Beef and sheep farms across both these islands could see their incomes virtually wiped out in the event of a hard Brexit, but across all farm sectors the impact of Brexit is far from uniform, a new study has concluded.

Highlighting the issues at the annual conference last week organised by animal feed importers WR Barnett / R&H Hall, was Professor Michael Wallace from University College Dublin (UCD). Wallace, originally from Monaghan, previously worked at AFBI and only recently took up a position at UCD, after three years at Newcastle University.

He presented soon-to-be published work undertaken during his time at Newcastle University which looked at the impact of three different Brexit scenarios on UK farm incomes.

Soft Brexit

The first scenario considered a so-called ‘soft’ Brexit, where the UK and EU put in place a free trade agreement (FTA), and the UK adopt EU tariffs on imports (therefore does not go off and bring in cheap food, tariff free). Under a FTA some checks are required on trade (non-tariff barriers), but in general the overall impact on prices and farm incomes is small.

Hard Brexit

The second scenario is the so-called ‘hard’ Brexit, favoured by many of the most fervent Brexiteer politicians. Under this scenario the UK becomes a free-trading nation, setting zero tariffs on food imports from around the world. That brings UK producer prices down to world levels.

“The UK is the second or third biggest food importer in the world, so there are lots of countries looking for access. The beef and sheep sector has been protected by the EU. Beef, in particular is very vulnerable as global competitors are much cheaper,” explained Wallace.

Under this scenario beef and sheep producer prices fall by around 40 and 20% respectively. In NI, it would leave 35% of beef and sheep farms with zero cash income (assuming direct payments continue as at present). But take away direct payments, 80% of beef and sheep farms would have zero cash income.

The situation on other farms is not as drastic. Average dairy farm incomes are cut by two-thirds, but still remain positive. The situation on arable units is little changed, although if direct payments are removed average incomes in both sectors move to a negative. That leaves pigs and poultry.

“Both sectors are relatively Brexit proof, whatever the scenario” suggested Wallace.

WTO option

The final scenario is where the UK leaves the EU without a deal, and adopts the EU tariff schedule on all imports, including from remaining EU member states. The same tariffs apply on exports to the EU. It is the so-called WTO (World Trade Organisation) option.

With beef, pork, poultry and cheese exports from Ireland to Britain facing a significant tariff wall, it would see UK prices rise to consumers, and deliver significant increases in farm business income on UK farms, especially on dairy farms. The only sector taking a hit is the sheep sector, given its reliance on the EU market during peak supply.

“There might be a short period where this WTO option happens, but the pressure on consumers would be immense, so politically it is not feasible.

“In my opinion, ‘no deal’ is highly unlikely – the consequences for everyone would be enormous – it would be a massive political failure on both sides,” said Wallace.

He also pointed out that as a whole, it is the Scottish of the four UK nations that are most at risk from Brexit, given the significant contribution of the beef industry (and suckler cow) to overall farm output.

However, outside of the UK, perhaps it is farmers in the Republic of Ireland who get hit the most from a ‘hard’ Brexit.

“The beef and dairy sector is exposed, and there could be huge impacts there. A ‘hard’ Brexit is likely to be more of a problem for the industry this side of the Irish border,” confirmed the UCD professor.

Volatile times in financial markets

Last weeks’ Barnett-Hall conference heard from financial adviser Paul Sommerville, who considered the current state of global financial markets.

He believes markets are in for a very volatile 18 to 24 months, which makes it difficult to make any firm predictions.

Among the largest economies, the USA is currently performing well, which has helped keep the US $ strong, but Sommerville argued that not everything is quite what it seems, and in 18 months we could see the US economy starting to struggle.

He also predicts that growth in the Chinese economy will be slow, partly driven by a debt timebomb amassed since 2007.

“I think China could cause trouble in the world economy, but I don’t think it will go bust” he said.

However, he was gloomy about the prospects for the Japanese economy, describing debt there as “staggering” and pointing out that with an ageing population set to shrink by a third in the next 50 years, there are real questions about who can pay this debt down.

“Japan will be at the absolute forefront of the next financial crisis,” predicted Paul Sommerville.

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