High performance will help farms survive Brexit

Strutt and Parker look at the effects of a no deal Brexit on agriculture: No Deal impact

They argue, 'The best insurance for a farm business remains to be as high performing as possible. Top-performing farms (in terms of the ratio of what they produce compared with the inputs needed to produce it) are in a far stronger position to cope with the changes.'

Another paper looks at the effect of changes in the funding of farm support: Funding gap

The paper argues, 'The changes will most affect farms that are highly reliant on Basic Payments - cereals, mixed and lowland livestock farms. Sectors like dairy will be less affected.'

They advise, 'Farm as efficiently as possible; the top 25% businesses are less reliant on direct payments and more resilient to volatility. Farmers should continue to look for ways to improve their farming systems, in terms of outputs and markets for their products, variable and fixed costs.'

Post Brexit tariff regime angers farmers

The NFU is annoyed about the removal of tariff safeguards for a number of agricultural sectors in the event of a no deal Brexit: Tariff review

Government policy appears to be driven by a desire to keep food prices low. Minette Batters, NFU president, said that the Government had 'betrayed' the industry.

Dairy sector also faces Brexit challenges

Much of the discussion of the impact of Brexit on agriculture has focused for understandable reasons on the livestock sector, particularly sheep farming. However, the dairy sector also faces challenges.

Rising production and static demand is currently creating an over supply problem in the liquid market. Muller has blamed its recent price cut to farmers on a 37 per cent reduction in the cream price.

Cross-border cream sales have been relieving pressure on the liquid market, but would face a tariff of £972/t in the event of a no deal exit, ruling out export sales.

Kite Consulting, a leading dairy consultancy, are advising farmers to ensure that feed stores are full on October 31st to lock in prices. That should include minerals and fats that come in by EU trades. They should also hold back on investing in new machinery until after Christmas: Kite's advice

Farmers fury over cull cancellation

Farmers are angry about the cancellation of a proposed badger cull in Derbyshire days before it was due to go ahead. The Government has given the green light to culls in 11 other new areas.

A cull has never been cancelled so close to the time it was due to go ahead. The decision was taken by Defra secretary of state Theresa Villiers on the grounds that badgers are being vaccinated against bovine TB in Derbyshire.

However, some see the hand of Boris Johnson's partner, Carrie Symonds, in the decision. Dominic Dyer, the chief executive of the Badger Trust, met her in Downing Street last month. She has helped him carry a banner when out campaigning against the cull. Mr Dyer wrote to Boris Johnson about the cull and three days later it was called off.

Farmers back no deal Brexit

A surprising number of farmers back a no deal Brexit given that many of them would suffer financially as a result. At least that is the case if one believes polls from Farmers Weekly. A health warning is always necessary about these polls as respondents select themselves and the Ns are often small. A poll which purported to show that a majority of farmers backed Brexit in the referendum has nevertheless embedded itself in the public mind.

43 per cent of 'about 300' farmers said they would be happy with a no deal Brexit while 57 per cent said they would not. Concern about leaving without a deal was strongest in Northern Ireland, Scotland and Yorkshire and Humberside. Optimism about farm business prospects is at its lowest level since the survey started a year ago.

A snapshot 24 hour poll found that 53 per cent would choose to leave the EU with no deal if they could vote again. 38 per cent said they would vote remain and just 9 per cent said they would back the withdrawal agreement backed by Theresa May.

It is interesting that the first poll is below a story about the impact of a no deal Brexit on the sheepmeat sector. About one-third of the UK's production of lamb is exported and 95 per cent of this goes to the EU. 40 per cent tariffs and regulatory barriers would almost wipe out exports.

The Government has ruled out culling as a response to such a crisis. It looks as if they favour a combination of a headage payment on breeding ewes and a slaughterhouse premium. The UK breeding flock already reduced by about 30 per cent in the 2017-18 breeding season as farmers responded to an uncertain future.

Mike Gooding, director of Farmers' First, one of Britain's biggest lamb exporters, told Farmers Weekly: 'Essentially, Brexit risks excluding UK produce from the EU market. A no-deal Brexit would result in the same outcome - but with that risk greatly increased.'

He predicted a substantial fall in sheep farming in the UK. 'My own personal view is that there will be far fewer farmers managing what sheep there are in larger flocks - possibly across multiple holdings.'

What chances of a green agricultural policy?

In the latest issue of Euro Choices Viviane Gravey asks whether Brexit will lead to a green agricultural policy. She notes, 'while UK governments have pioneered and pushed for many green instruments in the CAP, their overarching priority remained to limit funding – both EU and national – for agriculture.' Moreover, the four nations of the UK have developed divergent policies under the flexible umbrella of the 2014-20 CAP.'

She points out that 'the UK's long‐standing reluctance to increase EU‐related spending has repeatedly constrained the UK's commitment to agri‐environment schemes.'

She concludes, 'while the UK government's current commitment to "put the environment first" calls for radical post‐Brexit change, the policy‐making process does not augur well for such change. Instead, it bears sharp similarities to CAP debates old and new. Within the EU, the UK's commitment to greening agriculture was repeatedly undermined by its opposition to increased spending for CAP and its growing euroscepticism.'

'Outside of the EU, the UK's renewed commitment to greening agriculture risks faltering once more due to broader national and international political tensions. These difficulties are linked to fraught power sharing under devolution, the challenges of guaranteeing a shared environmental baseline across the UK, and agreeing a fair budget for agriculture policy throughout the four nations, as well as the uncertain contour of any UK‐EU deal and future UK trade policy.'

No deal Brexit a big hit on farm profits

A no deal Brexit would wipe £850m off the farming industry's bottom line according to research from farm business consultant Andersons. A Brexit no deal scenario would see a 18 per cent fall in profitability as against 18 per cent for a no deal scenario.

Andersons recently conducted research on behalf of the BBC to assess Brexit's potential impact on the profitability of UK farming, 9-12 months after Brexit taking place. To undertake this analysis, Total Income from Farming (or TIFF) was seen as a useful measure to look at the farming industry as a whole. It is an aggregate, so hides differences between sectors and individual businesses, but provides a simple measure of the profit of ‘UK Agriculture Plc’. In technical terms, TIFF shows the aggregated return to all the farmers in UK agriculture and horticulture for their management, labour and their own capital in their businesses. To allow for yearly variations in weather conditions and exchange rates for example, a three-year average (2016 to 2018) was used as the basis for comparison.

The assessment considered the potential impact of tariffs (including the UK’s March 2019 announcement on its No-Deal Brexit tariff schedule), non-tariff barriers and tariff rate quotas. Importantly, it was assumed that support levels to UK farming were kept constant as the UK Government has committed to farming receiving current levels of support until the end of this parliament (scheduled to be 2022).

Like all top-level industry averages, there is significant variation within the overall estimate. For instance, where output is concerned, substantial declines are forecast for sheepmeat (-31%), whilst output for cereals, milk and beef production are also down. Some increases are projected for horticulture and intensive livestock (pigs and poultry) provided there is sufficient labour available for undertaking operations.

With respect to costs, some decreases are forecast for inputs which would be affected by the introduction of lower UK import tariffs under a no-deal scenario. Examples here include animal feed, fertiliser and plant protection products. However, other inputs such as veterinary costs are projected to rise as it is anticipated that there would be a significant increase in demand for veterinary staff to assist with border inspection operations.

With many farms already struggling to break-even and the projected hit on profitability in some cases likely to significantly surpass the industry average, the viability of many farming businesses will be in jeopardy. Unsurprisingly, grazing livestock farms (particularly sheep) would be the most exposed given the output declines mentioned above, but a no-deal would also result in a significant downturn for dairy farming in Northern Ireland, given its reliance on having its milk processed in the Republic of Ireland.