A report by agricultural economists based at the Agri-Food and Biosciences Institute (AFBI) has highlighted the major effect that the pursuit of liberal trade deals post-Brexit could have on the beef and sheep sector.

Three scenarios

Using the widely respected FAPRI-UK economic modelling system, the AFBI economists looked at three different scenarios in a study funded by UK agricultural departments.

Their “worst-case” scenario is that the British government applies zero tariffs on imports as it opts to do trade deals around the world, leaving farmers fully exposed to global prices.

The effect is hardest felt in the beef and sheep sector, with the model predicting that beef prices will fall by 45% by 2025, with UK suckler cow numbers down by 42% over the same period.

In the sheep sector, price is projected to drop 29% by 2025. Both sectors take the biggest hit because current prices here are so far ahead of the world market.

Pigs, poultry, dairy and grain prices also fall under this scenario, but given that local prices are closer to international markets, the reduction is generally around 5% to 10%.

Scenario two

The second scenario is that the UK falls out of the EU without a free trade agreement, and therefore must trade on World Trade Organisation (WTO) rules where each country or trading bloc has its own tariff barriers.

In this scenario, it is assumed that the UK would apply current EU tariffs. The result is fewer imports from the EU, and higher prices for beef (+17%), pigs (+18%), poultry (+15%) and milk (+30%).

That would then filter through in higher prices for consumers, something that the British government will want to avoid.

However, even though other sectors might benefit in this scenario, that does not apply to the sheep sector given its reliance on EU exports to drive prices.

The model predicts local sheep prices would be 30% down by 2025.

Scenario two

The final scenario explored is that the British government and EU sign up to a free trade agreement post-Brexit allowing tariff- and quota-free access in both directions.

There would still be some added cost to business, estimated at 5%, to facilitate trade (for example, country-of-origin checks), but if this scenario played out, the model predicts the effect on all sectors would be relatively small.

Illustrative

Before drawing firm conclusions, it should be recognised that the scenarios presented are illustrative.

They do not take into account other local issues such as processing capacity in NI (for dairy and sheep) in the event of a hard Brexit, the importance of trade for carcase balance (selling fifth quarter) or consumer preference for British food.

In the end, we could end up with a mix of different scenarios such as a free trade deal with the EU, but also deals around the world at low or zero tariff rates (the preferred option of some British government ministers).

Other trade deals

What the work does highlight is the danger to the beef and sheep sector of the government pursuing deals with countries such as Brazil, Australia and New Zealand which can produce beef and sheep at much lower cost than us.

Commenting at the launch of the report yesterday (Wednesday), Professor John Davis from AFBI pointed to the current high reliance of the agri-food sector on trade with the EU and vice versa.

“If we want stability, we will hope to have a free trade agreement with the EU. Anything after that creates uncertainty.

"Ultimately, staying in the customs union and the single market is the best scenario of all,” he told the Irish Farmers Journal.

Also responding to the report, Conall Donnelly, the chief executive of the NI Meat Exporters’ Association (NIMEA), said that it clearly shows that “no deal” is not an option for the beef and sheep sector.

The red meat sector would be decimated under a cheap food policy.

"This would have immediate and devastating consequences for jobs in farming, processing and the wider rural economy,” he said.

He also highlighted that if the UK leaves the EU customs union, it will have a free hand in setting tariffs on food imports.

“The question is whether we can rely on future administrations not to abuse this power for political expediency.

"This report goes to demonstrates why a visionary, 25-year strategy from the UK government, laying out its commitment to food security, resilience and standards is now more important than ever,” he concluded.

In its response to the report, the Ulster Farmers’ Union warned farmers to be careful when drawing conclusions.

Read more

NI cattle prices holding as numbers tighten, lamb quotes up

Big opportunities for NI beef in Philippines