Top 25pc of farm businesses will succeed regardless of Brexit scenarios, says AHDB
PUBLISHED: 08:22 19 October 2017 | UPDATED: 08:22 19 October 2017
Farmers must keep a closer eye on their costs in order to break into the top 25pc of businesses which have the best chance of coping with the potential impacts of Brexit.
That was a key message from the AHDB (Agriculture and Horticulture Development Board) as it presented analysis from its latest Horizon report, which models how different trading arrangements, farm support measures and labour availability will affect farm profits.
It analyses three scenarios: a “business as usual” approach retaining a free trade agreement with the EU and current levels of subsidy support; a “unilateral liberalisation” approach to trade giving tariff-free access to the UK and reduced support; and a “Fortress UK” Brexit with no EU trade deal and dramatically-reduced support payments.
In the worst case scenario, the report predicts average annual farm incomes could fall by more than half from £38,000 to £15,000 if the UK unilaterally opened its doors to cheap food imports while reducing EU subsidies following Brexit.
AHDB senior analyst Sarah Baker said cereals, where farm support payments made up a significant proportion of income, is one of the sectors potentially most affected by policy changes, with low-performing farms actually making a loss under the third scenario, assuming the industry does nothing to respond.
But the predicted impact varied considerably across sectors, she said, with the model showing lowland sheep and beef businesses suffering financially under the third scenario, while dairy, potatoes and pigs could benefit from changes in tariffs offering the opportunity to displace imported produce.
“Before you all rush out and buy a pig unit, the caveat is that the model does not deal well with carcass balance,” she said. “For this study, a pig is a pig. At the moment, we have got a significant import requirement from the EU, and the model says we could replace all of that with homegrown produce.
“Obviously if that was to happen, we could see up-scaling but we would have to find a market for cuts of meat that the market here does not demand. But it shows there are opportunities.”
“The main findings suggest that where a greater percentage of the farm income comes from support payments, they will be most affected by policy. There will be winners and losers regarding trade. For net importers, it could help raise prices and present opportunities to displace some of those imports.
“The key message is that the top 25pc of businesses in every sector are always in a stronger position to cope, whatever the scenario. So what are we going to do about it?”
The meeting, at the East of England Showground in Peterborough was told that part of the answer was to keep a closer eye on costs, and farmers should consider getting involved with a benchmarking programme to assess the efficiency of each part of the operation.