there is a determined effort made by everyone involved to fundamentally address weaknesses and imbalances in the industry. One example is the poor negotiating position that individual producers have with procurement companies. Another deficiency is the lack of reliable up to date information available on the industry (The most up to date sectoral profile available on field vegetables is dated 2001). In the absence of a proactive determined effort to rescue the industry, is it only a matter of time before fruit and vegetable production follows the beet industry, but without the benefit of compensation or the dignity of a quick end?
Dr Richard Hackett.
Dr Richard Hackett is a crop consultant and member of the ITCA Email: richard.hackett@itca.ie
Source: HortiTrends News Room
