Brexit: How farming sectors will react

• Beef
• Sheep
• Dairy
• Pigs
• Grains and oilseeds
• Inputs

One of the biggest factors in the UK’s beef market is production in Ireland. The country exports 90% of all the beef it produces, half of which it sends to the UK.

With the pound weaker against the euro, this may well make Irish beef less attractive.

The strong trade link with the UK means the Irish Republic is also the most likely of member states to want a trade deal in the event of Brexit.  

The UK’s appetite for prime beef cuts means the vast majority of what it produces stays in the country. In this sense it is not nearly as dependent on access to export markets as the sheep sector, says Debbie Butcher, senior analyst at AHDB Beef & Lamb.

See also: Brexit – 5 economic factors farmers must watch

Having said that, what is exported tends to be lower-value cuts and cow beef, which serves to help balance carcasses and the dairy trade.

More than 90% of what we export goes to other EU members, with 70% going to the Netherlands, Ireland and France. So access to those markets is still important.

The UK also exports to Hong Kong, Vietnam and Africa, but these are immature markets, and only represent low value and low volume.

The sharp fall in the value of sterling has put UK sheepmeat exports in a slightly more favourable position, while making home-grown lamb more competitive domestically, says AHDB beef and lamb analyst Mark Kozlowski.

A lot will now depend on how the value of the pound, euro and NZ dollar change and what kind of market access the UK is granted, particularly to France.

Roughly one-third of UK sheepmeat is exported, with about 85% going to other EU members.

According to HMRC, of the 102,000t exported in 2014, about 50,000t went to France alone.

For non-EU countries to make up for what France takes would be significant, said Mr Kozlowski. Demand from the Chinese market (via Hong Kong) had slowed, due to high stocks of NZ lamb and higher domestic production.

Depending on what happens with the UK’s economy, consumers may have less money to spend and lamb purchases are very price sensitive.

If prices stay as they are, removing support could have very serious consequences for the UK sheep industry, says Mr Kozlowski.

The main short-term effects on UK dairy farms will be on milk and feed prices – both should rise as a result of the fall in sterling value.

Kite Consulting reckons farmgate milk prices could improve by 1.5p-2p/litre in the short term, helped also by gradually tightening supply.

Arla’s currency change mechanism would slow the impact of currency-related price increases, says Kite’s John Allen.

“The impact will feed through over the next two years. As Arla is a UK market leader, other players could delay their increases. We will have to be aware of this impact.”

While there had been an immediate currency-related soya price rise, along with increases for other feeds, global stock levels of soya could ease prices by autumn, countering the currency impact, says Kite. It predicts a likely average concentrate feed price increase of 5-7%.

Overall, currency changes could raise the cost of milk production on a typical dairy farm by 0.7p-1.0p/litre.

Kite says dairy staff from other EU countries should be reassured that in the short term, there is no need to make rash decisions.

The UK is a big net importer of pigmeat, bringing in 862,320t in 2014 compared with exports of 266,200t.

The weak pound will make imports less competitive against domestically produced pork, says Martin Howarth, AHDB Pork analyst.

Retailers are unlikely to change their buying policies quickly, he adds, but these higher prices will have a more immediate effect on prices paid by processors, as they will be handling both imported and domestically produced pigs and pork.  

Pig prices have been rising anyway and this might give added lift, says Mr Howarth.

Longer term, if more UK processors get approval from the Chinese, pork exports could grow there, where demand is currently booming and the pound has fallen from 9.7956 Chinese Yuan (CHY) to 8.7955 CHY since the referendum. However, this is not so much dependent on being in or out of the EU but on gaining approvals.

Pork (and poultry) producers may also see British consumers choosing pork over more expensive proteins, particularly lamb, if their spending power reduces.

Grain prices have improved by up to £5/t since the referendum result, benefiting from the lower value of the pound.

This put feed wheat harvest prices in a range from £107-£114/t ex-farm midweek, with Scotland at the top end of that range.

Result day – Friday 24 June – saw little movement in ex-farm prices but a rise of almost £5/t in futures.

However, farmer activity picked up a bit on Monday and Tuesday, says Frontier Agriculture’s grain director Simon Christensen.

Export prospects have improved but little business is being done on that front until more is known about harvest size and quality, as combines are rolling in southern and parts of Eastern Europe.

Mixed weather in western Europe was posing potential quality questions, says Mr Christensen.

Oilseed rape has bounced back following the Brexit vote to a level of about £270/t ex-farm for harvest, about £15-£20/t higher than the previous week.

Global oilseed consumption is set for a record, while soya and palm oil production prospects have been knocked by unfavourable weather.

Feed ingredient prices have seen some of the biggest post-vote changes, with the pound’s fall against the US dollar pushing soyameal prices up by £25-£30/t to about £360-£365/t spot, delivered.

Soya leads other protein prices, which have also risen, says Eric Thomas, feeds commercial manager at the Wynnstay group.

Maize, maize gluten, imported beet pulp and maize distillers have risen by up to 7%. Rapemeal saw smaller increases at first but was now chasing soya up, say traders.

Quotes for further forward are more difficult – cash is tight on farm and markets are waiting for currencies to settle and for more concrete details of harvest yields and quality.

Fertiliser prices have risen post-result, putting UK ammonium nitrate (AN) prices up by about £4/t on farm. This means it is still available at less than £170/t for July – £50-60/t lower than a year ago, while imported AN has gone up by £10-£15/t to about £165/t.

However, currency uncertainty means traders are reluctant to put out offers on imported material for now. Red diesel has risen by up to 3p/litre on currency and uncertainty.