Will animal feed supply be affected by Brexit?

The news surrounding Brexit is all doom and gloom at present, but there are many sectors being proactive ahead of the historic event. The Irish Grain and Feed Association (IGFA) is one of these organisations.

Like it or not, our high livestock population and a declining tillage area means this country imports a large amount of ingredients for animal feed.

In recent years, Ireland has produced approximately 2.3 million tonnes of cereals each year – of which only a small amount enters the human food chain. Traditionally, this country has been 92% self-sufficient in cereals.

However, an expanding dairy herd and a constant need for products like maize and soybeans for energy and protein means that we import approximately 3 million tonnes of feed ingredients to the country each year.

Many of these imported products are co-products from the food industry and not digestible by humans. Without a livestock industry these co-products would go to landfill.

Minerals, trace elements and basic cereals are all products that we import from the UK. Many of these items have a short shelf-life and all come through the port. It’s a complicated business and farmers need to be sure of a constant supply.

Deirdre Webb – director of the IGFA – assured AgriLand that everything possible has been done by its members to ensure farmers have feed supplies. Animal feed supply should not be disrupted once March 29 arrives.

The organisation has been working since June 2016 – with members – to avoid chaos in the case of a hard Brexit.

“It has been very difficult to get the authorities to discuss a hard Brexit and that is where we had problems. Certainly, the closer we got to Christmas the harder it was and while the political stance was no hard Brexit, for us to get prepared for a hard Brexit, we had to consider and prepare for a hard Brexit. It is still difficult to get clear answers on the issues.”

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Supplies are ready; costs are stable

However, feed availability is not expected to be affected at farm level in the short term. Forward planning by the IGFA members will help to maintain costs. In the short-term animal feed prices are not expected to rise due to Brexit, but this can not be guaranteed into the future.

“A percentage of supplies are in store now. We’re prepared from that perspective. The feed-material supply chain is prepared. From the logistics perspective an awful lot of work is being done,” Deirdre explained.

“The difficult decisions are being made today [Wednesday 16]. Buyers will be changing supply patterns today.

On some commodities we buy three-to-six months ahead so people will have waited for this vote and they will be changing [supply chains] for March delivery.

The majority of additives, such as vitamins, enzymes and trace elements, have traditionally come through the UK. These additives are more complicated to import and store than basic cereals or corn.

“Some additives cannot be stored for long periods. Adding extra storage time or bringing the product longer distances may make the supply of such additives more critical.

“The reality is feed businesses will now make decisions to protect their farm customers just as we did in the fodder crisis. Some of these decision will mean walking away from long-term business relationships.”

Agriculture price index

Brexit preparation

So how did the IGFA prepare for Brexit?

Deirdre explained: “We took a look at the situation immediately back in 2016 and decided that the first thing that we needed to do is to make judgements on what the tariffs might be. So we gave buyers guidance on how to look up their exact codes and estimate the tariff.

“That way they were able to estimate the cost of them. Our first line – which would be our feed material importers – started to re-organise their supply chain.

Importers would be accustomed to doing that anyway based on currencies, so while re-organising supply chains is difficult, it would be something that we would do normally.

Pinch-point ports

In the case of a hard Brexit and border controls, product will be delayed coming in at the ports.

“The pinch point obviously is going to be the port capacity for bulk commodities. This is why we need a wider discussion around port strategy and the dependence of the rural hinterland on our deep-sea ports.

“A hard border for the mills along the border will result in more pressure on southern ports for supplies. Otherwise border mills suffer the cost and delays crossing the border. Most businesses have used the facilities offered by InterTradeIreland to fully consider these issues.”

Image source: Safe Bulkers

Feed schemes

Brexit will also mean that new markets will have to be found for Irish products. Ireland has to stack up against other countries and be easy to trade with in terms of meeting quality standards.

Ensuring that different feed and quality systems are accepted as equivalent in other member states was a crucial step taken by the IGFA. This avoids extra costs from implementing different schemes, from different countries.

“We have equivalence across our feed schemes in Europe with the main European schemes. So what we started to do with them is build a further benchmark and we’re building that with the International-Trade Centre, which is part of the World Trade Organisation [WTO].

“So basically, the International Trade Centre will host the independent benchmark, we have provided the technical input.

“There will be two things in this for upstream customers and our farmers. For the feed industry, it means a supermarket would be able to look at that benchmark or indeed a regulator in a third country and see that the Irish feed mills have a credible system in place and that it’s gone through this global benchmark. So that’s a major initiative and objective for us.

“It means once a feed safety system has gone through the benchmark it’s easier to gain equivalence or gain access [to a market] for feed, but it’s a support as well for our livestock farmers and their livestock products. It’s reducing duplication and providing everyone with greater transparency. The customer at the end of the day is the retailer.”

Environmental foot printing

“On the environmental side the feed industry has completed a project with the commission on environmental foot printing for feed,” Deirdre explained.

“We’ve completed the EU Product Environmental Footprint [PEF] pilot and we’ve continued to promote product environmental foot printing, as a means of self-improvement when it comes to environmental performance.

“The PEF feed methodology is endorsed by the commission. Customers will know that what we’re saying about our products, or the relevant benefits of our products, is credible and transparent.

“Linked to that is the work done on a publicly available database on feed ingredients from the GFLI [Global Feed Life Cycle Assessment Institute]. Altogether the Commission expects that environmental foot printing for the feed industry has become a lot more accessible with the publication of the PEF pilot guidance.”

Breaking trade relationships with the UK

In recent times currency events have meant that Ireland had moved some of its trade away from the UK, but from now if we have a hard Brexit, the UK may not even be an option for buyers.

Deirdre explained that trading books will now be split to ensure supply. The UK grain, even if it was competitive will not be destined for the south of Ireland this season. Traders simply cannot take the risk on tariffs. Orders going in now will be to avoid the UK.

Historically, they would have been a very good supplier of the basic cereals and losing the UK as a potential supplier of extra feed grains is not what we would choose.

“When businesses switch a supply chain it doesn’t go back in my experience. When you lose a customer it is very hard to win them back. Some of the suppliers that we will be losing now have supplied this country for 40-50 years,” Deirdre added.

Brexit is a major challenge for us. However, with planning we feel we can mitigate against the most damaging effects in the short term.

Deirdre commented that: “It can be a time to bring forward decisions that needed to be made and that is a good thing.

“IGFA feed members are constantly facing challenges and experiences tells us, just like our farm customers, we are resilient and can meet these challenges.”