UK farmers are facing the prospect of a 25% drop in lamb prices as buyers on the continent seek to protect themselves from the consequences of a no-deal Brexit.
UK farmers facing 25% lamb price drop as Continental European buyers shun contracts
According to the British Meat Processors Association (BMPA), retailers in the EU are refusing to sign long-term contracts with UK exporters to avoid paying tariffs of 40-65% on lamb after October 31, the current Brexit deadline.
Nick Allen, chief executive at the BPMA, told Farmers Guardian, Agrimoney’s sister title, that UK Prime Minister Boris Johnson’s promise to leave the EU “no ifs, no buts” was “hitting home” on the Continent.
‘Not offer long-term contracts’
He said: “Retailers are concerned that if they sign a contract, they are obliged to take the lamb and it puts the onus on them to pay the tariff, so what they are not doing is agreeing prices.
“They are not saying they are not going to buy it, but they will not offer long-term contracts.”
Instead of offering the security of a contract, retailers are proposing to buy at “spot prices”, the cost at which lamb can be sold for immediate delivery, which once tariffs are included, would make UK produce uncompetitive.
The industry faced similar problems in the run-up to the last Brexit deadline on March 31, but at that time of year, the beef sector was harder hit.
“Come October 31, or around that time, you will start to see an immediate crash in farmgate prices,” said Mr Allen.
“How low that will go, we do not know.
“The National Sheep Association and AHDB have been forecasting a 24-25% drop in the lamb price, but I am feeling even more pessimistic than that at the moment.”
‘Close to the wind’
Mr Allen also suggested ministers would need to be careful to ensure any no-deal support package for farmers did not violate World Trade Organisation (WTO) rules, which prevent governments from compensating for tariffs.
“Whatever scheme they come up with has to distance themselves from compensating for tariffs, otherwise they will find they will be raising questions at the WTO,” he said.
“The government might sail close to the wind on this because it will take the WTO a long time to deal with it and even then, what will they do, but ministers have to be mindful.”