Farmgate prices will need to fall heavily without Brexit deal

Farmgate prices may have to drop significantly to remain competitive if the UK fails to negotiate a trade deal with the EU before it leaves.

Without a trade agreement, UK agricultural products will be subject to the hefty import tariffs the EU slaps on goods coming from outside the single market. It will also face expensive non-tariff barriers that add to costs, such as import licences.

The warning comes from farm business consultant Andersons following an analysis of possible Brexit scenarios, including the effect on three farm models.

See also: Farming sets out how policy should look post-Brexit

Sheepmeat

For UK sheepmeat to remain as competitive as it currently is on the Continent, deadweight lamb prices would have to fall 17.5% to 330p/kg, according to Andersons.

This was based on current deadweight prices of about 400p/kg and the EU’s import tariff of 12.8% plus €1.71/kg (£1.45/kg). It also assumed some of the additional costs would be offset by changes such as currency and the supply chain would absorb 20% of the additional costs.

Milk prices

Milk prices would be in line for a 10% fall, according to the Andersons calculations, with a downward pressure caused by restrictions on raw milk from Northern Ireland to the Republic of Ireland and a need to find non-EU buyers for surplus milk powders.

Feed wheat prices, however, would need to fall 20% in order to continue trading competitively, based on UK prices of £125/t (UK feed wheat is currently trading below this) and a €95/t (£80/t) import tariff.

Trade deal deadline

Michael Haverty, senior agricultural economist at Andersons, said it was likely the UK would fail to negotiate a trade deal within the two-year deadline allowed after officially triggering exit talks.

Unless the EU was to unanimously extend these talks, the UK would automatically lose its membership and all preferential trade arrangements.  

It was believed this period without an EU-UK trade agreement may last two to five years post-Brexit, while a new agreement was negotiated, said Mr Haverty.