Impact of a No-Deal Brexit on Farm Profitability

With the UK due to leave the EU on 31st October and the possibility of a No-Deal Brexit becoming more likely, The Andersons Centre (Andersons) recently conducted research on behalf of the BBC to assess its 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) is 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.

Taking into account previous studies, some of which have been undertaken by Andersons, a top-level assessment of the impact of both a Brexit Deal and a No-Deal on the output of each farming sector was compiled in addition to an estimation of the effects of both Brexit scenarios on key costs which are incurred by UK farming. This 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).

Under a Brexit Deal scenario, a small decline in profitability (3%) is projected; however, under a No-Deal, an 18% decline is forecast.

Impact of Brexit on UK Farm Profitability under a Deal and No-Deal Scenario

Sources: The Andersons Centre and Defra

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.

An 18% decline in profitability would equate to a hit to UK farming generally of almost £850 million. With many farms already struggling to break-even, 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.

For further information on how a No-Deal Brexit could affect farming and to address the trade-related risks arising, Andersons is running a webinar on Thursday, 12th September to provide further information on how businesses can prepare. Further information is available via:

https://attendee.gototraining.com/r/1384475755831393282

EU Agrees Mercosur and Vietnam Trade Deals

On 28th June, twenty years to the day that negotiations started, the EU and Mercosur reached a political agreement on a substantial free trade deal.  The EU estimates that, when fully implemented, the deal will reduce tariffs its exporters face by approximately €4 billion.  On a busy weekend for Cecilia Malmström, EU Trade Commissioner, the EU also signed the free trade agreement with Vietnam which had been largely negotiated in 2018.  Both deals are meant to send a message that, with the backdrop of the US-China trade dispute and the increased friction likely to result from Brexit, that the EU is open for business and keen to conclude trade deals with other global partners.   These announcements follow similar recent deals with Japan and Canada.  From an agri-food perspective, the Mercosur deal is attracting most attention as it could have significant implications for sectors such as beef, poultry and sugar.

EU-Mercosur Trade Deal

The details of the Mercosur deal are complex.  In summary, the South American trade-bloc, consisting of Brazil, Argentina, Uruguay and Paraguay, would see tariffs removed on 92% of all its imports to the EU over a period of 10 years.  Focusing on the agri-food sector, tariffs will be cut on 82% of imports coming from Mercosur, with remaining agri-food imports subject to more partial liberalisation.  Notably, this includes beef where a quota of 99,000 tonnes will be permitted to be exported to the EU at preferential rates.  This will be implemented over a five-year period.  Additional volumes of imports will also be allowed of poultrymeat (180,000 tonnes) and pigmeat, (25,000 tonnes), with import restrictions on sugar and ethanol also eased.

From an EU export perspective, tariffs will be eliminated on 91% of its total exports and 95% of agri-food exports.  The dairy sector in particular will benefit from improved market access, with a quota of 30,000  tonnes for cheese, 10,000 tonnes for skim-milk powder and 5,000 tonnes for infant milk formula (Mercosur tariffs are currently at around 28% for dairy products).  These volumes will be phased-in over 10 years.   Whilst improved market access for dairy was welcomed in some quarters, market experts opined that demand for dairy products in the Mercosur market is quite lethargic and is hampered by high inflation, sluggish economic growth and a volatile political environment. 

Mercosur has also committed to protecting the Geographical Indications of 357 EU food and drink products.  The EU is also keen to point out that its food standards on Sanitary and Phytosanitary (SPS) matters would not be compromised in any way.  The EU-Mercosur deal also has a Sustainable Development chapter which commits both parties to upholding their Paris Climate Accord commitments

European beef, poultry, sugar and ethanol producers are expected to come under increased pressure from cheaper imports from South America as a result of this proposed deal.  The agreement has already attracted condemnation from the EU’s farming lobby with organisations such as Copa-Copega and the Irish Farmers’ Association (IFA) complaining that agriculture had been sold out to facilitate a wider deal.  Tellingly, the EU Commission also announced a €1 billion fund to help farmers to adjust to the market disturbances that could be potentially caused by the EU-Mercosur trade deal which indicates that there will be a significant impact on European farmers.

The feedback from the EU farming and food industry points to trouble ahead because, as our previous article on 26th June noted, the agreement thus far has only been at the political level and a number of hurdles remain.  Firstly, it will be translated into legal text before being put forward for ratification by EU Member States and the European Parliament.  Like the EU-Canada (CETA) agreement, there can still be several twists and turns in the process and the deal could be scuppered by a Member State or by a regional Parliament such as Wallonia.  Already, there is significant pressure being exerted on the Irish Government not to back the deal and it is anticipated that there will be similar calls elsewhere.

Any on-farm effects from this deal remain some way off, and in any case would be phased in over several years.  By the time this happens, the UK is likely to have left the European Union, so the impact of this particular deal might be negligible.  That said, the EU-Mercosur deal increases the competitive threat of South American products in European markets.  It is also likely to offer a template for any future trade deals between the UK and Mercosur which the UK is likely to prioritise post-Brexit. 

EU-Vietnam Trade Deal

This pact will eventually see duties removed on 99% of the EU’s imports from Vietnam.  Whilst the formal text has been approved by the European Commission, it still requires ratification by the European Council (representing the EU Member States) and by the European Parliament.  This is expected later this year.

From an agri-food export perspective, Vietnam with its population of around 95 million represents a fast-growing South East Asian market.  Its dairy industry is valued at approximately £5 billion and it currently imports 80% of this demand.  Average incomes have also been rising thereby driving demand for beef and pork products in particular, although the US and New Zealand account for the vast majority of these imports.

As with Mercosur, the UK’s pending exit from the EU means that it may not benefit significantly from this deal.  That said, much will depend on the length of the transition (implementation) period arising from the eventual Brexit deal and the UK’s access to third country market that have free-trade deals with the EU as part of this.  However, the South East Asian market is lucrative and the UK needs to prioritise the development of such markets as it resumes its independent trade policy.

This article is from Andersons’ AgriBrief Bulletin, a subscriber-based publication which provides readers with expert, concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry and what it means for you and your clients. For further information, including a free trial, please visit:

https://agribrief.co.uk/.

Arable Market Thoughts

It never rains, it always pours!  By early June, some were concerned about the dry soil conditions, by the end, the concern was flooding.  Most of the crops that had been flattened have picked up, but not all, increasing the risks of Fusarium.  Combinable crops now require sunshine to help them ripen with good quality and bushel weights.

The other thing that has fallen over this month (which we had been warning would happen) is the premium that the old crop wheat carried over new crop.  Sooner or later the two crop prices have to merge, and they did this decisively in June.  In fact old crop long-holders will be feeling frustrated by the chart clearly showing July 2019 futures values in January of £180 now being worth £145.  Also, new crop wheat prices have taken a sharp turn upwards, now clearly ahead of old crop.  This will encourage any buyers to take short term cover and close the gap.  Farmer sellers with adequate storage might be tempted to carry the grain over if it is in satisfactory condition.

Globally, the wheat crop is overall healthy and abundant, with expectations from the International Grains Council that it will outstrip consumption to leave slightly higher stocks this coming season.  This has helped explain the price falls in the market.  Maize though, the main combinable crop in the world, is thought abundant but not likely to match annual demand, so stock levels are expected (by the IGC) to decline again this year.  This will be the third decline since 2016/17 from 363 to 284 million tonnes; a substantial fall.

Soybean stocks are also thought likely to return a small decline in physical stock level after the 2019/20 season, although only by 1 million tonnes.  This is a tiny change after such a sharp rise in stock from 25 million tonnes to the current 53 million in only six years.  The question of how much oilseed rape will be grown in the UK is concerning many; whilst we have reported the poor OSR conditions on many farms this year, we have not pointed out that other arable farmers are quietly very happy with the condition of theirs. Some has been grubbed and replaced, other fields are looking excellent.

Bean crops are largely looking good throughout the country, and with new crop reaching good prices, perhaps now is the time to book some in.  Currently, we would expect bean crops to outperform their overall dismal performance from last year.

This article is from Andersons’ AgriBrief Bulletin, a subscriber-based publication which provides readers with expert, concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry and what it means for you and your clients. For further information, including a free trial, please visit:

https://agribrief.co.uk/.

Milk Production

According to BCMS data, March saw births to a dairy dams reach 137,000 head, some 3% higher than the five-year average and the most calf registrations in the month of March since recording began in 2003.  There are a number of possible reasons for the increase and the rise is probably a combination of all of them.  Cows were in good physical condition when they came into season last year, having been housed longer due to the bad winter and being put out to pasture when the grass growth was improving but before the drought had impacted.  The increase may also be due to more businesses switching from all-year-round calving systems to spring block and also those already on a spring block system tightening their calving window.

The result has seen an increase in cows at the peak of their lactation during the spring flush.  UK milk production has been at record levels throughout 2019 so far.  Peak delivery may have been reached earlier than in recent years when a long-term high of 37.74m litres was delivered on 26th/27th April.  Throughout April deliveries were running about 4% above last year’s levels.  During the first quarter of 2019, cumulative production was 3.4% higher than for the same period in 2018.  The increase in production is seeing downward pressure being put on farmgate prices as processors are having to sell unplanned increases in milk deliveries on the spot market at 13-15ppl.

However, globally, milk production is tight and is expected to remain so throughout 2019 which appears to be helping UK farmgate prices to a certain extent.  Margins have been squeezed in Australia, the US and the EU through high input costs and low farmgate prices leading to a reduction in production.  In addition, demand is expected to remain strong from China throughout the year due to the impact of African Swine Fever in the country.  It is thought dairy cows might enter the beef market as the price of beef increases due to the demand for alternative protein sources to replace pork, thereby reducing milk availability in the country.  In the second half of 2019, UK production growth is expected to slow, due to a smaller herd and a drop in fertility, a knock-on effect from the hot summer last year.

This article is from Andersons’ AgriBrief Bulletin, a subscriber-based publication which provides readers with expert, concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry and what it means for you and your clients. For further information, including a free trial, please visit:

https://agribrief.co.uk/.

Cabbage Stem Flea Beetle

Many will have noticed there are considerably fewer bright yellow fields than last year, and some a much paler shade of yellow than their owners will have wanted.  Evidence suggests that in the UK a slightly lower amount of oilseed rape was planted last autumn than previous the year.  A considerable proportion did not have a good start, possibly in part as a result of the very dry soil conditions at the time, but also the concerns of Cabbage Stem Flea Beetle (CSFB).  This a meant an unknown quantity, but perhaps 8% of the national crop, written off before winter.

That which made it to the spring, is also in rather poor condition now, with another 5-10% being written off largely in the central and Western parts of England.  This will either be replaced with another crop or fallowed, or in some cases, left in poor condition, its owner resigned to the fact it will probably generate a poor yield.  It is concerning that reports are emerging that CSFB is having a damaging effect on the emerging sugar-beet crop too.  It is too early to speculate on yield impact, but we will continue to monitor this situation.

Ironically, reports from Lincolnshire suggest some bee-keepers are concerned there is insufficient OSR to supply enough nectar to produce honey from their hives.  Perhaps the loss of Neonicotinoids has had adverse impacts even on the insects that the ban was designed to protect.

What the impact of CSFB on OSR in the British farmer’s rotation in future might be is unclear, but many growers and agronomists have suggested their rotations and crop recommendations will not include OSR for at least three years.  The OSR area is in long-term decline; its area topped out in 2012 and has fallen every year since then apart from once.  In 2019 we could harvest the lowest rape area since 2004, and possibly the smallest crop since then too.

This article is from Andersons’ AgriBrief Bulletin, a subscriber-based publication which provides readers with expert, concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry and what it means for you and your clients. For further information, including a free trial, please visit:

https://agribrief.co.uk/.

Land & Rental Values

Latest results from the RICS/RAU Land Survey reveal a mixed picture for farmland values.  The data covers the second half of 2018 and shows the Transaction-Based Measure falling back considerably to below the benchmark £10,000 per acre level.  The average price for H2 2018 was £9,571 per acre (£23,650), some 16% down on the first half of the year and 8% lower than the corresponding period in 2017.

The Transaction-Based measure can be quite variable as the number of sales is relatively small (and the series also includes sales with a residential element).  The Opinion-Based measure is a hypothetical estimate of surveyors of a bareland price for agricultural land.  This has moved in the opposite direction for the second half of last year to £7,638 per acre (£18,873 per Ha).  Within this, arable land values recorded a small decline, but pastureland experienced an increase.

RICS/RAU Rural Land Values 1998-2018

Looking ahead, contributors to the survey suggest uncertainty in the marketplace is affecting demand with a net balance of -16 expecting demand to rise.  In contrast, they are expecting more land to come to market over the next year, a net balance of +6.  No data is available on contributors’ price expectations for the coming year.

The Survey also includes information on land rents in England and Wales.  All categories recorded an increase in the second half of 2018, compared to the first six months of the year.  The results are in the table below:

Farm Rents in England & Wales – RICS/RAU
 Half YearArable (£/acre)Pasture (£/acre)
AHA 86ATA 95AHA 86ATA 95
H1 2017751465394
H2 2017781415893
H1 2018761445793
H2 20188014960104

This article is from Andersons’ AgriBrief Bulletin, a subscriber-based publication which provides readers with expert, concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry and what it means for you and your clients. For further information, including a free trial, please visit:

https://agribrief.co.uk/.

How Has Farming Changed Since the UK was Last Outside the EU?

UK farming will soon be operating outside the European Union for the first time since we joined the, then, EEC in 1973. In preparation for its round of Spring Seminars, Andersons the Farm Business Consultants have looked into the archives to compare UK farming 46 years ago with today’s sector. The table below shows some key indicators for the agricultural sector. (All financial figures are in real terms at 2017 prices.)

At the farm level, the industry is smaller in monetary terms and less profitable (although land values are much higher). However, the wider food chain has done an impressive job in boosting food exports and feeding households cheaply. Food self-sufficiency has not changed greatly. For those advocating a completely free-trade approach to food after Brexit, it is interesting that food self-sufficiency was close to 30% in the 1930s – the last time it was tried. The industry is also doing ‘more with less’, in terms of people, land and animals.

Clearly, UK farming is a very different industry to that of the early 1970’s. However, there is also an argument that being part of the Common Agricultural Policy for 40 plus years has held the sector back from what it might have achieved. The next decade or two seems set to unleash even greater change.

There is some trepidation about what the future might hold for farming. One of the ways to reduce uncertainty is to gain the best understanding of the current situation and possible future direction. Andersons are running a series of Seminars at thirteen venues around Great Britain in March, looking at the prospects for UK agriculture in greater detail. This includes the opportunities post-Brexit and the issues the sector needs to tackle, whatever sort of Brexit emerges. For more information please go to www.theandersonscentre.co.uk/Seminars

Ends

No. of words: 444

Author: Richard King

Date: 13th February 2019

This news release has been sent from Andersons, the Farm Business Consultants Ltd, Old Bell House, 2 Nottingham Street, Melton Mowbray, Leicestershire LE13 1NW. For further information please contact Michelle Turnbull on +44 (0) 1362 688761 or +44 (0) 7904 436288.

Brexit Reaching Tipping Point

On 15th January, the Government suffered a historic defeat (by 230 votes) in its first bid to get Parliament to accept the Withdrawal Agreement and accompanying Political Declaration.  As a result, the sense of chaos and uncertainty in Westminster has accelerated. Whilst it is clear that the Parliament does not want this deal (in its current form), what is not clear is what sort of deal there would be a majority for.  The EU is clear that the ball is now in the UK’s court and the Prime Minister, assuming she wins today’s confidence vote, needs to set-out a plan by Monday.  Following last month’s article, below is an update of the potential options available in the coming weeks and months.  It is likely that a combination of these will be required.

  • Cross-party dialogue: this is the most obvious first-step that the Government needs to take and the noises from Downing St. suggest that it has already started to do this.  However, such an approach does not have much chance of succeeding if additional options to the PM’s deal are not considered.
  • Indicative votes: have been suggested by several MPs as a means to break the deadlock as the votes would be non-binding. It would help to gauge what there could be a majority for in the House of Commons.  The scale of the Government’s defeat on the Withdrawal Deal shows that another vote on the current deal has no chance of succeeding unless it can be changed fundamentally.
  • Renegotiate with the EU: on numerous occasions during the Brexit process Westminster has been operating in a silo and has not sufficiently considered the EU’s perspective in the negotiations.  Whilst some form of Brexit might eventually emerge as a favoured arrangement within the House of Commons, it has no chance of succeeding without agreement by the EU.  What is clear is that the EU will not back-down on the backstop and the UK Government’s strategy of trying to isolate Ireland has back-fired at every juncture.  It is therefore clear that if the UK wants to dilute the backstop, which is detested by many in Westminster, a lighter form of Brexit will be required. Below are some of the possibilities available;
    • Norway Plus / Common Market 2.0 – both of these options are broadly similar and essentially amount to the UK being within the European Economic Area (EEA) similar to Norway.  But, in addition, the arrangement would include agricultural products and the UK being part of a Customs Union.  As mentioned previously, this option has gained traction but the big drawback is that Freedom of Movement would have to be accepted, and as this was a major reason for the Leave vote in the first place.  It is unlikely to be favoured by many in the Labour party. Added to this, the UK would not have voting rights, would probably have to pay into the EU budget, and could not strike its own trade deals.  Therefore, it continues to be very difficult to see this arrangement being successful without some form of emergency brake on immigration as a minimum, even then it presents grave difficulties. 
    • Customs Union with the EU: this is  the favoured option by the Labour party as it would go some way towards addressing the Northern Ireland border but would potentially curtail free movement.  However, on its own, it would not prevent border checks on the island of Ireland as sanitary and phytosanitary (SPS) checks would still be required.  Unless the UK could agree some form of regulatory equivalence agreement with the EU, of the kind that has never been reached before, then Brussels will continue to insist on a backstop. It would also mean an independent UK trade policy for goods would be largely redundant.
    • Free-Trade Agreement with the EU: an accord similar to the CETA agreement with Canada is championed by many Brexiteers as the panacea to the current impasse and they claim that it will also address the Irish border problem.  A cursory assessment of the EU’s Official Controls Regulations (2017/625) would show that this is simply not the case, as SPS border controls would still be required on the island of Ireland.  Such controls would of course be unacceptable to the DUP and the famed technological solutions are years away (and some doubt whether they are feasible at all). 
  • Second Referendum: this is still the favoured option amongst many Remain MPs, however, as with all other options, there is not a majority in Parliament for this and the Labour leadership is lukewarm to say the least.  Even if a majority of MPs decided on a second Referendum, the path ahead would be fraught with difficulties.  Firstly, what question(s) would need to appear on the ballot box to reflect the now diverse range of opinions in the UK (from No Deal to No Brexit).  Secondly, it could lead to social instability as there would be heated opposition in some quarters and would at least entail another six months of uncertainty.  Some would argue that another Referendum, if framed correctly, could at least lead to a definitive answer (e.g. if Leave won, then the issue is dead for a generation).  However, all indications suggest that it would be another close vote, and if anything has been learned in the last few years is that the British public do not want more of the same, no matter what the outcome is.
  • No Deal: continues to be the default option and with 72 days until Brexit, its likelihood increases by the day, particularly if the House of Commons does not pass a cast-iron guarantee that No Deal will not happen. As outlined in previous issues, a No Deal has the potential to severely damage UK farming, especially as it may well eventually encompass a liberal trade policy with respect to imports.  On 16th January, the NFU has emphasised its view that a No Deal would be catastrophic for UK farming and most business associations agree with this view.  From an Irish perspective, a No Deal also presents a major dilemma.  If it does not introduce some forms of regulatory checks on produce coming in from the UK (including from Northern Ireland) in the event of a No Deal, then this may be viewed unfavourably by customers elsewhere in the EU and non-EU, who may in-turn place some additional controls on Irish produce. Such a development would have damaging ramifications for the Irish economy, whilst the re-introduction of a hard border would have severe social consequences. In such a situation, it is therefore likely that the Irish Government would first seek to introduce temporary measures along the border (citing safety concerns), similar to what was done during the foot-and-mouth crisis in 2001.  It could potentially keep these for weeks if not months in the hope that a more sustainable Brexit outcome could be achieved.  However, even such a temporary move is also likely to entail problems.
  • Extension to Article 50: all of the options set-out above contain unpalatable elements.  With the time relentlessly ticking towards the 29th of March and numerous Bills and secondary legislation still required to be passed by the Commons, the prospect of an extension to Article 50 grows by the day.  Rumours circulating in Brussels suggest that preparations are being made for a formal request by the UK for an extension and while a period of 3-months is doable (i.e. till early July) a longer period would present legal problems for the European Parliament if the UK is still a Member State and has no MEPs. Therefore, if an extension is to be accepted by the EU and its Member States, it will need to be coupled with a clear plan from the UK as to what form of Brexit or plan of action it could agree on which could be countenanced by the EU.

Overall, it now appears that an extension to Article 50 will be required and another attempt will be made by the Government to get some form of Withdrawal Agreement passed by the Commons.  It would appear prudent to do this after indicative voting to discern what sort of a deal would garner a majority, bearing in mind what would also be acceptable to the EU.  If the Government fails at the second attempt to pass a deal, much will then depend on Labour.  If it attempts another confidence motion and loses, will it call for a second Referendum?

Many questions remain. All the while, agri-food businesses have to try and cope with all of the uncertainty which does not show signs of dissipating just yet.

This article is from Andersons’ AgriBrief Bulletin, a subscriber-based publication which provides readers with expert, concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry and what it means for you and your clients. For further information, including a free trial, please visit:

https://agribrief.co.uk/.

UK Harvest Commences

UK Combinable Crop Harvest – What should we Expect?

The harvest is in its early stages; this year a little earlier than usual.  Over the last six weeks, the UK has received minimal or no rain (at least in England) with June receiving only 25% of the normal levels, and July just as parched so far.  Consequently, some crops across the country will have been too dry to yield properly.  Before that, of course, though March, April, and the first half of May, the UK received 50% more rain than normal, leaving those areas with strong soils and healthy levels of organic matter, with a long-lasting moisture reserve.

Crops were late emerging from winter dormancy or being planted often into cold, wet spring soils and so had a lot of growing up to do in a short amount of time.  This alone reduced expectations of harvest yield.  But it is possible that those crops on land strong enough to retain some moisture for a while may have done better than expected.  It appears that moisture held deep below the soil’s surface has, on may farms, been a lifeline for the survival of this year’s crops, with the sunshine and hot weather providing an opportunity for heavy, high bushel weight crops to develop.  It has been mentioned that this is the weather pattern that more continental countries experience every year, the Paris Basin included.  Crops on lighter soils though will presumably bring overall yield averages down.

OSR

More specifically, oilseed rape, whose harvest is now well under way, needed minimal swathing or spraying in many parts this year.  Some crops are dry but not completely mature, with brown seeds.  As yet, yields appear to have held up well, albeit maybe not a record season, even after moisture adjustments are accounted for.  Farmers should be careful not to harvest oilseed rape too dry as it can incur penalties if moisture levels are below 6%.

To recap, the standard FOSFA contract for oilseed rape is for 9% moisture.  You lose 1% of price if moisture goes up to 10% and gain 1% for every 1% the moisture falls down to 6%.  Below that point, it becomes difficult for a crusher to extract oils so could be unsellable.  Certainly, a penalty such as a blending charge with wetter seed would become payable.  It is worth getting the moisture right and if you’re not sure, keep it comfortably above 6%.

Barley

The barley harvest too is under way, with moderate to good yields, and excellent quality on the whole, although it is too early to reach big conclusions about national yields.  Bushel weights are high, meaning a greater tonnage might fit in the barn than usual.  It also means those farmers who take their own grain to a store, should beware of trailer weights; overweight vehicles tend not to be prioritised for tipping, or, if more road travel is required, not allowed back on the road.  Some hauliers might end up carrying too heavy a load; it is the driver’s responsibility and could be expensive to them.  It will catch some hauliers out.

Wheat

It is possible that the very first wheat crops are starting to be cut now, but it is too early to make any useful comments about it.  More next month.

This article is from Andersons’ AgriBrief Bulletin, a subscriber-based publication which provides readers with expert, concise and unbiased commentary on the key issues affecting business performance in the UK agri-food industry and what it means for you and your clients. For further information, including a free trial, please visit:

https://agribrief.co.uk/.

Andersons’ Greening Factsheet 2018

Greening will remain a key part of the BPS until the scheme ends. Andersons’ 2018 Greening Factsheet is accessible by clicking here.

The 2018 scheme year has seen a number of rule changes that applicants need to be aware of. These include; 

  • Restrictions on applying Plant Protection Products (PPP) on Ecological Focus Areas (EFA) land, and also restrictions on some field operations on EFA fallow
  • Removal of the 30Ha limit on Greening derogations
  • Weighting of Nitrogen Fixing Crops (NFC) for EFA increased to 1.0 from 0.7
  • An extension to the period Catch Crops must be in place

More details on these are given in the 2018 Greening Factsheet.

Impact of WTO Trading on NI Beef and Sheep meat

Switch to WTO trading conditions could devastate Northern Irish farming

If the UK fails to agree a post-Brexit trade deal with the EU and has to instead revert to World Trade Organization trading conditions, Northern Ireland beef and sheep meat output could decline by 21%, with exports to the EU collapsing by over 90%. These are the findings of a new 124-page report commissioned by the Livestock and Meat Commission for Northern Ireland (the LMC).

The report, produced by farm business consultancy The Andersons Centre with support from Oxford Economics, gauged the impact on the Northern Irish beef and sheep meat industry of moving from EU to World Trade Organization (WTO) trading conditions under two scenarios: 1) “WTO Equivalence” (where the UK and EU impose reciprocal tariffs on each other’s imports based on the current EU Common External Tariff, as well as an assumption that there would be mutual recognition of veterinary and other technical standards) and 2) a unilateral “Open-Door” trade policy whereby the UK reduces its tariffs on imports from major agricultural producers but without any reciprocal agreements in place. 

The report’s key findings were:

  • If the UK adopted a unilateral Open-Door trade policy, Northern Irish beef and sheep meat output would decline by 21%, as exports to the EU collapsed by over 90%.
  • However, even under WTO Equivalence, whilst output could rise marginally in the short-run (as domestic consumption displaced EU imports) gains would be eroded by declining consumption in the longer-term due to higher prices, and exports to the EU would still fall by over 90%.

The report also found that:

  • Tariffs for meat sales are substantial, ranging from 40% to around 100%.
  • Non-Tariff Barriers (NTBs) are estimated to amount to a 3% tariff equivalent under WTO Equivalence and 5.7% under an Open-Door trade policy. These estimates are based on a thorough examination of NTBs and their impact on the red meat sector rather than relying on generic estimates, which is a drawback with previous studies on this issue.
  • Farm profits decline in both scenarios particularly when combined with reductions in farm subsidies.

The report concludes that if an Open-Door trade policy was adopted, the viability of beef and sheep farming across large swathes of Northern Ireland would be seriously threatened, with grave consequences for the wider Northern Irish rural economy.

The report makes six recommendations for policy-makers:

  1. Agree interim Single Market (EEA) and Customs Union membership for at least 5 years post-Brexit to negotiate the finer details of the eventual deal and develop the required infrastructure, with a mid-way review to examine whether enough progress has been made (e.g. technology to facilitate frictionless cross-border trade)to affect timeframes.
  2. Set up an Agri-food Workers’ Scheme to permit continued access to labour for Northern Ireland processors, coupled with incentives for locally-based staff.
  3. Bolster efforts to get Northern Irish products approved for sale in non-EU countries, including gaining mutual recognition of veterinary standards.
  4. Formulate a long-term strategy for food and farming.
  5. Ensure that food imports meet the same rigorous standards as domestic produce.
  6. Adopt EU Official Controls of animals and meat products at slaughter houses, meat plants and collection centres for live cattle within the UK and Republic of Ireland to permit frictionless cross-border trade.

If WTO trading did come to pass, the report suggests several further recommendations, including as a last resort considering a “Cyprus-type model” for cross border trade if no other agreement is possible.  This is because the island of Cyprus is within the EU, but only the southern half is recognised as within the Single Market.  Consequently, there are special rules regarding the trade of goods between the southern half and the Turkish Republic of Northern Cyprus. However, the report also notes that whilst a Cyprus-type model could help to facilitate trade reasonably close to existing levels, potential obstacles remain.

The report’s other recommendations in the event of WTO trading coming to pass include setting bilateral Tariff Rate Quotas to mirror historic trade flows between the UK, EU-27 and non-EU countries, as well as Northern Irish beef and sheep meat exporters capturing more of the domestic UK market and opening-up new markets.

Michael Haverty, lead author of the study, said: “An Open-Door trade policy would have a devastating impact on the industry both domestically and internationally. Whilst a Cyprus-type model highlights the need for contingency planning, the ideal outcome remains avoiding WTO trading conditions by agreeing interim Single Market and Customs Union membership for 5 years post-Brexit, incorporating a mid-way review, to negotiate and implement a more considered long-term agreement.”

The report is available via:

https://theandersonscentre.co.uk/wp-content/uploads/2019/06/LMC-Final-Report_31_Aug_17.pdf

The Andersons Centre acquires InsideTrack

The Andersons Centre is delighted to announce its acquisition of InsideTrack, the highly-respected publication aimed at keeping the UK arable sector informed on the latest economic, policy and environmental developments.

InsideTrack will be compiled by The Andersons Centre’s Research Team, headed-up by Richard King, who commented that “InsideTrack has established a strong reputation for providing in-depth and independent analysis of the key developments affecting the UK’s arable sector. Over the years, it has provided an original and thought-provoking perspective and The Andersons Centre is excited to be taking on its production”.

Michael Haverty, Senior Agricultural Economist at The Andersons Centre, will be responsible for editing the magazine and stated that “it is an honour to take-on the editing of InsideTrack and we are looking forward to continuing the great work that Simon Ward and his team have undertaken over the years. We are also committed to ensuring that InsideTrack continues to inform its readers by covering the issues in an unbiased manner whilst also providing unique insight into the factors that influence the viability and profitability of the arable sector.”

The Andersons Centre is keen for InsideTrack to continue to offer an independent perspective on arable matters over the coming years, which promise to be momentous for UK agriculture, and will also be developing new focus areas for the magazine including agri-tech and insights on international market opportunities.

About The Andersons Centre:

The Andersons Centre provides market-leading advice and business information to the agricultural, rural and food sectors. Its business is built around a team of farm business and research consultants with a wealth of knowledge and experience in all areas of agriculture and its associated industries. As well as providing agricultural consultancy and farm business advice, The Andersons Centre also works with companies trading with farmers, the Public Sector and other rural professionals throughout the UK and Northern Europe. The Andersons Centre’s experienced Research Team is proud of its ability to understand the implications of policy, including the latest information on CAP Reform and the implications of Brexit for UK agriculture. It produces a number of regular bulletins, undertakes research projects and edits two agricultural costings books.

For further information, please visit www.theandersonscentre.co.uk

About InsideTrack:

InsideTrack covers a wide variety of issues relating to arable agriculture including the Common Agricultural Policy, commodities markets and trade, European matters including Brexit, rural development, environmental issues, renewable energy, crop science and agri-tech. It is used as a reference source by agricultural advisers and consultants, distributors, grain marketers, lawyers and leading farming businesses and is based on primary information sources from the UK, Europe and the rest of the world. Ten issues are produced per year plus supplements, as appropriate.

For further information, please visit www.insidetrack.org.uk

InsideTrack and the InsideTrack device are trademarks owned by The Andersons Centre LLP