The unknowns and ‘what ifs’ of Brexit for the tillage sector

CAP, exchange rates, straw, trade agreements…the unknowns of Brexit.

We all know that Brexit isn’t simple and while Fiona Thorne gave a very comprehensive outline of what is likely to happen on tillage farms in an Irish context at last week’s Teagasc National Tillage Conference, she later outlined some of the unknowns and “what ifs” of Brexit. As she said herself it’s a long list.

A very important factor to consider is the future of CAP and what it will look like after 2020.

Fiona explained that 63% of the specialist tillage family farm income comes from direct payments and any changes to the CAP will have a big effect on this.

Also Read: Tillage income second highest, but 63% is coming from direct payments

Exchange rate movements and inflation in the wider economy were among some of the other unknowns that Fiona mentioned that can impact on prices and income.

Straw

The Teagasc economist admitted that straw is something that the team are scratching their heads about. Straw receipts and the amount that moves north and south of the border is a big unknown for many farmers.

What’s happening in other sectors?

The effect of Brexit on other sectors will also impact the tillage sector. For example, a downturn in the livestock sector would affect animal feed demand.

Fast forwarding to the year 2026 Fiona explained why the impact on the tillage sector is unknown.

“The demand for cereals in the year 2026 is affected by what’s happening in the beef, pig and poultry sectors, but this analysis is not good at capturing large amounts of structural change within any of the individual sectors.

So, by the year 2026 there could be significant structural change not just within the tillage sector, but also within the beef sector in particular, on foot of these dramatic price changes that we’re talking about.

Free-trade agreement

Fiona added that another policy scenario that could occur is a free-trade agreement between the UK and the EU.

She continued: “We would still have non-tariff barriers to trade which would apply to imports coming into this country.

“So you still have to bare in mind that even though WTO tariffs mightn’t apply in that situation, you would still have logistical costs, transport costs and phytosanitary rules and regulations that would have to be met that would have costs associated with them.”

Unilateral trade liberalisation scenario

The UK could also decide to liberalise trade and reduce or remove its import tariff.

“What we have to remember is that the Irish tillage sector is a net importer of cereals and, even in this trade liberalisation scenario, you’d still be looking at WTO tariffs applying on exports from the UK into Ireland.”

WTO tariffs:
  • Wheat – €95/t;
  • Barley – €93/t;
  • Oats – €89/t.