Angus Kebbell takes a look at two major global rural issues from an Irish perspective, assessing the impact the European drought will have on agricultural production, and how Ireland faces competition from Brazilian beef

This week we are looking at some major global issues from an Irish perspective. We are talking to Irish natives, Phelim O'Neill and Anne Finnegan.

European food production is down for all the main commodities, cereals, dairy, meat, and in particular cereals due to the impact the heatwave is having on stocks.

The EU's short term outlook for 2022 for agricultural markets puts the cereal production forecast down by -2.5%. For this year, and that's despite the expectation of a higher output this year, particularly as crop rotation rules were relaxed given the global demand for cereals resulting from Russia's war in Ukraine.

The reality is that Europe is in the grip of an intense heatwave and half of the continent is or has been under drought alerts or warnings associated with soil moisture deficits and vegetation stress.

And it's not just in grain, pasture is struggling, irrigation is becoming a huge problem, and water is now becoming a huge problem in Europe. The Joint Research Center of the EU issued their drought report for July, and it really is stark when you look at the amount of Europe that is impacted, and the severity of the impact particularly in Portugal, Spain, France, and parts of Italy.

A challenge for agriculture and a challenge for food production and grain prices are on the move up, and of course they are significantly higher than they were 12 months ago. Will prices continue to rise?

Anne Finnegan says “I think ultimately the rubber is hitting the road now, and we're getting into a physical market, as opposed to very much a market that was dominated by, you know, events and volatility and possibly some element of financial speculation as well. We are in the in the midst of the physical market and I certainly think that this probably serves to maintain price pressure, you know, so the falls that we have seen, you would expect that's probably done now, and that we really need to see where the physical market brings us. But I mean the global expectation is that the harvest will be slightly back this year as well, the real challenge I think in that is what's happening more broadly in terms of, you know, countries moving to restrict exports, to manage their own domestic markets which is really having a huge impact on the global export market, and particularly on the most vulnerable countries who are really reliant on grain. So I think even in that context you're talking about a very tight market, and I think there's price pressure there.”

The conversation then shifted towards Brazilian beef production and Phelem O'Neill says he has been looking at the Brazilian export figures for the first half of this year, and records associated with Brazilian exports are something that just keep occurring. “It's another record performance this year. They are 20% ahead of last year, and the reality is to put to put some numbers on that you're talking about an extra 100,000 tonne of extra product that has come on to international markets from Brazil. So the other thing too that was interesting, of course, and again, Irish farmers are currently feeling the squeeze and have felt the squeeze over recent weeks with falling beef prices. Now we just looked and stretch this out a little bit further and looked at the world price situation. And the interesting thing is that the price is hanging up around 5 Euro per kg or better in many of the major exporting countries, in the USA for example, in Australia, and indeed Argentina which would normally be one of the lower price countries, now in Brazil prices have come back in recent weeks, they did hit a high of 4.20 Euro per kg equivalent earlier this year. There are now back below the equivalent 4 Euro a kilo there. But the reality of life is that when we talk in Ireland here and we wait for whatever the targets that will be set for the sector, the reality is that Brazil is continuing to grow, as indeed this industry has predicted that it would do, there's no surprises here for anyone."

USA are bit of a conundrum in that they almost import as much beef as they export every year. And the reason for that is that they export the higher value steak meat cuts. “They import the four quarter manufacturing beef which basically drives the burger business in the US which is so big, but the reality is the USA are selling their steak meat into the top end of the Middle East, and indeed Asian markets, they are the number one supplier to Japan and to Korea, and they've actually grown their business now to China dramatically over the last couple of years as well. and for Ireland of course, it's hard to get into the Chinese market. We never get into the South Korean one. And we're only just starting to do a little bit into Japan. So you know the reality is we've looked here in Europe and okay, you may say Irish prices there for a few weeks would have crept to the top of the word price, but they've certainly come back with a bang over the last few weeks. And I suppose the message from this is that fundamentally the word beef market is solid, the demand out there is more than whatever supplies are available. And that's despite the rise in volume that's coming out of Brazil."

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Angus Kebbell is the Producer at Tailwind Media. You can contact him here.