Since the starting gun was fired at the result of the Brexit referendum, there has been – and continues to be – a huge debate about the nature and scope of future UK agricultural policy once we are out of the European Union.
An array of interest groups, from the CLA to the NFU, the RSPB, the Soil Association, food producers and supermarkets, have been lobbying hard to put forward their cases for how farming should look from 2019 when we expect the UK to leave the EU.
For decades, the British farming community has been the recipient of generous subsidies under the EU’s Common Agricultural Policy (CAP). Last year CAP payments to the UK totalled about £3bn, making up about 70 per cent of farmers’ net incomes. Once the UK leaves the EU, these payments will stop, potentially endangering businesses across the country.
Expect a significant reduction in direct support and potential increases in the cost of getting products to market
At this point there’s no knowing what support the Government will provide when we exit the EU and the CAP. But we must expect, at the very least, a significant reduction in direct support and potential increases in the cost of getting products to market (tariffs).
How will farmers need to react?
- Become more flexible
Adapting farming arrangements and access to land (contracting, share farming, tenancies, ownership)
Revisiting their fixed costs, such as machinery and labour (changing to leasing arrangements and temporary labour)
Using land in different ways to promote sustainability e.g. using less productive areas to provide habitat and enhanced biodiversity.
- Add value wherever possible
Producing for specific markets to obtain premium prices
Aim to differentiate your produce and introduce on farm processing.
- Drive efficiencies by reducing overheads and the costs of production
Reducing production costs by rationalising (creating fewer, larger enterprises)
Enhancing production performance through improved technical management and a focus on the most productive areas
- Manage risks including:
Production risk – through technical excellence and appropriate investment
Commodity price risk – through enhanced marketing strategies and product differentiation
Financial risks – through restructuring debt and finance arrangements
Who will be hardest hit?
What we call the UK’s farming industry is really a collection of farming systems, each with their own supply and demand characteristics, support systems and environmental impact. Each is at a different stage of maturity in reacting to a no or low subsidy world.
Arable and extensive livestock farmers will experience the greatest challenge and change.
For example, intensive livestock (pigs and poultry) producers receive negligible subsidy support and their businesses have undergone huge rationalisation, so the impact is likely to be less obvious here. Fruit and vegetable producers receive more subsidy, but their major issue is their reliance on migrant labour.
Dairy farmers receive greater levels of subsidy. However, direct aid forms a very large proportion of income and profit for arable and extensive livestock farmers.
It’s these last two sectors that will experience the greatest challenge and change, particularly in lowering the costs of their overheads.
Uncertainty with opportunity
Some see the end of the CAP as a chance to explore a different approach and new import and export markets. Customs checks, labour shortages, tariffs – all are a possible, but not inevitable, part of a changed farming landscape. However, with food security a key risk, some public funding is highly likely in this brave new world. What farmers are hoping for now is for the Government to show some vision to help them make the brave decisions that will be necessary.
Agriculture is a litmus-test for the Government’s Brexit negotiations… If [it] can make British farming a success post-Brexit then it will be the clearest indication that the country can succeed outside Europe.
NFU President, Meurig Raymond