Interview: Prof Michael Wallace talks about how Covid-19 is creating a new economic and trade landscape for Irish agri-food

A huge shift in consumer behaviour and also in trading conditions, in a very short space of time, has meant that Covid-19 has brought with it a raft of challenges for Ireland’s farming community and agri-food sector.

As Professor Michael Wallace explains, being agile and responding swiftly to new trends is key. “When we were seeing the emergence of this pandemic in China, I don‘t think we would have anticipated the scale of potential impacts on Irish agriculture. Things changed very quickly and very dramatically as the lockdowns started in Europe; in the short-term there was this huge surge in retail demand with initial panic buying, which the food system had to respond to very quickly.

“The nature of demand has also changed, leading to dislocation across the sector. Foodservice channels evaporated overnight with a move away from eating out of home, which is a massive chunk of the market and a very valuable part of the industry.

“Meanwhile, demand at retail level increased. Responding to this shift in demand has costs and challenges within the food supply chain. The beef sector has seen demand for high value cuts destined for the foodservice market shift downwards, which has had a really detrimental impact on carcase value. Instead, there has been greater demand for convenience meat products such as mince and diced beef for casseroles etc.

“More than 30 per cent of Irish beef exports to the UK normally go to the foodservice channel; now, we have seen a great ramping up of minced beef and cheaper cuts into the UK, with product being imported from Poland by some British retailers.

“The foodservice segment is very important for dairy as well. Processors have responded to the changes taking place there with the likes of portion packs to restaurants and hotels disappearing and a repositioning into other product lines that have expanded."

Prof. Wallace continues that there have also been operational and logistical challenges: “Processors need to ensure the health and safety of their staff — this can clearly have an impact on operational costs for businesses and the volumes of product that can be processed. Additional costs to do with transport logistics because of additional controls at ports of entry and a shortage of shipping containers are also evident."

These costs, he explains, associated with shifting demand and with operational and logistical challenges, tend to get passed back to the producer and have a real impact at farm level.

Showing Resilience

The industry he believes, however, has equipped itself very well: “It has shown tremendous resilience and has adapted quickly to difficult circumstances. We have seen contingency plans being put in place for milk to ensure there is enough staff at peak processing. And a really positive response from the official side with the Department of Agriculture rising to meet the challenges.

“It is an important time of the year for the cattle trade — people need to buy cattle — and we have seen the livestock marts moving very quickly to online platforms to allow trade to continue, showing immense adaptability. Given the diversity of product mix in the dairy sector, and the additional processing capacity already built up, this has given a certain level of flexibility and resilience.

“We may see more milk going into milk powders in the short-term. In relation to managing imbalances that are there, such as the loss of high value cuts of meat, there are real challenges.

“There isn’t an awful lot the industry can do about some of these demand shifts but  greater promotion of steak and roasting cuts in the retail channel would help. The European Commission has approved some limited assistance to industry to help manage stocks through private storage.”

Opportunity

Commenting on where opportunity may lie in the coming months and into next year, Prof. Wallace explains that new consumer behaviour patterns will dictate the direction of the market.

“What will be important is how consumer behaviour adapts as we emerge out of the crisis. In some ways we have gone back to basics — there is more cooking in homes, preparing meals from scratch — that that is not necessarily a bad thing for the food industry.

“Sometimes highly processed prepared foods do not create more value for the farmer, actually a focus on premium fresh product in the retail market may give better returns for the primary producer. Also we may see people start to appreciate the importance of resilient food supply chains, and see more positive attitudes about the vital role of the farmers who produce the food we need.

“There is opportunity for innovation also; meal kits and home delivery options providing a more direct route to the consumer, which may become important for smaller food businesses that can provide a bespoke service. We have seen already how the industry can adapt very quickly and address demand in the marketplace.”

Professor Wallace notes that the longer term impact to the overall economy will affect the agri-food industry but he also stresses that how the farming and food industry respond to these challenges will shape the way we emerge from the fallout of the crisis.

“Because we have had such a severe economic contraction, that will continue to have a huge impact on employment and that will, in turn, impact on spending going forward. Consumers will be looking for competitively priced products. Again, beef could struggle more, which is a cause for concern but it could also create opportunity—comfort food for example is very important in recession time. Off-farm employment is also crucial for the agri sector so, with job losses, how this might impact on farm households is a worry.”

Climate Action and Policy

Professor Wallace says that Covid-19 has highlighted the very real importance of CAP and its role in protecting farm incomes and a secure food supply.

“It is more important than ever to have a strong agricultural policy that is adequately funded. Discussions on the future CAP reform are currently taking place and this crisis will shape that agenda to some degree. This may include looking at the risk management strategies we have in place — it is crucial that we have right risk management tools in place to support the industry in times of difficulty.

“National policy is very important too, ensuring that there are appropriate supports for farming families. There is strong provision already including advisory and knowledge transfer supports, but we must continue to respond appropriately to new needs and challenges.”

Concluding, he points to the fact that there is a renewed appreciation right now of what our farming communities and the broader food industry does, and the importance of having a safe, resilient food supply chain.

“People were scared when they saw empty shelves – of course, we were not running out of food, it was simply panic-induced shopping patterns – but it opened up people’s minds a bit as regards the importance of having a secure supply of food."

However, climate issues and the food industry’s responsibility here will not disappear and he stresses the need to see this as a further opportunity for the sector.

“As we rebuild, environmental sustainability issues will not go away, but we shouldn’t view it  as negative. We should look at it as a marketing badge for Ireland, offering a sustainable, natural, high quality food supply that is minimizing our impact on the environment.

“Operating at a low carbon and low nitrogen footprint will be more important than ever, as we enter a very different international marketplace after Covid-19, and how we position ourselves will be key to re-building those markets and growing them in years ahead.”

See the original article in Irish Farmers Monthly.