Economic uncertainty and extreme weather make agriculture an unpredictable business, says Alan White
What image comes to mind when you think of a farmer? A scowling ruddy-cheeked man sitting ten feet up in the air on an enormous tractor pulling a huge trailer loaded with bales of straw? Perhaps a grumpy ruddy-cheeked man astride a quad bike, cursing his collie dog for its apparent inability to keep some errant sheep in order?
Well, if your imagined farmer is grumpy, it is probably for good reason. Brexit uncertainty combined with extremes of weather which may be put down to climate change, make modern farming an unpredictable business. Our imagined farmer is probably scowling because he is worried about whether or not he will make any money selling his load of straw or flock of lambs.
The EU has set up a “solidarity fund”, part of which will help offset the effect of Brexit on EU farmers. In contrast, UK farmers have had repeated promises of support, but to date nothing has been made available to farmers, nor even any detail of what support might be forthcoming. We all know that promises don’t pay the bills.
Earlier in 2019, when the country planned to leave the EU, prices for Scotch beef reached a three-year low. There has been some improvement since, though that could be attributed to reduced supply. Bad weather in the first half of 2018 was followed by a hot, dry summer, which at the time we all enjoyed. However, late snow in 2018 meant that mortality rates among livestock were significantly higher than usual, and the hot dry summer meant lack of fodder for winter 2018/19, so farmers sold stock, often at a loss, in the second half of 2018 to avoid having more mouths than they could feed. Farmers can ill-afford another year of losses.
While “deal or no deal” might make good TV, there is a direct impact in the real world now. As various politicians have said, no deal simply means the UK would trade on World Trade Organisation terms. Put bluntly, WTO tariffs would mean UK exports to the EU would be more expensive. That additional expense would be borne by the exporter, but the merchants who actually sell produce into the EU have included clauses in contracts so that any additional cost will be passed on to farmers.
Amid all the media attention around court cases and speculation about “what if”, it has gone relatively unnoticed that in March this year the Government published a set of tariffs which the UK would apply on an interim basis in the event of a no deal exit. These tariffs are generally lower than those currently applied under EU rules to imports from third countries. The impact of that would mean imported produce from around the world will have access to the UK at lower cost than has been the case to date. While that might sound like good news for consumers, the impact could be far reaching. The British Retail Consortium, the Food and Drink Federation and the National Farmers Unions are warning that the effect of tariffs and probably more importantly, non-tariff trade barriers such as veterinary inspections, food safety standards and certification, will lead to shortages of fresh food and drink, particularly fruit and vegetables
The exchange rate also has a significant effect on consumer prices. A weaker currency means imported produce is more expensive in the UK. Uncertainty around the eventual outcome has weakened sterling and if that continues then imported goods will be more expensive than they might otherwise have been.
There are also wider environmental issues to consider. Given the declared climate emergency, can it really be the case that importing produce which has travelled thousands of miles is a sustainable food policy for the UK? Now, more than ever, the country needs to support its primary producers, the farmers. Government needs to provide financial support to ensure farm businesses can survive the likely shock effect Brexit will have on them; consumers need to buy locally produced food; and we all need to adjust our diets to become less reliant on non-domestic food groups. In that way we can all help tackle climate change and contribute towards “net zero”, whilst at the same time supporting our friends and neighbours who work the land.
Alan White, Partner in Land and Rural Business at Gillespie Macandrew