There is a common misperception about agribusiness in Ireland: that it is on the way out. This mistaken belief is strengthened by a thriving economy in which other sectors are growing at an extraordinary rate, much faster than agriculture.

Mr Aidan O'Driscoll, chief economist with the Department of Agriculture, Food and Rural Development, insists agribusiness is not decreasing. Instead, output is growing. Agriculture's share of the economy is shrinking, he explains, but that is simply because the rest of the economy is growing so fast.

Mr Gerry Farrell, executive of the IBEC Food and Drink Federation, agrees. "The industry has not grown to the same extent as other sectors. Most of the growth in the economy that has taken place over the last number of years has taken place outside the agribusiness and food industry."

There are two main elements of agribusiness, says Mr O'Driscoll: "Both primary agriculture - what happens inside the farm gate - and the food industry, which is what happens mainly in factories. There are those two elements, agriculture and the food industry, and they are usually referred to together as the agri-food sector."

A meat factory where animals are killed and the carcasses quartered is as much a part of the food industry as an advanced plant that makes confectionery goods.

The meat sector, the dairy sector and the fast-growing area of prepared consumer foods are the three principal sectors in agribusiness, according to Mr Farrell.

"The meat and the dairy sectors would be the two principal, shall we say, agribusiness, and would be the two traditional industries in Ireland, but now we have a third one, which is prepared consumer foods," he adds.

He says the beef, dairy and prepared consumer goods sectors are each about £1.1 billion (€1.4 billion) industries. Meat and poultry are around £400 million. In 1999 primary agriculture accounted for 3.9 per cent of GDP, 8.2 per cent of employment and 5.6 per cent of exports. The agrifood sector accounted for 9.6 per cent of exports and 11.1 per cent of employment and 10 per cent of GNP so it remains important in the economy.

But when the Department of Agriculture, Food and Rural Development commissioned a study using the most recent figures available - which were from 1997 - it found the agri-foods sector accounted for 27 per cent of net foreign earnings from merchandised trade.

This means that although the agri-food sector accounts for only 9 per cent of exports, the sector almost entirely uses domestic inputs compared to the computer industry which would use imported inputs.

"That does highlight that it is still an extremely important sector for this country," says O'Driscoll.

In the case of primary agriculture, the numbers are declining across the EU as well as in Ireland. There are just over 125,000 people working in agriculture, while the food sector employs more than 40,000. Although the food industry is a smaller employer than agriculture, it is more stable.

"You've two different patterns: you've declining employment in rimary agriculture but stable employment in the food industry and at the same time growing output in the food industry," says Mr O'Driscoll.

As output in the food industry is increasing, and employment remains static, productivity has increased with the adoption of new techniques as the industry uses more high-value added goods than previously.

THE growth in this industry, says Mr O'Driscoll, is in the prepared consumer foods category. Enterprise Ireland's definition of prepared consumer foods runs: "All food products which have undergone secondary processing including ready meals, processed meats, pizzas, pies, savoury products, ice cream and confectionery products, dairy desserts, soups and other prepared consumer-ready foods."

Another growth area is food ingredients. "The Kerry Group, for example, have specialised in food ingredients. They've become one of the biggest world players in the food ingredients market. The food ingredients are the kind of things that the prepared consumer foods group uses to make its products. They turn milk and beef and products into these ingredients," says Mr O'Driscoll. It is in these two growth areas that employment has grown, he says.

In the basic food industry, however, the first level of processing has declined somewhat, says Mr O'Driscoll. The BSE crisis has closed some of Ireland's foreign food markets and caused a decline in consumption in some markets; this has had a knock-on effect on the industry.

Mr Farrell is aware that while traditionally the old agri-business industries have been strong and solid with plenty of innovation and notable success, particularly with butter, cheese and vacuum-packed beef, there is no doubt that the fastest growth is in the area closest to the consumer.

Changes needed in the agri-food sector have been identified in the Agri-food 2010 plan of action. For example, we need to rationalise our primary food industry, because there are too many plants involved in primary processing of beef and milk and so on.

We also need to improve our competitiveness in both agriculture and the food industry, says Mr O'Driscoll. "But if we do these things and we do it right, there is a reasonably good market there and we can grow, we've already shown that we can grow, for example in prepared consumer foods and in food ingredients."