Farmers must take a long-term view

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The outlook for agriculture in Northern Ireland – and internationally - remains fundamentally strong, according to Alltech vice president Aidan Connolly.

He also believes that industry can look forward to change in the coming years.

“Yes there is pressure on international milk markets at the present time,” he explained. “But over the next number of years, this vista will change radically. The fundamental drivers for agriculture remain the same: demand for food will grow inexorably as the world’s population increases by 50% over the next few decades.”

Kentucky-based Mr Connolly, who is also Alltech’s chief innovation officer, visited Northern Ireland earlier this week.

He said: “One of the most telling developments to have taken place over recent times is the change in attitude of the banks towards agriculture.

“They now see farming as an exciting investment opportunity, for the long term. This is in total contrast to the situation that prevailed prior to the property crash and these institutions’ then love affair with developers and the IT sector.

“Banks around the world have recently developed a number of important investment portfolios with agribusiness and food development related opportunities placed at the very heart of these projects.

“In our own case we have acquired seven animals feed businesses in Northern America during the past 18 months. This entailed an investment of US$1.5 billion.

“All of these businesses have brought us one step closer to the farmer. But to make this happen required leverage from the banks.

“But we secured the additional capital that we needed quite easily. As a result, we are now working with banks in the US, the Netherlands and England.

“So the various financial institutions are keen to lend and this fact must be factored into farmers’ thinking for the future.

“Most farms in Northern Ireland are family owned and managed. So the time scale to be addressed, particularly where succession must be considered, is three decades ahead: not the next three months.”

Mr Connolly believes that China will remain a key player in the development of international dairy markets.

“Growth in global dairy consumption is likely to remain in the region of 2.0% per annum,” he said.

“But it is the buying policies of the Chinese authorities that have been to the fore in determining the strength or otherwise of dairy markets.

“During the recent past they have acted to buy up 6 months’ supply at one time. And it is this effect that is at the root of the volatility challenge now facing dairy farmers around the world.

“Another factor coming into play here is the fact that most dairy farms are run as family businesses. They are at the far end of the food supply chain and tend to amplify changes at demand level, in the context of their own milk output levels: it’s called the Bullwhip Effect.”

While Connolly is upbeat regarding the long term prospects for dairy, he does not hold the same view where beef is concerned.

“The redmeat industry has fundamental problems to overcome,” he said.

“Beef is perceived as unhealthy, expensive and is the most inflexible of all the meats available to consumers.

“As a consequence, beef consumption levels are falling at the present time. And it will be difficult to reverse this trend.

“Poultry, on the other hand, is pretty tasteless. Yet it is an extremely versatile meat. Approximately 50% of the new thinking brought to bear within the international meat sector over the past decade has been poultry focussed.”