No-deal Brexit: Cereal prices expected to increase by 5% at the Irish farm gate

An increase in income from cereals, an increase in input prices, but an overall decline in family farm income due to other enterprises on tillage farms – what a ‘no-deal’ Brexit might bring.

Teagasc economist Fiona Thorne enlightened the attendance at the Teagasc National Tillage Conference about what might happen after Brexit.

In order to do this Teagasc examined two scenarios – a baseline and a ‘no deal’ – in the year 2026. The first scenario was based on the UK never having voted for Brexit.

The second was based on the UK leaving the EU on March 29 with no trading arrangement in place with the EU. If this happened World Trade Organisation (WTO) rules would kick in.

The two scenarios are outlined in the diagram below. The ‘no deal’ would mean that for every tonne of wheat that comes into Ireland a €95/t tariff would be applied to it; the tariff on barley would be €93/t and oats €89/t.

Fiona marked an ‘X’ through these tariffs in the diagram below as Ireland would no longer import from the UK because the prices would no longer be competitive.

In order to examine the effects on family farm income Fiona outlined factors that can impact on price changes.

She also stressed that 20% of the output on tillage farms, over the last number of years, has come from a beef enterprise on the farm. So the gross output doesn’t just come from cereals.

Four specific factors that impact on price changes:
  • Status of the sub sector – if the sector is a net importer or a net exporter;
  • Trade competitiveness – size of the tariff if applied, price competitiveness;
  • Trade openness – amount of trade with the UK;
  • Non-tariff barriers to trade – the UK is no longer our go-to point for imports. However, additional costs of moving to other countries for products are not that high.

Effect of a ‘no-deal’ Brexit on cereal farms

“Wheat and barley will not see massive increases in prices as a result of a ‘no-deal’ Brexit, but cereal prices would be expected to increase by about 5% at the farm gate in Ireland, as a result on a ‘no-deal’ Brexit,” Fiona explained.

Input prices are expected to go up in many cases.

“We’ve increased input prices for seed and concentrate as a direct result of the increase in cereal prices and we’ve also factored in non-tariff barriers to trade associated with additional transport and logistical costs for getting inputs into this country in the ‘no-deal’ situation.”

From L-R: Some of the speakers at the Teagasc national tillage conference were John Spink, Teagasc; Steven Kildea, Teagasc; Guy Smith, deputy president of the National Farmers’ Union; Fiona Thorne, Teagasc; John Cullen, John Cullen grain and tillage farmer; Ewen Mullins, Teagasc; and Andy Doyle, chairperson. Image source: Dylan Vaughan

Family farm income decline

The family farm income on a tillage farm is expected to drop by about 3%.

“We’re looking at a slight decline overall in family farm income at a system level for ‘no deal’ versus the baseline.

Family farm income is expected to decrease by about 3% for specialist tillage farms in this scenario. This is really to do with the importance of beef and sheep on tillage farms.

“Most of the severe price changes that we’re witnessing here are coming from the beef output produced by tillage farms; that was for the average producer.”

Fiona added that there will be a decrease in income no matter how efficient the farm is.

On a farm which is just producing cereals there is expected to be an increase in income in a ‘no-deal’ situation. Fiona outlined that on a per hectare basis the income from a winter wheat crop should see a slight increase.