The Impact of Agri-Business Processing Firms on
the Local Economy
Mary Carey
Teagasc Rural Economy and Development Programme
School of Economics, UCD
Supervisors:
Prof. Cathal O’Donoghue, Rural Economy Research Centre, Teagasc;
Prof. Aisling Reynolds-Feighan, School of Economics, University College Dublin
Outline
1. Introduction
2. Research objective
3. Literature
4. Overview of agri-business processing firms
settlement type, firm size, ownership)
5. Economic linkages
6. Conclusion
7. Next steps
(inputs, labour, outputs)
(location,
Introduction
• Strength of economic linkages between sectors –
construction v. manufacturing
• Bio-sector and its impact on the economy - low import
dependence, high local multiplier & low levels of profit
repatriation (Riordan, 2012)
• Geographical Spread of the sector highlights significance of
the location of agri-business processing firms (Carey &
O’Donoghue, 2014) – high LQ in Border region
Research Objective
1. Provide an overview of the Irish agri-business
processing sector
Processing sector includes dairy processing, beef processing, other
meat processing, poultry processing, functional ingredients
preparation, sea food processing and other consumer foods.
2. Understand the economic linkages of the agri-business
processing sector
Origin of firm and destination of inputs (upstream purchases), outputs
(downstream purchases) and employment flows.
Literature
• Net income theories – reduce leakage of income and
attract external income (Persky et al., 1993)
• Degree of ‘Local Economic Integration’ (Courtney et al.,
2008)
• Sectoral Characteristic - the construction sector is considered to be better
integrated than the manufacturing sector (Williams, 1994).
• Organisational Characteristics – firm size, ownership and age (Courtney et
al., 2008).
• Locational (or contextual) Characteristics - settlement type/hierarchy and
proximity to urban centres
Overview of agri-business processing firms
• Teagasc Survey (2014) contains an array of information
including:
• characteristics of the firm (location, number of employees, turnover,
year of establishment, ownership etc.),
• inputs (labour, raw material, transport, water, energy,
communication, others across the 6 zones) and
• outputs sold across 6 zones (A -> F).
Location of surveyed processing firms
• Geo-reference by Electoral
District (ED).
• ED with agri-business
processing firms are
highlighted in red.
Table 1: Regional distribution of surveyed processing firms
Border
West
Midland
Mid-East
South-East
Number of
firms
31
16
11
26
32
Percentage
13.8
7.1
4.9
11.6
14.3
South-West
56
25.0
Mid-West
Dublin
Total
24
28
224
10.7
12.5
100
Map by Mary Carey
© Ordnance Survey of
Ireland and Teagasc
Location by settlement type
• Census 2011 data used to define the types of settlement based on the
population of the Electoral Divisions (ED).
• Open countryside or village (less than 1,599 people); small towns (1600-4999
people), medium towns (5000-9999 people) and large towns (greater than
10,000 people and the 5 main cities.
• 50 per cent of agri-business processing firms are located in very rural EDs
Table 2: Processing firms by settlement type
Village
Small
Town
Med
Town
Large
Town
Number of
firms
111
17
30
21
45
224
Percentage
49.6
7.6
13.4
9.4
20.1
100
Cumulative
49.6
57.1
70.5
79.9
100
City
Total
Firm size and ownership by settlement type
Firm size by number of employees
• 32.6 per cent micro (less than 10
employees)
• 52.7 per cent SME (10 to 250
employees)
• 14.7 per cent large (more than 250
employees)
Firm ownership
• 94 per cent of agri-business firms are
Irish owned
• The 5 main cities have the highest
percentage of foreign owned agribusiness firms.
Table 3: Percentage of firm by size by settlement type
Med Large
Town Town
Table 5: Percentage of firm ownership by settlement type
Village
Small
Town
Micro
34.2
41.2
16.7
33.3
35.6
32.6
Irish
SME
51.4
52.9
66.7
52.4
46.7
52.7
Large
14.4
5.9
16.7
14.3
17.8
14.7
City
Village
Small
Town
Med
Town
Large
Town
94.6
100.0
90.0
100.0
88.9
93.8
Foreign
5.4
0.0
10.0
0.0
11.1
6.3
Number
of firms
111
17
30
21
45
224
Total
City
Total
Economic linkages of processing firms
• Teagasc Survey (2014)
• 224 processing firms reported the distribution of the firm’s
inputs (labour and non-labour inputs) and outputs (customers &
industry) across 6 zones (A-F).
1. Labour (distance employees travel)
2. Non-labour inputs (raw materials,
transport, water, energy,
communication, other)
3. Outputs (spatial distribution of
customers)
Zone A: less than 10km
Zone B: between 10-20km
Zone C: between 21-40km
Zone D: NUTS 3 region
Zone E: elsewhere in the ROI
Zone F: international
Non-labour inputs by zone
Zone and Distance Band
• Origin of non-labour inputs
Non-Labour
Input
• Almost 40 per cent are
sourced within 10km
Raw Materials
• Almost 76 per cent are
sourced within the region
Water
• Less than 7 per cent
sourced internationally
Communication
• Import (from outside the
ROI) is higher for raw
materials
Average
Transport
Energy
Other
Cumulative
Share
A
B
C
D
E
16.3
1020km
8.6
37.8
17.0
15.3
10.3
17.1
3.9
75.6
11.7
4.8
7.9
0.0
0.0
43.8
8.2
16.8
10.9
18.8
1.5
31.0
5.2
12.4
16.4
31.6
3.4
28.6
15.0
18.0
17.3
11.5
9.6
38.9
11.0
13.0
12.9
17.6
6.9
38.9
49.8
62.9
75.8
93.4
100
0-9km
21Region
40km
10.9
14.7
F
Note: rows sum to 100 and may not sum exactly to 100 due to rounding effects
Rest of
ROI
27.0
Imports
23.0
Labour inputs by zone and by settlement type
Distance Travelled to Work by Zone and Distance Band
• Labour costs accounts for
26 per cent of overall total
inputs in the agri-business
sector.
• 92 per cent of agribusiness’ employees
travel less than 20kms.
• Settlement type (village to
city) does not seem to
impact the distance
travelled by agri-business’
employees.
A
B
C
2140km
6.8
D
E
F
Labour
Village
72.5
1020km
17.5
1.5
Rest of
ROI
0.6
Small town
84.5
10.7
4.7
0.0
0.0
0.0
Med town
71.3
17.8
7.1
2.2
1.5
0.2
Large town
84.4
13.4
2.0
0.1
0.0
0.0
Cities
70.2
24.1
4.4
0.9
0.2
0.2
Average
74.0
17.8
5.8
1.2
0.6
0.6
Cumulative
share
74.0
91.8
97.6
98.8
99.4
100
0-9km
Region
Note: rows sum to 1 and may not sum exactly to 1 due to rounding.
Imports
1.1
Outputs - Location of customers
• Relatively high
heterogeneity on main
market for output
depending on settlement
type
Zone and Distance Band
Output by
Settlement type
A
B
C
2140km
10.5
Village
10.7
1020km
9.7
Small town
32.1
19.9
• The agri-business firms in
the open countryside and
villages have lowest
percentage within zone A
and highest exports.
Med town
17.6
Large town
• Agri-business firms in
cities reliance on zone A
finding contrary to what
the literature would
suggest.
D
E
F
12.9
Rest of
ROI
32.1
14.9
8.3
7.7
0.0
6.2
7.3
13.6
28.7
0.2
45.9
11.2
18.2
10.2
2.6
0.0
Cities
46.1
23.0
6.4
5.9
9.3
0.2
W. Average
23.8
12.8
10.3
11.0
22.4
0.6
Cum.
23.8
36.6
46.9
57.9
80.3
100
0-9km
Region
Note: rows sum to 1 and may not sum exactly to 1 due to rounding.
Exports
1.1
Conclusions
• Importance for rural Ireland - 50 per cent of agri-business processing firms
are located in the open countryside/village.
• Agri-business processing firms in villages and the open countryside have a
higher propensity to export and are less reliant on the local market to sell their
produce.
• Regional significance - 76 per cent of non-labour inputs are sourced within
the NUTS3 region and only 7 per cent are imported.
• Domestic ownership - 94 per cent of agri-business processing firms are Irish
owned.
• Commuting patterns are relatively short - over 90 per cent of employees
travelling less than 20km to work in an agri-business processing firm.
Next steps
• Appropriate modelling technique when dealing with
shares…. Fractional multinomial/mixed logit?
• Estimate regional coefficient which measures the strength
of ‘regional economic integration’
• Regional coefficient inserted into the Spatial Input-Output
table generated by applying Cross-Industry Location
Quotient (CILQ) to the national I-O tables.
Thank you!
Mary.Carey@ucdconnect.ie
or
Mary.Carey@teagasc.ie