NI agri-food sector should expect ongoing volatility in 2016, Danske Bank tells breakfast briefing

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Danske Bank’s Agri Economic Outlook Breakfast for members of the Guild of Agricultural Journalists took place at the Kingspan Stadium in Belfast. The Bank warned that the NI agri sector is facing “multiple threats” in 2016, with the pressure on milk prices and uncertainty around a UK exit from Europe – the so-called Brexit – of particular concern. The EU is a major export market for NI’s food manufacturers and the bank said a ‘Brexit’ could potentially hinder growth in the local industry if agriculture does not remain a priority sector.

Speaking at the briefing Danske Bank’s Head of Agricultural Relations John Henning said that with the challenges of 2015 continuing into 2016, the agriculture sector must play to its strengths, be ambitious and look at innovative new ways of dealing with global price volatility. Mr Henning said that while farmers can’t influence the weather or commodity prices, they must maintain their focus on what happens inside the farm gate.

“Our farmers need to focus on what is in their control. They can’t control the global price of milk or beef, but farmers can focus on what they can control at farm level. That means farm efficiency, supply chain management, succession planning and making sure their business acumen matches technical performance,” he said.

Further outlining the issues farmers are concerned about, Mr Henning added: “Industry downturns and political support for the agricultural sector remain a constant challenge. It was recently reported that farm incomes in Northern Ireland had fallen by over 40 per cent in the last year.

Guild members attending the event also heard from Danske Bank Chief Economist Angela McGowan, who agreed that the global picture is mixed for the agri-food industry.

She said: “Danske Bank is forecasting growth of around 1.9 per cent for the agriculture sector over the course of the next year and around 1.2 per cent in 2017. We expect the global economy to grow by 3.3 per cent this year and 3.5 per cent next year as the world’s largest economies continue to grow. Chinese growth is expected to stabilise at 6.7 per cent and the US should grow by roughly 2.5 per cent. It is encouraging too that one of our main export markets, the Republic of Ireland, is now the fastest growing economy in Europe.”

“However, we have had a volatile start to the year in global markets and the strength of sterling against the euro means there continues to be pressure on local exporters. Milk prices, like most commodities, continue to be depressed and that shows no sign of changing in the short term. However, Danske Bank anticipates commodities in general to stabilise in the second half of this year.

“A potential Brexit could also have a bigger impact here than in Scotland, England and Wales as we in Northern Ireland get more money per capita from Europe than them. We estimate the direct financial implications at £371m a year in terms of lost CAP and Structural funds. It has not yet been made clear that agriculture, in the event of a Brexit, will be a priority sector for the UK government.”