Focus turns to China as sheep farm incomes set for Brexit hit

Ireland exported an estimated 50,000t of sheep meat valued at €240 million in 2016, with 60% of total exports heading to British and French markets.

Last June, the UK electorate voted to leave the European Union and its departure could have negative impacts on the incomes generated on Irish farms.

Dr. Kevin Hanrahan, Head of Teagasc’s Rural Economy and Development Programme, touched on how this could materialise at the Irish Grassland Association’s Sheep Conference last week.

One of the areas Hanrahan said could impact on Irish sheep farm incomes is reduced payments under the Basic Payment Scheme – known to many farmers as the Single Farm Payment.

“The basic payment depends on the European budget and the UK is the second largest net contributor to the European budget.

“When the UK leaves there will be a hole in the European Union’s budget and no other member states are putting their hands up to fill that hole,” he said.

“The European budget will get smaller and CAP still accounts for 40% of European spending.

Almost certainly there will be fewer resources available for agriculture and, post-Brexit, the basic payment will get smaller in Ireland.

Hanrahan said that the funding available under the Basic Payment Scheme could fall by 10% – meaning that an Irish farmer’s ‘cheque in the post’ will be considerably reduced in a post-Brexit environment.

The Teagasc economist also spoke about tariffs and the role they could play in such an environment.

“Tariffs, by construction, are prohibitive and are designed to stop trade from happening.

“If the British were facing these tariffs, they would have difficulty getting lamb into the French market so maybe there is an opportunity for Irish farms,” he said.

A free-trade agreement might mitigate the negative impact of tariffs being applied to Irish shipments to the UK, he said, but it depends on whether or not we can get one.

However, he added, when an analysis was carried out it showed that Irish farm incomes would take a hit from Brexit.

We have tried to take account of price shocks from Brexit.

“In summary, we have also tried to take account of the fact that if the UK leaves, the European budget would get smaller, the CAP budget would get smaller and farm income supports would get smaller.”

The Teagasc representative added that the Irish sheep sector is dependent on support payments and with many farms also carrying a cattle enterprise it is likely that incomes will fall.

“So despite the fact that we may see some improvement in sheep prices, we are also likely to see a dis-improvement in almost everything else,” he added.

Also speaking at the conference, Joe Ryan, Senior Executive with Meat Industry Ireland, said the markets of interest are the US and China.

“There is a keen interest among our members in terms of access to that [US] market.

“It is not going to happen overnight, but it is something that the Department of Agriculture has started and submitted the initial documentation – so hopefully it will happen sooner rather than later.

China will probably take a little bit longer.

“We have seen how long the beef application has taken, but we are hopefully close on that front and positive news there might help us drive on an application in terms of sheepmeat access,” he said.

Bord Bia’s Declan Fennell also touched on the importance of the Chinese market.

“China is the biggest producer, the biggest importer and the biggest consumer of sheepmeat globally.

“And what happens in China certainly has a huge impact in terms of the global sheepmeat market and, indirectly, what happens here in Ireland.

“We saw a boom period from 2014 up to 2015 where there was a huge demand and we saw more New Zealand and Australian product going into China.

“Then the market stabilised and went through its own temporary slowdown. On a positive note, that’s beginning to return – in terms of growth coming back.

They won’t go back paying the sensational prices that they did before, but the appetite to import is huge.

“There are only three countries that have full market access for sheepmeat exports to China. That’s New Zealand, Australia and, to a lesser extent, Uruguay.

“All eyes are on New Zealand,” he said.

The Bord Bia Lamb Sector manager also discussed a major promotional campaign being spearheaded by Bord Bia in Asia.

“We secured a €3.7 million campaign to promote European beef and lamb in Asia – China being one destination,” he said.

Some 80% of the funding was made available from the European Commission, while the remaining 20% was provided by Bord Bia.

Fennell added that it will give Ireland an advantage in showcasing its sustainability standards as Bord Bia is leading the campaign.