Will the Brexit tractor drag down forlorn farmers?
Britain has voted to leave the EU, perhaps making one of the most audacious economic and political decisions in years. But how does Britain’s independence affect farmers? Now the shock of the fallout has died down, UK farmers remain sharply divided on the consequences for the industry. Here we explore some of the issues they face:
- Commodity prices will rise It is inevitable that food prices will rise with the pound slumping to its lowest level in 31 years and the UK heavily reliant on imports. Whilst the uncertainty puts us in a position of weakness we think increases will be kept to a minimum as it is unlikely others will want to isolate us. It is anticipated that we will seek to negotiate deals with other non EU countries to cushion any losses.
- Export tariffs affecting livestock With trade negotiations likely to be delayed British exporters will be left uncertain about their futures. The sheep sector remains the most vulnerable with concern over tariffs on exports, opening the market to competition from South America. Our dependency on the EU is huge as we currently don't export to the US so farmers will be hoping that they will retain access to the single market post Brexit.
- CAP Common Agriculture Policy
UK farmers receive approx £2.5 - £3 billion a year in farm subsidiaries under the EU’s common agriculture policy, farmers will want reassurances that the government will put a similar support scheme in place. In addition there was huge support for environmental schemes with research into the effect of nitrogen and pesticides on land, this research must be maintained to ensure UK farming is kept at the fore front. The NFU will be calling for guarantees that support for farmers post-Brexit will be at a sustainable level so that farmers can remain competitive in the EU.
- Overseas Labour
Perhaps the fruit and vegetable industry face the largest threat as they may find it more difficult to hire staff for the harvest season.UK producers rely heavily on overseas workers to harvest their crops. If the government targets immigration as part of its negotiations it could have drastic consequences and will result in an increase in the amount of imported vegetable and fruit.
In summary, it is unlikely that Europe will turn its back on Britain as we have one of the strongest economies in the world but it will require some tough negotiations and may mean that there is some short term uncertainty and lack of investment. There is anecdotal evidence of foreign buyers already moving to take advantage of the weak pound and acquire agricultural land. For an industry which is already troubled it will be a tough couple of years, there is undoubtedly a strong future for farming in the UK but of upmost importance is the industry managing this time of uncertainty. Wholesalers are already beginning to put their prices up and the large supermarkets are continuing to squeeze producers, it is essential that farmers keep a close eye on costs and maintain good relations with suppliers.
Lenders have exercised a great deal of forbearance to support their customers in these difficult times and avoided taking any enforcement action despite the terms of loans being breached. However many agricultural observers believe the point is being reached where creditors may start taking action to recover their debts. Many suppliers have extended their credit terms to support farmers and this in turn is now jeopardising their own businesses.
Author: Simon ThomasView all Our News