Sentiment among Irish food and agribusinesses has bounced back from the pandemic, although a significant portion of firms have reported a negative impact from Brexit and many are dealing with significant cost inflation.

According to farming, food and agribusiness specialist professional services firm Ifac, optimism levels among businesses in the sector have risen to the highest point in the four years that it has been carrying out its AgriBusiness Report.

More than 200 owners, managing directors and CEOs of micro-businesses and SMEs in the sector were surveyed by Amárach Research during the summer on behalf of Ifac for the latest report.

More than three quarters of companies expressed optimism in the outlook, up from just over half last year.

However, seven in ten said they dealing with higher costs this year with inflation apparent in several areas.

"For food companies, it's around packaging and ingredients. For agribusinesses, steel and timber are very much increasing and the costs are being felt by the consumer or the farmer customer," David Leydon, Head of Food and AgriBusiness at Ifac told Morning Ireland.

The most recent figures from the Central Statistics Office showed consumer prices rising at annual rate of in excess of 2%.

Those inflationary pressures are likely to stay elevated in the months ahead with Ifac expecting cost rises in the agribusiness sector to continue to be passed on to customers.

"We expect higher food prices and higher prices for farmers across a range of areas," David Leydon said.

"It's down to global commodity price increases, Covid has had an impact, the Suez Canal ship blockage had an impact and Brexit had an impact," he explained.

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Recruitment issues

With the Brexit transition period ending at the start of this year, around two thirds of firms said they had been negatively impacted by Brexit with half citing transport disruption as the most significant impact.

55% said the pandemic had precipitated a change in consumer habits.

Nearly all businesses surveyed said they intended to maintain or grow employee numbers in the next year.

However, over two thirds said they were finding it difficult to recruit the right people.

This is in keeping with the experience of other industries, such as construction, hospitality and care sectors, which have reported labour shortages in the aftermath of the lifting of pandemic restrictions.

On the banking and payments front, the report noted that platforms like Stripe and Revolut were gaining traction among SMEs.

The majority of businesses - 83% - said they use bank transfers to receive payments from customers.

Cheques remain an important payment method with 72% of agribusinesses accepting this form of payment.

"While it is encouraging that optimism levels have bounced back strongly, trends to watch out for are rising costs, recruitment challenges, negative impacts from Brexit, and lower than ideal R&D investment," David Leydon said.

"A real missed opportunity is around the strategic planning process. It's concerning that nearly 80% of SMEs do not have a current strategic plan in place to guide their business," he noted.

"Our report shows that despite massive COVID disruption, the Brexit challenge, and climate change, Ireland's food & agribusiness sector remains resilient, and optimistic about the future.

"With markets more connected than ever and investment in the sector hitting an estimated €22.3 billion in 2020, this is a time of opportunity," John Donoghue, CEO of Ifac said.