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Coronavirus: UK farmers face brutal test ahead of Brexit

The pandemic has exposed tensions over food security that are now playing out in the UK-EU trade talks

At his farm in the Shropshire village of Middleton Scriven, Richard Yates has been saying goodbye to his cows.

After the UK entered lockdown in March, the milk processor Mr Yates had supplied for six years said it would end daily pick-ups, cutting down to every two days to save money. But that would have required the 54-year-old farmer to buy a larger milk tank. Combined with plunging milk prices, it made his herd of 150 Friesians financially unviable. Mr Yates — who also raises lambs and grows arable crops — decided to sell the cows.

“My father is buried about 20 yards away from my milking parlour. We used to call ourselves ‘cow men’. There is a certain empathy that one gains from milking cows twice a day, every day,” Mr Yates says. “I’ve sold them with a very heavy heart.”

Other parts of his farm also look vulnerable. His Easter lambs were hit by a drop in prices due to the pandemic, while a second flock of 1,000 lambs born in March and April will be sold early next year just after the UK’s Brexit transition period is scheduled to end. With about a third of UK lamb currently sold into the EU, the shape of the market into which they will be auctioned remains uncertain.

It is on farms such as the one owned by Mr Yates that the impact of coronavirus is rapidly colliding with the country’s plans for Brexit, the issue that consumed British public life until the arrival of the pandemic.

Disruptions from coronavirus have elevated the issue of food security globally. Governments have rushed to shore up food supply chains upended by the closure of restaurants and the grounding of flights.

This process carries added urgency in the UK, which, having left the EU, now faces a critical decision about the future of its food market. The UK’s transitional trading and border arrangements with the EU end on December 31, and without a permanent trade deal by then the UK could crash out, cutting into food export markets and severely hurting business for farmers such as Mr Yates.

Even without such a “no-deal” exit, the terms the UK agrees with other countries on trade in food and agricultural products will determine the extent to which farmers are forced to compete with rivals from overseas. This will affect levels of food self-sufficiency and perhaps dictate whether the UK’s fragmented farming sector must face a brutal transformation into a globalised industry.

Minette Batters, president of the National Farmers’ Union, says government ministers are divided on how to safeguard the industry post-Brexit. “It’s a major reset moment for food and farming, and a failure to get it right will be disastrous,” she says.

Up to this year UK farmers received about £3bn in annual EU subsidies under the Common Agricultural Policy, which aims to protect European farmers and food supplies. While trading freely within the bloc, they had been protected from competition outside it by high tariffs on agricultural food products. Free movement of people has also benefited British farmers: about 70,000 to 80,000 mainly eastern European seasonal workers travel to the UK to harvest fruit and vegetables each year.

The existing subsidies will be gradually replaced with a UK environmental payments scheme which is promised to be of similar value, starting in 2021. But details of this scheme are still unknown, as are the UK’s future trading arrangements. New trade deals could subject farmers to cheaper overseas competition, potentially bringing down food prices for consumers, but also forcing some of the UK’s 140,000 farms out of business.

Making a nod to the farming industry’s main fear, Ms Batters says: “I have heard ministers say that Brexit is the opportunity to bring in cheap raw ingredients and add value to them under the Union Jack.”

The ‘hungry gap’ returns

The period from March to early June in the UK used to be known as the “hungry gap” — a period when winter root vegetables were no longer ripening but spring fruits and vegetables were not yet ready.

For decades, UK consumers have not had to experience the hungry gap. A globalised food industry filled it. Fresh Ghanaian mangoes can be packed on to a flight to London and reach stores within 72 hours of picking. Even the millions of Britons in food poverty are less subject to the seasons than to the generosity of food bank donors.

But this spring the spectre of food scarcity appeared again. In the weeks before and just after lockdown began on March 23, UK shoppers were confronted with a sight not seen in generations: empty supermarket shelves, as panic buying compounded the impact of households transferring food buying from restaurants to stores.

The food industry responded quickly. Factories cut their ranges to churn out more of the key products. Supermarkets rationed items per person and ramped up home deliveries, while the government relaxed competition rules so they could co-ordinate.

Henry Dimbleby, co-founder of the Leon Restaurants chain who was last year asked by the UK government to conduct a major review of the country’s food system, says: “It is hard to convey, having seen it from behind the scenes, what an extraordinarily good job the food system has done [in the pandemic].”

But more stubborn problems are emerging. Since the closure of restaurants and other food service outlets, surplus milk, dairy products and potatoes have led prices to drop, filled warehouses and briefly forced milk dumping. When restaurants closed, meat producers lost the market for many of the most expensive cuts of each animal, squeezing them financially. And fruit and vegetable farmers began a race to recruit local workers to replace overseas pickers no longer able to travel.

As the UK negotiates on trade deals with the US and EU, farmers have seized on these renewed concerns about food security to push the argument for supporting domestic production. A fresh round of talks with the EU began on Tuesday, with the sides still far apart on issues such as fisheries and competition rules; talks with the US started in May.

Last month the government released a scheme of tariffs to be imposed in the event of the UK failing to reach a trade deal with the EU. They included duties on beef, butter and poultry to help protect UK farmers, meeting with tentative approval from the sector.
Just over half of the UK’s food is sourced domestically; that figure was as low as a third in the run-up to the second world war, before reaching a high of more than 80 per cent in the 1980s.

“Being able to be as self-sufficient as we can in what we are good at is not a protectionist argument,” says Ms Batters. “We’ve always supported sourcing out of a global food larder but we have a good climate here, we have a large population and we are an island nation. We absolutely should be aiming to produce more of what we are good at.”

But Mr Dimbleby warns that over-reliance on local food production presents its own risks, such as shortages resulting from the failure of a domestic harvest. “We don’t know what form the next crisis is going to take, so having diversity in the system is a good thing: diversity of species, of supply, of supply chains, of types of farming,” he adds.

On a question key to post-Brexit trade negotiations, both say the UK must insist that all imported foods be produced to the same animal welfare, safety and environmental standards as those grown domestically.

“I don’t think it makes any sense,” says Mr Dimbleby, “to create a system that enhances and restores our environment here and just export those problems overseas in the form of trade deals bringing in lower-standard foods that undercut what we produce in the UK.”

Cabinet divisions

Beef treated with growth hormone and chlorine-washed chicken, two methods of meat production that are allowed in the US but not the UK, have become totemic for those who suspect a free-market approach to farming may prevail post-Brexit.
] The Financial Times reported in May that the UK government is drawing up plans to cut tariffs on US agricultural imports to help push forward a trade deal. Led by international trade secretary Liz Truss, the plan has exposed divisions in government. Senior officials at the Department for Environment, Food and Rural Affairs and the department’s secretary of state, George Eustice, together with the Cabinet Office minister Michael Gove, are worried the US tariff cuts will be followed by UK concessions on animal welfare standards.

A Defra spokesperson says: “We have been clear that in all of our trade negotiations — including with the US in our first round of negotiations — that we will not undermine our high domestic environmental protection, animal welfare and food safety standards by ensuring in any agreement British farmers are always able to compete.”

Wyn Grant, emeritus professor of politics at the University of Warwick, says farmers may lose out to the demands of other business interests such as financial services and manufacturing as the talks progress. “In trade negotiations with the US — but not just with the US — there are other sectors that you could argue stand to benefit substantially, and those benefits would override any concerns about farming.”

Not all observers of UK agriculture worry about import standards. Some believe the shock of being forced to compete internationally would, over time, prove healthy — potentially boosting productivity.

Shanker Singham, a trade and competition lawyer and fellow at the Institute of Economic Affairs, a free-market think-tank, opposes attaching stringent animal welfare and environmental standards to imports. The IEA is close to the hardline pro-Brexit MPs that helped propel Prime Minister Boris Johnson to power. “If you are going to take that kind of approach, you should never have left the EU,” he says. “You can dress up your protectionism as something else, but it is clearly protectionism.

“[This] is an opportunity for UK farmers. They are banned at the moment from US markets in lamb and beef — that could change. There is massive protein demand from all around the world, places like the Gulf. UK farmers ought to do well by servicing that.”

David Hughes, emeritus professor of food marketing at Imperial College London, says the perception of UK food as higher quality and hence more expensive than elsewhere is not always accurate. Argentine beef farmers “could meet our animal welfare requirements at a substantially lower price than we could produce”, he says.

“They were major suppliers to us, then we blocked them when we joined the EU. We put up a nice big fortress because we wanted to be more self-sufficient,” he says. “In a world of swashbuckling, cavalier round-the-world trading, when you make trade deals with some larger countries that have lower-cost agriculture, they are going to want access to your markets.”

Farming’s fragile finances

Financially stretched consumers may also stand to gain. Mr Singham believes ministers are acutely aware that throwing open access to the UK food market could help bring down domestic food prices.’

Conservative MPs have traditionally been close to the farming lobby, whose members are over-represented in their rural constituencies. But Mr Johnson won December’s general election with the aid of what became known as the “red wall” — traditional Labour voters who switched sides in some of the opposition party’s heartlands in the Midlands and northern England.

“From this particular government’s perspective, if you do want to hold on to ‘red wall’ constituencies, you are going to have to do things to lower the price of energy, food and so on,” Mr Singham says.

According to Euromonitor, UK consumers devote 6.8 per cent of their spending to food, compared with 11.9 per cent in France, 11.1 per cent in Spain and much higher proportions in developing economies. In the US, food accounts for just 5.6 per cent.

For most farmers, financial rewards are scarce. More than half of farms generated a negative return on capital in 2018-19, government data show. Figures from Mr Dimbleby’s team reveal that UK food producers in 2017 on average made a 1 per cent return on capital employed, compared with 11 per cent for processors, 12 per cent for manufacturers, 8 per cent for wholesalers and 6 per cent for retailers.

The sector’s fragmentation is one reason, Mr Dimbleby suggests: unlike in France, UK farmers have not formed co-operatives. Failure rates in the UK are low and land prices high, while an inheritance tax break on agricultural land encourages farms to stay in families. The structure of the UK industry has left farmers facing both intense financial pressure and accusations of being overly cushioned from global markets.

Now the pandemic has focused attention back on to them.

Mr Yates, in Shropshire, is hopeful. He says: “We mustn’t take our eye off the fact that hopefully the country appreciates the value of a regular supply of high-quality, affordable, traceable food . . . Perhaps this will be a fork in the road.”

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