Andersons Business Matters

Andersons Business Matters is our new publication which is designed to complement Andersons annual Outlook publication. Each edition focuses in detail on a selection of topics at the farm-level. The current edition focuses on;

  • Arable profitability and long-term trends on our Loam Farm model
  • Beef costs of production
  • Depreciation
  • Is there an optimal dairy system?

To access our latest edition, please click here.





Brexit: It’s Just the Start

The farming industry breathed a collective sigh of relief when the UK and EU signed their 11th-hour trade agreement.  However, those in the agricultural sector who believe that trade issues have been put-to-bed for the foreseeable future are likely to be disappointed.  Now that the UK has left the EU, the industry will arguably have to keep a closer eye on trade policy, not least to ensure that the sector’s position is protected when deals are being done.  This is the message from Andersons the Farm Business Consultants.

Firstly, the UK/EU ‘Trade and Cooperation Agreement’ (TCA), even at 1,246 pages, is not the final word on trade with the European Union.  The next few months will see how the complex provisions of the deal in areas such as Rules of Origin, Customs and Checks impact on trade in practice.  Already problems have been seen, especially regarding Northern Ireland.  And this is when trade flows have been quieter than usual as a result of previous stockpiling.  The TCA does not cover services (around 80% of the UK economy), including the key sector of financial services.   There are also unresolved questions on data sharing, and some parts of the deal, such as fisheries, come up for review after five years.  Therefore, perhaps after a brief pause, there is likely to be continuous ongoing negotiations with the EU on these issues.  The danger for farming is that it might get drawn into these negotiations as ‘leverage’.

The TCA also includes Level-Playing-Field provisions to uphold existing standards in areas such as environmental standards and labour law.  Any significant undercutting by one side could lead to retaliatory tariffs by the other – with farm goods likely to be a key target for any such tariffs.  How the level-playing-field rules are going to work in practice is very unclear.  For example, if the UK were to authorise GM crops, or at least gene-edited crops, would the EU see this as a reduction in ‘environmental standards’.  The scope for arguments seems huge.

The second main area of concern is trade deals with other countries or trading blocks.  The TCA was largely about protecting what was already in place  –  i.e. the significant trade between the UK and the EU.  Therefore, the agreement largely preserves the status quo and has had little effect (so far) on markets.  Any new deals the UK signs with other countries will see a change in the trading environment – and an effect on prices.

Much of the focus in this area has been on the US and the potential clash of production standards with the famous chlorinated chicken and hormone beef.  A deal with the UK is unlikely to be top of Joe Biden’s to-do list in the short-term.  Deals with Australia and New Zealand are perhaps more likely in the short-term and, arguably, could have a bigger impact on our farm markets – especially in the livestock sectors.  Free trade agreements with these two nations are seen by the UK Government as a prelude to the UK joining the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).  Further down the line, the UK is almost certain to explore deals with other agricultural ‘powerhouses’ such as Mercosur, which includes Brazil, and Argentina.

The danger for farming in all of these potential deals is that the UK Government may be willing to trade access to our agricultural markets for gains for our exporters elsewhere in areas such as aerospace, financial services, medicines etc.  The UK farming industry needs to ensure it is not made a sacrificial lamb.

The final area concerns tariffs on food imports generally.  For those countries we do not have a Free Trade Agreement (FTA) with, the level of tariff protection offered by the new UK Global Tariff (UKGT) is very similar to that which we enjoyed in the EU.  However, the UKGT is only ‘temporary’ and could be easily changed.  If the UK economy enters a post-Covid recession, might the Government be tempted to move to a ‘cheap food’ policy and lower some of these tariffs?

In summary, trade matters will continue to be important for the farming sector for years to come.

Andersons is running two Webinars on the 11th February looking at trade matters in more detail along with farm profitability and future agricultural policy.  For more information, please go to



No of words 725
Author Richard King
Date 22nd January 2021

This news release has been sent from The Andersons Centre, Old Bell House, 2 Nottingham Street, Melton Mowbray, Leicestershire LE13 1NW.  For further information please contact Richard King on 07977 191 427.  

Outlook 2021 – A Landmark Year Ahead

The coming year will see a step-change for UK agriculture. Farms will have to adjust quickly to a new business environment which is likely to be more testing. This is the overall message from Andersons Outlook 2021 which has recently been published.

The hope is that 2021 will see life return to the ‘old normal’ after the upheavals of Covid-19. However, the farming sector faces a further set of challenges. The end of the Transition Period marks the start of the real Brexit. The ‘friction’ in trade between ourselves and our largest trading partner will be much greater – leading to higher costs which may well be passed back down the supply chain. Maybe as early as next year the UK will start to conclude independent trade deals with other countries. The danger here is that access to our agricultural market is granted in return for concessions elsewhere. UK farmers could be faced with low-cost competition, possibly producing to different standards.

2021 will also see the first year of the truly ‘renationalised’ farm policy outside of the Common Agricultural Policy. Although each part of the UK is doing its own thing and progressing at different speeds, the overall direction of travel is clear. In the future, there will be less support ‘as of right’, and land managers will be expected to deliver something to society in return for the funds they receive.

Andersons’ consultants experience is that this should not necessarily be something to be feared. There are still great opportunities to improve financial performance in all sectors of our industry. Without the distorting effects of direct support, there can be a greater focus on the areas of activity on farm that actually make a profit. Over time a stronger, more resilient industry should result, able to meet many of the other challenges that lie ahead.

With Brexit and (hopefully) Covid-19 moving down the political agenda, the environment will move back up. Especially with the UK hosting the COP26 climate conference in Glasgow in November 2021. The farming sector will be expected to play its part in meeting the country’s net zero aspirations. This will require a change in practices and systems. Whilst this will be process over many years, 2021 may be seen, in hindsight, as the year when concerted efforts to address climate change really began in earnest.

Covid itself will continue to present challenges to the farming sector. The UK is likely to suffer from an ‘economic long-Covid’ – the lasting financial effects of the massive spending that has been incurred to support the economy during the crisis. The Government will be looking to balance the books and this could mean tax increases. There may also be pressure on areas of spending deemed not to be a priority – for example farm support, despite earlier promises.

With such challenges in the year ahead, and longer term, farm businesses will need to be both resilient and adaptable. Andersons has been working ‘at the coal face’ with farmers and the allied industries for over 40 years assisting them to make the right decisions, whatever the business environment.

Outlook 2021 is sent to all Andersons’ clients and contacts. Additional copies can be obtained free of charge by calling 01664 503200. The publication is available to download from the Andersons Centre’s website and is accessible by clicking here.

Andersons will be running a series of webinars and seminars in the spring looking at the prospects for UK agriculture in greater depth. This includes two webinars taking place on 11th February which provide updates on profitability, trade and future farm policy. For more information,  please go to the respective weblinks below;

Impact of the Covid Crisis on Livestock Farming

The pandemic has illustrated that ‘Black Swan’ events do exist.  It highlights the importance of being prepared for events that have a small chance of occurring but a large effect when they do happen – they are more abundant than most people accept.  The progress of the disease in the UK has now slowed and thoughts are turning to how to loosen some of the lockdown rules in order that things can begin to return to ‘normal’ – especially getting the economy restarted.

The world has a lot to learn about how it has, and has not, coped over the last few months and continues to adapt now.  Some supply chains have demonstrated remarkable resilience and adaptability, others less so.  What would we do differently next time?  Early reports suggest congestion in Beijing now exceeds that of the same time last year.  Have we learnt much?  The UK food and farming industry needs to repair, mend and raise its resilience.  Farms, it transpires have greater resilience than most other businesses, but food supply chains are more fragile it seems.

Impact on the Dairy Sector

Covid-19 has seen some producers having to discard their milk as increased demand from the retail sector has not made up for volumes usually consumed in the food service sector.  But you cannot turn a dairy cow ‘off and on’ and production is expected to continue to rise as we head towards the spring peak.  According to the AHDB, GB average daily milk deliveries to processors for the week ending 11th April, were up 1.4% on the previous week’s average.  This is, however, 2.3% below the average deliveries for the same week in 2019, but remains in-line with the AHDB’s forecast for this year. Some farmers will be trying to dry cows off early, but this will be a small adjustment nationally.
These figures include an estimated 800,000-900,000 litres of milk which was not collected during the week ending 11th April and had to be thrown away by producers.  This volume is about 0.4% of the total milk delivered for the week.  Since then, according to the AHDB, there have been no further reports of milk not being collected.  However, in some cases, only the fat content has been utilised, with the skim reportedly ending up in anaerobic digesters.  As a result of the over-supply, producers have seen some processors introduce new pricing measures.  This has led to calls for a specific support scheme for the sector.
At the beginning of April, all Muller suppliers were asked to reduce their supply by 3% until the end of May.  It is unclear what action will be taken if a producer fails to cooperate.  Perhaps the most notable actions have been those of Medina and Freshways – both of which have a significant share of their business in the food service sector.  Suppliers to Medina will see their milk price cut by 5ppl as from the 1st May after the processor announced a further 3ppl drop, after having already said the price would fall by 2ppl.  This will see its standard litre down to 20.75ppl.  In addition, payments will also be deferred by 21 days.
Freshways has back-dated its price cut by 13 days and is also extending its payment terms.  Freshways has restricted its A pricing to 60% of a producer’s current A quota, with milk delivered in March being paid 50% at the end of April and 50% by 15th May.  On top of this, the processor is reported to have actually increased its prices to supply Nursing Homes, something which has not gone un-noticed by the national press or some of its customers in the food service, who are looking to distance themselves from the processor’s negative publicity.
Not all processors are cutting their prices though, some of the supermarket aligned contracts have seen rises. For example, Belton Farm (cheese), Barbers (cheese) and First Milk (cheese) have all announced they will retain their current price until at least June.  Before it announced the 3% supply reduction, Muller (see earlier) told suppliers they would receive a 1ppl rise from May 1st, this was rather surprising at the time and will probably be short-lived.
It is estimated around 550 farmers, predominantly those supplying Freshways and Medina are under serious financial pressure.  The RABDF has launched a survey and is asking all those affected by the Covid-19 milk crisis to submit an online daily account of their losses so that it can supply Defra with ‘accurate and credible supportive data’.  The survey can be accessed at Further comments are provided below on what support is available and what industry is calling for.

Meat Sector Impacts

The beef sector has experienced price declines recently, primarily due to the loss of the food services trade.  In the UK, about one-third of beef product sales in monetary terms are to the food service sector.  Such sales consist of the highest value products (e.g. fillet steaks).  With the implosion of demand, this has a much more pronounced impact on carcase value, which some have estimated to have declined by around £200 per head (or 15-20%) at the processing level.  Increases in retail sales which have taken place are primarily for mince and burgers, which are of lower value, thus only partially compensating for steak sales losses.  At the farm level, price declines have remained relatively small with GB steer prices on 18th April (324 ppkg) approximately 4% lower than prices on 21st March (336 ppkg).  If the Covid crisis continues for a sustained period, further farmgate declines are likely.

The lamb trade has also experienced issues, although the Easter holiday and the recent commencement of Ramadan have mitigated the problem.  That said, major concerns remain due to the closure of the food services sector in continental Europe, most notably France.  As more UK lamb comes onto the market later in the year, any oversupply at that point will have a much more pronounced effect on prices.  If restaurants do open, they are unlikely to be operating at capacity, due to social distancing measures.  As most lamb is eaten outside of the home, this will present difficulties.

Similar trends have taken place in the pig meat sector with convenience products (e.g. bacon and sausages) seeing sales increase significantly but demand for roasting cuts has decreased markedly.  There are additional complexities at play more globally in pig meat.  Processing capacity in the US has been hit by coronavirus cases amongst workers in meat plants, meaning that production lines have shut down.  Whilst Europe has not witnessed processing disruption on the scale of the US, food services demand has lowered, meaning price declines have resulted.  Imports of pig products have slowed, meaning a relatively buoyant closed market for the UK producer in the short-term.  Some items remain scarce in the shops.

Much of what will happen in the pig meat sector will be governed by the recovery in the Chinese market which has been hit by both the Covid crisis and African Swine Fever (ASF).  China has started to re-open again after a lockdown in some regions, and some analysts have predicted that Chinese demand will be back to 90% of normal levels by the end of the year.  On the supply-side, it has had to deal with ASF which has almost halved its breeding sow herd and is only in the early stages of recovery.  Short-term, the deficit of pork in China should help European prices recover from Covid.  It could also provide some support in other protein categories but will not compensate for the losses in carcase value seen in beef, nor the potential oversupply in lamb as the UK production season progresses.


In reaction to the Covid crisis, various forms of support have been instigated across Europe.  Some mechanisms have been aimed at the wider economy, whilst more recently, specific measures to support the farming sector have been announced by the EU-27.

Looking at the economy generally, whilst the UK has opted for a furlough system, this scheme is of limited use to the food sector as it necessitates workers being off work for that period.  This has created difficulties for processors who have to continue operations whilst also coping with price declines.  The wage subsidy systems in place elsewhere in countries such as the Netherlands, Ireland and New Zealand, arguably offer more support to sectors such as agri-food where turnover declines are projected, but production must continue.  In the Netherlands for example, if a 25% decrease in turnover is projected, the State will subsidise approximately 22.5% of wages for a 12-week period.

As regards the farming sector, the EU-27 recently announced a range of measures to support agricultural commodities, including the re-opening of Private Storage Aid (PSA) for several commodities including beef (25,000 tonnes) and lamb (36,000 tonnes).  Pig meat will not be supported by this scheme. For dairy this will see the opening of PSA for SMP, butter and all cheeses that are suitable for storage.  The volume allocations for each country have not been set yet.

PSA will allow the temporary withdrawal of products from the market for a minimum of 2 to 3 months, and a maximum period of 5 to 6 months.  It has been initiated to reduce supply and rebalance the market.  There are shortcomings though.  In beef, storing product means freezing it, thus value deterioration versus fresh.  Also, when the storage period ends, that product will need to be released onto the market thus increasing supply and lowering prices at that point.  The EU plans to formally agree the scheme by the end of April.  Previously, the EU also announced plans to offer increased flexibility to CAP and Rural Development funding, including larger BPS advances to farmers.

In the UK, there has not been any announcement of support specifically directed towards the agri-food sector.  Whilst many of the more generic support measures (e.g. Coronavirus Business Loan Interruption Scheme (CBILS)) will offer some assistance, there have been many industry calls for targeted support. The response from the Government so far has been to relax some elements of competition law to make it easier for processors (e.g. in dairying) to be able to come together and work out how to temporarily reduce production to create space in the market. For the dairy sector, the Government has asked the AHDB and Dairy UK to co-ordinate a proposal.  But the industry is claiming this is too late, particularly for those 550 dairy farmers who need urgent support now to help with their cashflow.  A letter has been sent to Defra calling for a targeted grant scheme similar to those being offered to the retail, hospitality and leisure sectors.

Given the extent of the price declines and impact on turnover have affected many agricultural sectors, it is evident that more targeted support from Government is required.  Otherwise, many businesses will come under severe pressure in the weeks ahead, with many likely to cease trading.  If this happens, it will take the sector much longer to recover.


Image source: Imperial College London

Source: Imperial College London

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:

Impact of Trade Barriers on UK Beef and Sheepmeat

Beef and sheepmeat trade with the EU could plummet by over 90% under a ‘No Deal’ Brexit.  This is one of the headline findings of a study recently published by the AHDB in collaboration with QMS and HCC.  The report, complied by The Andersons Centre, looks at the impact of trade barriers on the UK beef and sheepmeat sector post-Brexit.  It examined two scenarios; a Brexit Deal and a No Deal Brexit.  Some of the main points include;

  • Trade impact under a Brexit Deal scenario is relatively small:  total exports would decline by about 1% in volume terms (imports 0.8% lower), driven by EU27 declines.  Sheepmeat exports to EU27 are forecast to decline by 1.5% whilst corresponding imports would be 3% lower. These declines are chiefly due to Non-Tariffs Measures (NTMs) – i.e. the increased trade ‘friction once the UK was not part of the Single Market.  There would be minimal changes to non-EU trade.
  • Significant upheaval under No Deal: trade with the EU27 would plummet (by 92.5%) due to the imposition of tariffs, TRQs and higher impact of NTMs.  Sheepmeat trade with the EU would be almost completely wiped out.  Substantial declines in trade with the EU27 would also ensue for beef – exports down by 87%, imports declining by 92%.  Somewhat better market access for beef compared to sheep, due to TRQs, would permit some UK-EU trade to continue.  The introduction of a new 230Kt TRQ for UK beef imports would cause non-EU imports to soar by over 1,300%.  This would lower prices and drive-up UK consumption by approximately 7%.  Sheepmeat imports from non-EU countries are not anticipated to change whilst consumption is projected to rise by 14% due to declining prices.
  • Price impacts: there would be small declines under a Brexit Deal scenario (-1 to -3% respectively).  Under No Deal severe price declines would be seen.  Sheepmeat is particularly exposed (projected 24% price fall under No Deal).  Downward price pressure for beef (-4%) under No Deal arises due to competition from lower priced world-market imports.  This would be exacerbated if significant volumes of Irish beef enter the UK barrier-free via NI.
  • Value of carcase meat output: under a Brexit Deal, output would decline by an estimated 1.7% whilst under a No Deal the decline would increase by nearly ten-fold (-11.7%) with sheepmeat output nearly 31% lower which would be devastating for incomes in the sector.  Growth in exports to non-EU markets under No Deal would be insufficient to compensate for the loss of access to the EU27.

Projected Impact of Trade Barriers on Domestically-Produced Beef and Sheepmeat (Farm-Gate Level)

Sources: Defra (2019) and The Andersons Centre (2019) *Baseline Figures derived from Defra data.

  • Similar Impacts at Farm Level:  Andersons’ Meadow Farm model projects a 27% decline in profitability (£68 per Ha versus the current £93 per Ha) under a Brexit Deal, but the farm would still be profitable provided it can maintain its current support levels.  Even with support unchanged, Meadow Farm starts to generate unsustainable losses under No Deal with a projected deficit of £45 per Ha, equating to a £7,000 loss.
  • Domestic Market Opportunities: could arise for domestic producers if trade barriers reduce the competitiveness of imports.  However, the proposed access granted under additional TRQs in the beef sector would diminish this.  There are also fears that future changes to standards might make imports more competitive, thus limiting domestic market opportunities even further.
  • Frictionless trade with the EU27 as a third country is not currently possible: and looks set to remain so for at least a decade as the required technology has not yet been developed, let alone tested.  Long-term, technology can contribute to reducing this via e-certification systems, but friction cannot be reduced completely.  Post-Brexit increases in trade friction are inevitable.
  • Most significant non-tariff measures relate to value deterioration: value deterioration (especially fresh meat) arising from border-related delays associated with physical checks and sampling (associated with sanitary and phytosanitary (SPS) regulations) is of most concern to industry and is the biggest contributor to non-tariff costs generally.  Its impact on frozen products is much lower but still a factor in terms of potential penalties imposed on delayed consignments.
  • Uncertainty about future border arrangements:  under No Deal centres particularly on trade on the island of Ireland which the UK Government has claimed would remain frictionless.  If there are also no checks on NI-GB trade, whilst any exports routed from Dublin to Holyhead would be subject to tariffs and regulatory checks, the potential for re-routing meat from the Republic of Ireland via NI and onwards to GB without any checks, could result in substantial volumes of Irish beef being placed on the UK market (beyond the 230Kt TRQ) by the ‘backdoor’.  If significant volumes enter the UK in this fashion, substantial price declines for UK beef farmers would ensue.
  • Disproportionate impact on Small and Medium-Sized Enterprises (SMEs): arising from higher operating costs, fewer loads dispatched and a lower propensity to avail of special authorisations such as AEO status (which confers a lower risk on operators from a regulatory authority perspective).
  • Inflationary pressures: particularly for farm-level imported inputs from the EU27 (e.g. fertiliser, medicines etc.) but also elsewhere.  These costs are unlikely to be absorbed by the supply trade and would be passed on to consumers and/or to primary producers (i.e. farmers).  Any meat price rises are likely to cause consumers to increase their propensity to substitute with cheaper sources of protein, thereby making it more likely that beef and sheep farmers would beat the brunt of price pressures.

The study concluded that a Brexit Deal based on a comprehensive FTA and close customs and regulatory arrangements with the EU would be far preferable to a No Deal Brexit, which could have a devastating impact, especially for sheepmeat.  Whilst developing overseas markets will be crucial to the long-term success of British beef and sheepmeat, close attention must be paid to protecting existing markets, specifically the domestic UK market and the EU27 export market.  The study also found that even if the UK had never entered the EU (or EEC) in the first place, it is highly likely that markets such as France would still be vital to the British sheepmeat industry due to proximity.  To minimise any upheaval post-Brexit, the report states that having a comprehensive mutual recognition agreement between the UK and the EU is crucial.

The report’s findings were similar to several previous studies; however, this study goes into significantly more detail on how non-tariff measures could affect the sector.  It also provides useful insights on the implications of a No Deal Brexit for carcase balance in the sheepmeat sector where it estimates that up to 22% of the annual UK lamb kill (3.1 million head) could be affected.  This would be a major challenge to a sector where approximately one-third of the lamb crop is exported each year.  If it wasn’t already clear, this report underscores the importance of a good Brexit Deal for the grazing livestock sector.  The report is available via: 


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:

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:

The hidden danger in food and feed: The Andersons Centre in cooperation with the HFFA Research GmbH published a report on mycotoxins

The report highlights that it is crucial to put in place science-based measures and policies to decrease one important and emerging danger in food and feed: mycotoxins. These are toxins produced by fungi infesting plants and they pose a danger to human and animal health. In recent years, mycotoxins have consistently been one of the top three causes of food and feed safety alerts in the European Union. However, contrary to expert knowledge public perception is different: As mycotoxins are natural food contaminants, they are not considered a real danger. Graham Redman (The Andersons Centre) and Steffen Noleppa (HFFA Research GmbH) underline that mycotoxins are likely to become a greater issue for food and feed safety in the future as forecasts suggest that climate change and other drivers will further contribute towards the risk of mycotoxin build-up in, for instance, maize and wheat.

Thus, mycotoxins have and will have significant impacts on farmers’ management practices and profitability. Furthermore, they incur costs for the overall society as the toxins can deteriorate agricultural productivity and food quality and may cause severe health problems.

Download: Mycotoxin Report