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No pretty picture for Irish PRW sector, but cattle herd growth offers some hope.

No Pretty Picture for Irish PRW Sector, But Cattle Herd Growth Offers Some Hope EEC political decision-making results in abundance of empty warehouse space. Commodity price support cuts coupled with surplus sales tell the story. Meanwhile, private stores score gains.

In common with the refrigerated warehousing industry in Europe, Irish cold stores are suffering diminished occupancies as a result of changes in the European Common Agricultural Policy (CAP) introduced by the Agricultural Commission in Brussels.

A combination of the Milk Super Levy, reduction in intervention support prices, and very active selling of surpluses on world markets has reduced butter stocks from 950,000 tons in December of 1987, to 400,000 tons last December. Stocks of beef have fallen from 800,000 tons in December of 1987 to 600,000 tons by December 1988. Intake tonages of butter and beef under the intervention support are forecast to fall further in 1989.

Reductions of these magnitudes in prime storage products have, of course, had a serious effect on the Irish PRW industry. Fundamentally a producer and exporter of primary agricultural products, Ireland has, with its small population, no large scale food distribution industry to fill the empty space in the warehouses. Cold store operators have added a great deal of capacity to cater to the heavy intervention supported stocks of the late 1970s and early '80s. Consequently, there is large scale overcapacity in the market with a downward spiral in prices now becoming evident. It would appear the industry is faced with a two to three year low in terms of stock holdings and prices obtainable for services.

The realization of the likely outcome of the support changes in Brussels prompted some of the leading factors in the Irish refrigerated warehouse business to expand their core outside the country and/or to diversify into related areas of activity. Two of the industry's leading operators run facilities in the United Kingdom, and one of them is active in the United States. Other leading concerns have diversified into meat slaughtering and deboning, frozen food manufacturing, food retailing, etc. There are moves within the industry toward joint ventures with food manufacturers and refrigerated warehouse management for the private sector. In addition, foreign consultancy, license and know-how agreements are areas being examined by Irish PRWs as a means of riding out the current adverse conditions in the domestic industry.

A further element in the economic downturn has been the growth in private storage capacity. Since 1975 it has multiplied by a factor of three while public storage capacity has doubled. This has added to the problems of low tonnages available for the public operator. Since much of the recent private growth was carried out as part of expansion or modernization programs, it qualified for capital grant aid assistance from Brussels. In times of low tonnages, some of these private operators have become competitors to the public facilities. And with their low cost facilities and own tonnage as a base, they are capable of undercutting prices of the public operator. Warehouse efficiency and the ability to compete at low price thresholds is now a must for the public refrigerated warehouseman in Ireland.

With low occupancies and a much faster inventory turn for bulk products, improved warehouse systems are now vital for the Irish industry. Many warehouses are installing mobile racking to facilitate speedier stock location and withdrawal. Computerized utility management, energy cost models, and reductions in space refrigerated are some of the steps being implemented to cut costs in response to falling revenue.

There are reasons, however, to look with some optimism to the future. The changes of the C.A.P. have led to milk shortages in parts of the European Community, as well as a fall in cattle herd numbers. These shortfalls will be redressed as farming efficiencies improve and the natural rise and fall cycle in agricultural outputs occur. Ireland's cattle herd is again on the increase after three or four years of decline. In particular, the numbers of breeding cattle are on the rise. There has been a dramatic increase in the output of added value food products over the last several years. Ireland enjoys an excellent disease-free status for its livestock, as well as a reputation for being an environmentally clean country. The exports of food -- both as primary and added value products -- is expected to grow steadily over the next year. The Irish refrigerated warehouse industry is ready and equipped to play its part in this growth.
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Title Annotation:Warehousing World; public refrigerated warehouses
Author:Butler, Thomas C.
Publication:Quick Frozen Foods International
Date:Apr 1, 1989
Words:747
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