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What will Brexit really mean for UK farming?

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How will Brexit affect UK agriculture?

The date for the UK to leave the European Union is looming nearer, with the government putting in a March 2017 deadline for the start of two years of exit talks.

However, it remains uncertain what Brexit means for UK agriculture.

Sure, the immediate effects of the UK's vote in June to quit the EU have been favourable for farmers, with a resulting tumble in sterling boosting the competitiveness of exports, and supporting domestic prices of the likes of agricultural commodities.

'Honeymoon to end'

"We have had a little bit of a honeymoon period," said David Swales, head of strategic insight at the AHDB agriculture bureau.

However, this will "not last for ever", he added, flagging the tests to be encountered as the UK defines its post-Brexit relationships with the EU, and the rest of the world.

"There is the issue of the time required for negotiating new trade deals, which could hamper industry growth if negotiations are protracted," Mr Swales said.

Furthermore, "with limited opportunities to grow domestic markets, particularly if lack of free movement of EU workers reduces population growth, barriers to EU exports could hit investment levels".

As the financial services and pharmaceuticals industry form the focus of the government, question remains where the agriculture and food sector, currently worth around £80bn, will fit.

Here we have a look at AHDB assessment of the key Brexit pressure points for different agriculture sectors.

Dairy

The overall value of exports of dairy products amounted to £1.1bn in 2015. Of this, approximately £800m comprises sales generated to other EU countries.

Around 90% of UK dairy exports by volume are destined for EU.

Therefore, any imposition of tariffs on UK exports to the EU could cause damage to the industry, especially for cross-border trade with Ireland, where large volumes of milk are exported from the UK for processing.

That is not to say there is no reason for optimism.

"The UK is reliant on imports of butter and cheese for domestic demand, and could open the domestic industry to outside the EU," the ADHB said.

Beef

The UK exports carcasses and the meat is returned after further processing.

Therefore, this industry is reliant on tariff-free access to Europe, otherwise such a trade could involve payment of two tariffs, rendering it uneconomic.

"This could have significant implications for the cull cow market, affecting dairy as well as beef producers," according to AHDB research.

The country's dominant supplier, Ireland, with a market share of 70% is again is an EU member.

However, removal of EU tariffs, which currently prevent beef imports from outside the EU, could also open the market to competition.

These could include beef exporting countries, which are currently affected by the EU ban on the use of animal growth hormones.

Sheep meat

The UK is by far the largest exporter of sheep meat in the EU, so tariff-free access to the EU is crucial for this sector.

Exports to France make up half of all exports.

After Brexit, UK's lamb industry, currently protected by EU tariffs, would struggle to compete on prices globally.

But "there are opportunities to position as a premium product," said AHDB research.

Pork

The EU currently supplies around 60% of domestic pork demand.

Tariff or quota limits on the volume of pork traded between the EU and UK could mean price volatility, affecting demand.

EU import tariffs could also curb sow meat exports to the UK's main customer, Germany, seriously reducing the value of UK sows.

Poultry meat

Changes to trade conditions affecting poultry could have an impact on other meats.

However, it can also be a boon to the domestic industry.

"Loss of tariff-free trade between the UK and EU could increase demand for UK poultry meat but not limit the industry's ability to balance demand for different parts of the carcass," said the AHDB.

Cereals and oilseeds

Oilseeds and grains already operate in a comparatively free-trade environment globally.

Nevertheless, exposure to global markets could increase if exports to the EU are subject to tariffs and or non-EU imports into the UK are tariff-free.

"EU rules have prevented genetically modified crops," said AHDB's Mr Swales. "It will be interesting to see what the UK's approach will be."

Potatoes

A number of agreements between the EU and other countries give UK tariff-free access for exports.

This is significant, as 75% of seed potato exports are for non-EU countries.

Crisps, a growth exports market, will also be affected, as trade is mostly with EU countries.

But opportunities abound, as British processed frozen products, currently competitive on price compared with EU imports, could benefit from tariffs domestically.

Also the UK is currently bound by the EU's phytosanitary controls on fresh and seed potatoes and if the country gains flexibility to negotiate on phytosanitary regulations with potential trade partners, the sector could benefit.

Horticulture

The UK's horticulture sector is reliant on imports due to high consumer demand of several out-of-season products and produce that cannot be grown in the UK.

Current EU tariffs on horticultural imports offer a degree of market protection, but not enough to deter non-EU imports.

"Although it is possible the UK government may decide to put import tariffs in place in the absence of an EU trade deal, this could mean consumers would have to pay more for fruit and vegetables," ADHB research said.

However, such a move could also be politically unacceptable and therefore the government may seek to reduce or remove tariffs.

Though this would little affect existing trade with the EU, which is tariff-free, it would also apply to shipments from non-EU countries.

By Tanya Ashreena

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