How will Brexit impact on animal feed?
A ‘no-deal’ Brexit would be “an immense political failure on both sides of the equation”. That’s what Prof. Michael Wallace told delegates at the R&H Hall conference last week.
He continued to say that it would result in an increase of approximately €55/t on the cost of a ‘typical’ cattle compound crossing the border. He added that the scenario was unlikely, but warned of its consequences.
How much compound feed do we use?
Compound feed used in the Republic of Ireland increased by approximately 3.4% per annum from 2008 to 2017 – that’s an increase of 126,000t/year.
In 2008, approximately 3.75 million tonnes of compound feed were used in this country. That figure is now at almost five million tonnes. The expansion of the dairy industry played a major part in this increase.
How much feed travels across the border?
Approximately 175,000t of feed travels south and 147,000t travels north, according to Michael.
“A total of 320,000t of feed travels across the border and that equates to about 5% of the market. It’s not a huge amount, but it certainly is an important trade; quoting these kind of figures of only 5% denies the fact that, for some businesses, that cross-border trade will be quite significant as an overall share of the business.”
Michael explained that the nature of feed sourcing is that products come from all parts of the globe; this in turn “dilutes Brexit exposure”.
Approximately 20% of Irish compound feed ingredients come from the UK. However, when looking at different feed ingredients, 2017 saw the highest amount of wheat and barley being imported from the UK to the Republic of Ireland.
Brexit trade impacts
The first obvious impact of Brexit on the feed sector will be the addition of extra transaction costs.
“I think the no-deal scenario is highly unlikely. It can’t be ruled out, but the consequences of that for both the EU and the UK are enormous and I think, if we end up there, it will represent an immense political failure on both sides of the equation.
“The more likely situation will be where we no longer have the frictionless trade we enjoy between the UK and the Republic of Ireland within the EU.”
This situation will bring about technical barriers in relation to quality assurance criteria and product standards. The feasibility of an all-island supply chain may no longer be as practical in this event.
Michael added that lower non-tarriff barriers for feedstuffs can be expected on feedstuffs compared to animal products. He estimated that the ‘tariff equivalent’ would put a 2-5% cost on trade between the Republic of Ireland and the UK.
This results in the price of imported feed from the UK being €1-3/t more expensive than other feed imports. These extra costs will be diluted through big shipments and the real effect might be seen in cross-border feed deliveries – which are smaller, Michael noted.