Import threat to sheepmeat sector

Australia and New Zealand are pushing the UK to open its food market after Brexit and allow the same quota of low-tariff imports as they send to the whole of the EU. The UK would mirror the tariff rate quota of the whole EU bloc which would mean that larger imports of sheepmeat would be admitted tariff free. It is also likely that Australia would be interested in increasing their exports of cheese to the UK.

This could be devastating for the sheepmeat sector which has always been the most vulnerable to Brexit through a combination of increased imports and tariffs on exports to the EU. Upland farming is highly reliant on sheep.

The Government has produced some warm words, but Defra secretary Michael Gove has talked about 'an outcome that is net positive for UK agriculture.' In other words, some vulnerable sectors could take a hit.

Applying the whole EU TRQ to the UK would avoid the tricky problem of dividing it up while the EU would want to avoid a situation where its trading partners demanded compensation because the UK's departure would make their access quotas less valuable than before. This would particularly apply where an exported product is popular in the UK which is true of sheepmeat. It would also offer lower prices for consumers. Sheep farmers may have a tough fight on their hands.

Can new technology solve labour shortages in farming?

There is considerable interest in the potential of new technology for making farming more productive and less reliant on difficult to obtain labour. I think that the development and application of these technologies should form a key part of a domestic agricultural policy post Brexit, but no one should pretend that they offer a quick, readily available and affordable fix.

Big farms already use semi-autonomous satellite-guided tractors and combines, which can drive in straight lines without overlapping. However, these big machines also tend to compact the soil, affecting its long-term viability and plant growth.

Harper Adams University, using government funding from Innovate UK, have adopted machinery to drill, spray and harvest crops autonomously using open source software, cameras, lasers and sensors. They used drones and scout vehicles to monitor the field and collect data by bringing back soils and crop samples.

The first crop is slightly wobbly where the tractor failed to keep to its line. The first hands free crop is expected to yield only 4.5 tonnes per hectare, compared with 6.8 tonnes using conventional methods.

In the horticulture sector, where labour problems are particularly acute, machines to pick strawberries and apples are being deployed, but they pick at only one third of the rate of a human and miss 15 per cent of the crop. Moreover, the machines can cost something approaching £200,000. Most farmers reckon that their large scale deployment is at least a decade off.

However, it is clear that one narrative that is being put forward (see Matt Ridley in The Times today is that access to cheap labour has held back the introduction of new technology in British farming.

The deputy president of the NFU has told a meeting at the Liberal Democrat conference that future growth in agriculture will be driven by overseas labour. There was no sign of government action on labour and trade issues: Lack of action

Worker shortages draw media attention

The problems that Brexit has caused for labour intensive sections of agriculture have received considerable treatment in the media. The latest analysis in the Financial Times looks at Barfoots of Botley whose biggest crop is sweetcorn: Worker shortage

Barfoots operate along a strip of the south coast in West Sussex where there are many big horticultural firms. I have visited a number in the Littlehampton area. The area has a particularly favourable climate due to the shelter provided by the Isle of Wight.

Picking sweetcorn is a hard grind. It is repetitive and physical and must be done quickly if the product is to be on the shelf in optimum condition. Workers do 12-hour shifts on a range of tasks from picking to processing.

This year's headcount at Barfoots has been running about 15 per cent short, representing 50 to 60 workers. I would think that the biggest factor is the post-referendum fall in the value of sterling, combined with better opportunities in countries such as Poland. Seasonal workers also say they no longer feel welcome in the UK.

Another Brexit-related concern is, that like many horticultural concerns, Barfoots only produce in the UK from May to September. Production then shifts briefly to Germany, then to Spain and onwards to Morocco and Senegal. Post-Brexit import duties could play havoc with this arrangement.

What are the answers? Some would say pay more, but most workers earn between £8 to £10 an hour and there have been improvements in accommodation. Some growers offer English language lessons.

In the short run Barfoots are going to cut out labour intensive crops such as broad beans which offer small profit margins (although they are a useful part of a rotation).

Many see the answer in new technology, and I will consider this further in a later post, although it is not easily applicable to many labour intensive crops.

Seasonal workers will still be needed for many years to come and post Brexit there needs to be an arrangement for temporary work permits on the lines of the old SAWS scheme. Opinion poll data suggests that nearly two-thirds of voters would be prepared to support such a scheme.

Post-Brexit fruit picking apprenticeships

This is a dated satirical piece, but it makes some telling points in an amusing way given the Government's reluctance to accept arguments about the need for seasonal farm labour: Newsthump

Geographical indications become a Brexit issue

The basic idea behind geographical indications (GIs) is to prevent a domestic producer giving a name to their own product that gives the impression to consumers that it comes from the protected region covered by the GI, e.g., Parma ham. It is seen as a means of preventing the public from being misled by producers jumping on the bandwagon of a successful GI and also to prevent unfair competition.

The EU has been favourably disposed to GIs because it sees them as a means of encouraging high quality, value added food production in the EU which will increase returns to farmers. This has led to some conflicts with producers elsewhere in the world, e.g., with the United States over Parmesan cheese.

The EU has over 3,300 protected food and drink products which have a specific geographic origin. Sales of protected labels account for some six per cent of the EU's food and drink sector. The products are sold on average at a price more than two times higher than similar non GI products.

In the Brexit report from the Yorkshire Agricultural Society we did consider GIs, but in terms of continuing protection for British products such as Orkney cheddar cheese and Cornish pasties.

However, in one of its latest position papers the EU is demanding that Britain should legislate to recognise products such as Champagne, Parmesan and Beaufort cheese after Brexit. Such protection should be comparable with that provided by Union law: Position paper

Migration plans would hit farming hard

The plans for migration control after Brexit set out in the draft government paper leaked yesterday would hit farming hard, particularly the field vegetable and horticulture sectors which are labour intensive and rely on seasonal labour from elsewhere in the EU.

Under the Government's plans low-skilled workers wanting to stay more than three months would have to register with the Home Office. The National Farmers Union claimed that the plans would cause 'massive disruption to the entire food chain'.

The Government seems to have disregarded the arguments put forward by farmers, claiming that the shortage of labour can be dealt with by recruiting from the local labour pool and new technology. In practical terms we are near full employment, particularly in areas where fruit and vegetables are grown, and those workers that are available often lack the aptitude to tackle the work on offer. As for a shortage of labour becoming a spur for new technology, there are limitations here, particularly in terms of easily damaged fruit. I will look at this issue in more detail in a subsequent post.

There is some evidence that even Brexit voters are relatively relaxed about seasonal workers coming in for a time limited period. If voters found that fruit and vegetables were more limited in supply and more expensive to buy, they might start to question the wisdom of the Government's approach. The issue could readily easily by dealt with by a new version of the Seasonal Agricultural Workers Scheme, although the fall in the value of sterling continues to make the UK a less attractive destination for seasonal workers.

New aide has remain background

Former deputy chief whip and remain supporter Sir John Randall has been appointed as special adviser on the environment to Theresa May. Sir John was formerly the MP for Uxbridge and South Ruislip. In 2015 he stood down in favour of Boris Johnson.

It is expected that he will play a key role in shaping future government policy for agriculture. He is seen as an antidote to the pro-Brexit instincts of Defra secretary of state Michael Gove.

Farmers have been complaining that Gove's energetic interventions are just intended to raise his political profile, but if farming does better as a result, everyone is a winner. However, some farmers consider that he is paying too much attention to conservation and wildlife interests.

Hard Brexit threat to farm exports

Campaigning organisation Open Britain claims that agriculture could suffer if existing trade agreements with the US are lost as the result of a hard Brexit: How trade could be derailed

19 trade agreements could be lost. Exports including beef, lamb and oilseeds could face new trade barriers. It is argued that these agreements will be lost once Britain leaves the EU unless the UK can negotiate new deals with the US, or negotiate to remain within the EU-US agreements, which in my view is not very likely. As far as a trade agreement with the US, the Americans are likely to want concessions on agriculture.

The agreements include food safety and animal welfare standards covering beef and pork as well as concessions on cereals and oilseeds.

Ireland position paper raises more questions than answers

That is a general view of the Government's position paper on Ireland, but it applies particularly to agriculture. It is suggested that one option to avoid disrupting the substantial trade in food and agricultural products between Northern Ireland and the Irish Republic could be 'regulatory equivalence.' The UK would agree to achieve 'the same outcome and high standards, with scope for flexibility.' Is the latter phrase some kind of get out clause?

It is difficult to see how one could negotiate trade deals with countries like the US which would want entry to the UK market for its hormone reared beef and chlorinated chicken. Such deals are supposedly one of the benefits of Brexit.

If one had a customs agreement with the EU similar to that with Turkey, it should be noted that this excludes agricultural goods. Agricultural products would then need to be checked to ensure tariffs had been paid and that there was compliance with phytosanitary standards.

I am sceptical about claims that there is a technological fix to these issues, particularly given the current clunky state of HMRC's IT systems. The logical solution would be to have a border in the Irish Sea, but that is politically unacceptable, particularly with the DUP breathing down the Government's neck.

The New Zealand question

When Britain was originally negotiating and then confirming by referendum its membership of what was then the European Community, one of the issues was New Zealand agricultural products. I need to go back and read the contemporary literature, but essentially the point was that Kiwi exports of butter and lamb were important to its economy and the UK wanted to continue to have access to them tariff free, so it was agreed that quantities of these products could enter the common market free of tariffs.

New Zealand subsequently adopted a 'scorched earth' farm policy which caused more pain than many of its admirers admit and was also accompanied by a devaluation of the NZ dollar (as well as freeing up the country's ports from various restrictions). New Zealand has thus opened up new markets for its dairy products in East Asia and the Gulf states.

Nevertheless, that does not mean that the European market does not matter. New Zealand has formally objected to a plan that would limit the amount of its lamb sold in Britain. The UK Government wants to share the tariff rate quotas with the EU after Brexit. The hope is that replicating the EU's tariffs and quotas would make matters easier in the World Trade Organisation.

It is somewhat ironic given that it was hoped that one of the first post-Brexit free trade pacts would be with New Zealand. You might wonder what the UK could export all the way to New Zealand, but apparently it is about financial services.

The case for small farms

The CPRE are the latest contributors to the debate on farm policy post Brexit and they make the case for the benefits of small farms: Uncertain harvest

The report highlights the declining number of smaller farms. It argues that farm size diversity is a crucial consideration as we move towards Brexit. 'It could help deliver the many public benefits that we need farming to provide and that public funding – and the market where possible – should foster and reward.'

There is a case to be considered here. Big farms generally get a poor press, although many of them make substantial efforts on environmental protection. Moreover, they are potentially more internationally competitive, not that that has ever been a big concern for the CAP.

Migrant labour supply problem worsens

Growers of fruit and vegetables are reconsidering their investment plans as it becomes more difficult to recruit migrant labour from elsewhere in the EU. Some may relocate to eastern or central Europe: Pickers shortfall

According to a report in The Guardian: '“The perception from overseas is we are xenophobic, we’re racist, and the pound has plummeted too. We’ve gone with Brexit and that makes us look unfriendly.” Those are the words of John Hardman, director of Hops Labour Solutions, which supplies about 12,000 workers a year to food-growers. He reckons that when it comes to “food-picking jobs in agriculture – which means everything from strawberries to brussels sprouts”, there is currently a Brexit-related shortfall of about 20%, which chimes with recent surveys by the National Farmers Union.'

Farming tomorrow

It's difficult to keep up with the flood of reports on the future of agricultural policy after Brexit. Many of them say rather similar things, which I suppose reflects an emerging consensus focusing spending on 'public goods', although there is still a lack of clarity on the policy instruments that would deliver these objectives. The latest report comes from the Policy Exchange: Farming Tomorrow

It argues that subsidies on food production should be phased out and in the words of Policy Exchange's director, Warwick Lightfoot, be directed 'towards more sustainable goals - the landscape and its appearance.' Tariffs should be lowered unilaterally, so farmers would face a double whammy.

It is argued that the UK should replace the CAP with a new British Agricultural Policy which focuses on payments for ecosystem services (or natural capital) and phases out production subsidies and income support by 2025. Any remaining subsidies should be redirected towards protection for natural and public goods, and increasing R&D to boost innovation and the sector’s long-term productivity. The difficulty is that no one has yet come up with a feasible scheme for pricing ecosystem services.

Professor Tim Lang has described the report on Twitter as a 'clear neoliberal farm Brexit call' while another tweeter commented 'Bye-bye, quality British food.

A new and lasting food governance

Tim Lang, Erik Millstone and Terry Marsden call for a new and lasting food governance in a paper on 'Food Brexit: a time to get real': Food Brexit report

They argue, 'Brexit could, all too easily, diminish food security in the UK, where parts of our food system are already far too insecure; this rich country is pocketed with real food poverty, for example, and diet-related disease is part crippling the NHS. We understand food security to be the achievement of a system that provides food that is sufficient, sustainable, safe and equitable.

Brexit could, however, undermine all four of those aspects, in what is an already insufficiently secure food system. Moreover, the UK food system should not only aim for domestic security, it should also not undermine food security in any of the countries from which we buy, or to which we sell, foodstuffs.

This briefing suggests changes that the UK food system should be undertaking if its long-term structural needs are to be addressed. Our case is that the UK food system is highly vulnerable to the rising costs of diet-related ill-health, ecosystems damage, economic dependency, and social reliance on migrant and relatively low-waged labour.'

As far as the CAP is concerned, they state, 'So far, the national UK discussions about the various options for, and effects of, Brexit on food and agriculture policy have been discussed as if they were separate and independent variables, rather than interconnected.'

They note, 'The Brexit process is happening at a particularly vulnerable time for the UK food system - a time when it has become excessively dependent upon imports, while some of its population face worrying levels of ‘food poverty’, i.e. poverty which affects food consumption, 119 and while its productive base is declining, in terms of the number of farms and of small independent businesses, upon which it has historically relied.'

Benefits of high animal welfare standards

The House of Lords European Union committee has produced a report on Brexit and farm animal welfare, emphasising the many benefits brought by the high standards adhered to in the UK: Animal welfare

The report states that 'the UK has some of the highest farm animal welfare standards in the world. UK producers are rightly proud of these standards, and there is cross-sector support for maintaining high levels of farm animal welfare after Brexit.

In order to deliver on its commitment to preserving these standards, the Government must transpose existing EU law on farm animal welfare into domestic law so as to be effective on day one after Brexit. Thereafter, the Government, in consultation with the industry, consumers and other relevant stakeholders, will be able to consider whether to improve these standards.

Scientific evidence and advice should be at the heart of any farm animal welfare policy decisions, and the Government must ensure that withdrawal from the EU does not lead to a shortfall in funding for farm animal welfare research.

The Government must also bear in mind that while high farm animal welfare standards can be a selling point for UK producers, they also increase the cost of production. In the event that post-Brexit trading relations with the wider world, and if standards diverge over time with the EU, lead to increased imports from countries operating lower farm animal welfare standards, UK producers could become uncompetitive. This could undermine the sustainability of the industry or incentivise a race to the bottom for welfare standards—contrary to the wishes of the UK industry.

The Government must negotiate to include provisions regarding farm animal welfare in future free trade agreements. There is some doubt, however, over whether animal welfare can be used as a rationale to restrict imports from other countries under WTO rules. The Government must therefore explore the extent to which developments in World Trade Organization (WTO) case law allow the use of farm animal welfare as grounds for restricting imports under WTO rules.

The demand for high-welfare products is ultimately driven by whether consumers prioritise purchasing those products, at added cost, rather than buying cheaper, lower-welfare products. Labelling systems should be simplified, thereby helping consumers to make informed decisions about supporting farm animal welfare. Farm assurance schemes also help build consumer confidence through their high standards, inspections and associated labels. The Government should encourage the uptake of voluntary farm assurance schemes in the UK.

High farm animal welfare can be seen as a public good. We invite the Government to consider whether the delivery of this public good should be supported through agricultural funding after Brexit, bearing in mind that any such funding must respect World Trade Organization rules.'

The suggestion that funding for animal welfare could be part of a future domestic agricultural policy is an interesting one, although it is not easy to envisage the policy instruments that might be used. I also doubt whether it is technically a 'public good', more of a 'merit good'.

Thinking out of the box

Somehow I missed this comprehensive report by three leading agricultural economists and an environmental specialist when it first came out. It considers the issue of further modernisation of the CAP: RISE Report

The analysis laid out in this RISE Foundation report shows how the current CAP does not make best use of the considerable resources deployed to support land managers through the necessary transition.  The largest instruments of the CAP, the pillar 1 direct payments, which account for over 70% of CAP funds are ineffective, inefficient and inequitable.  It is suggested that these direct payments should be systematically reduced and resources switched to provide targeted assistance, including transitional adjustment assistance to help farmers adapt and rise to the specific challenges of improving productivity, resource efficiency and risk management and to pay farmers to provide specific environmental and other public goods.

The report argues that the two principal aspects of the CAP requiring the most attention are land management and risk management. Where land management is concerned, the greatest worry is that the current environmental standards are not being met. The report therefore proposes a redesigned, more integrated tiered structure of supports with clearer targets on the environmental outcomes sought.

The core issue concerning risk management is that the present approach in the CAP towards market orientation has not gone far enough. Indeed the sheer scale of direct payment inhibits farmers from better mitigating the risks they face.  The report outlines the full range of instruments that are most appropriate for managing risk at the farm level, market level and nationally at times of catastrophic risk.

Finally, following the lessons that have been learnt from previous successful reforms, the report suggests some procedural changes to kick-start a more effective reform process which brings together more constructively the conflicting interests in agricultural policy. This is particularly important given the difficulty of securing effective reform in the past.

It is suggested that the Commissioners (and their Directorates General) for Agriculture and Rural Development, for Climate and for Environment15, should be tasked to work jointly to produce the next reform proposals for adoption by the College of Commissioners. Following this, the co-decision process should be correspondingly adapted. This might involve the proposals being considered by an appropriate configuration of the Council Ministers who normally serve on the Agriculture, Environment or perhaps Energy Councils.

Gove to outline farm subsidy plans

Michael Gove will outline his plans for the future of farm subsidies today: Green Brexit

Farmers will have to earn support in the future by providing environmental benefits, although it looks as if there will be some scope for assistance with investment and food promotion. Upland farmers will also continue to receive support.

What can the UK learn from New Zealand?

It is often suggested that the UK could learn from New Zealand's experience of abolishing agricultural subsidies, although such comparisons often overlook the way in which the climate there favours pastoral agriculture and the extent to which devaluation assisted the transition (a devaluation of 55 per cent over ten years).

The AHDB has taken a systematic look at what might be learnt from New Zealand, emphasising the differences between the state of the New Zealand agriculture and economy in 1984 and that of Britain today: Kiwi subsidy reforms

Ten per cent of farmers were in serious financial trouble by 1986 and land prices fell by over half.

The principal conclusions are:

• Should the structure of farm support change there is likely to be a challenging transition period (my view is that phasing and managing this transition is crucially important.)
• In order for the UK agriculture industry to be successful post-Brexit there will need to be a focus on efficiency and streamlining.
• There may be opportunities for the UK to carve out niches and for agriculture to thrive through increased vertical integration.
• Agriculture operates most efficiently when decisions are based on actual market returns.

NFU suggests solutions to seasonal worker crisis

The NFU has warned that the supply of agricultural workers on UK farms is now 'in jeopardy' for the next two growing seasons. They have produced a report on the subject: Access to a Competent and Flexible Workforce

The options they suggest are:

• Reintroduction of a seasonal agricultural workers scheme
• An Australian style points based immigration scheme
• A UK points system to attract non-UK nationals
• Retaining an element of free movement

I would prefer a new SAWS scheme as there is already experience in operating such a scheme which has worked smoothly in the past.

Match fit for Brexit

Wyn Grant with Professor Rob Edwards (left), chair of the Farmer-Scientist Network at the Great Yorkshire Show.

'Match fit for Brexit' was the theme of a seminar sponsored by the Farmer-Scientist Network of the Yorkshire Agricultural Society at the Great Yorkshire Show, chaired by the writer and led by James Severn and Richard King of farm business consultants Andersons. They are offering a 'Match fit for Brexit' business review to farmers for £650 plus VAT.

Andersons realistically see area payments ending and they see the following possible forms of support in the future with a budget half of the current one:

• A wildlife and landscape scheme, agri-environmental, building on the platform of current schemes such as environmental stewardship
• Support for hill farmers which could be in the form of an area payment
• Productivity (research and development, knowledge exchange, training, capital investment
• Food promotion at home and abroad (my question here would be, is this cost effective?)
• Revenue insurance to guard against price volatility (I remain sceptical about whether this is the solution)
• Natural resources, focused on water and soil in catchment areas (more than one farmer I spoke to at the show highlighted the problem of soil exhaustion)

One point made in discussion was that the payments available in agri-environmental schemes might not be sufficient to motivate farmers to participate.

Andersons used their three 'model' farms to predict the impact of Brexit. (Note that their profit figures are after making allowance for 'drawings', i.e, a wage for the farming family). The arable 'Loam' farm makes a healthy £248 per hectare a year at the moment. This would go down to £108 in 2025 with good access to the EU and still over £60 with poor access. (My view is that cereal farms with no stream of income from non-farm businesses, which is the case for many of them in East Anglia, would be particularly exposed to price volatility).

The Freisian dairy farm makes a modest £4.4 per hectare at present, this would go down to £3.4 under good access and a bare margin of £0.6 per hectare under poor access.

The 'Meadow' mixed farm, which it was admitted in discussion, is not a well-run business, makes £35 a hectare at present. This would be a loss of £72 per hectare under good access and a big £233 under poor access.

The core message was that farmers should not worry about the figures they can't control like the Brexit negotiations and focus on how well prepared their own business is prepared to respond to the impact of change (albeit that the form of that change is very uncertain). There was a time window for adjustment, given a relative status quo over the next few years and a boost to prices from devaluation. Farmers need to step back from their businesses and review them. For example, farms need to look at their debt structure. Could machinery and labour be pooled with neighbouring farms?

There was some discussion about whether Brexit could lead to land abandonment, but it was felt that most available land would be farmed by someone who could do a better job with it. There was scepticism about whether there will be a big fall in land prices or rents given all the factors that are in play apart from CAP support.

Drones and precision farming

The following session dealt with this topic with speakers from Newcastle University. Precision farming was defined in terms of more correct decisions per area of land or unit of time.

Drones can provide very high resolution images across a wide spectrum, more so than near earth satellites, and they can fly under clouds. However, they cannot be used in anything more than light rain or winds above 23 mph (and winds are often higher above the ground).

The sophisticated cameras cost more than the drones, the cost of which is falling. A question that arose was whether the information gathered for an average sized farm for about £100 would bring a sufficient return in terms of lower inputs and higher outputs.