Brexit could see beef farm incomes slashed by 35% - forcing some to get out of the sector
'Ireland' just doesn't have the markets to take 250,000t of beef'
Beef farm incomes may be slashed by 35pc forcing some to get out of the sector because of Brexit, according to a Teagasc economist.
Dr Kevin Hanrahan told the Teagasc National Beef conference that there was no scenario he could envisage where farmers wouldn’t be negatively impacted by the UK’s departure from the EU.
And he was not optimistic about the prospect of increasing Ireland’s share in existing European markets, as these are what he described as mature markets.
"We just don't have markets that can instantaneously take that 250,000t of beef," he remarked. He also said that aside from lobbying, there is little that individual Irish farmers could do in response to Brexit.
Speaking at the event in Tullamore, Dr Hanrahan said “farmers in Ireland are incredibly resilient, they have hung in there a long time. This could be one of those inflection points where the shock is of a sufficient magnitude that they just stop doing what they have been doing, or many of them do.”
He believes the potential impact of Brexit “could lead to a big decline in the number of cows we have in the country, beef cows, and in the number of farmers farming beef. This is bigger than Brazilian beef, this is bigger than decoupling in terms of the potential impact on Irish cattle farming.”
If no agreement is reached with the UK ahead of Brexit, as Dr Hanrahan believes is a growing possibility, tariffs of 50pc could be applied to Irish beef which would also lose its preferential status, said Dr Hanrahan. If that is the case, he predicted “the demand for Irish beef in the UK market with that type of tax will be effectively zero."
The potential loss of the UK market, accounting for half of Ireland’s beef exports or 250,000m tonnes of beef per year, will likely be compounded by a reduction in direct payments from Europe as the overall budget lowers with the loss of Britain’s contribution. Teagasc estimates that this could result in a 10pc drop in direct payments.
Although he said there was a strong case for maintaining payments to Irish farmers, Dr Hanrahan admitted, “the most likely case is that the income support that farmers get will decline.”
Citing analysis carried out by Teagasc last November, he conservatively estimated that "for cattle finishing, cattle rearing farms you are looking at income impacts in excess of 30pc and that is assuming that they don’t reduce the amount that they produce."
"That 35pc is made up of a combination of negative price shock and a reduction in the type of direct payments that they are going to get form the European Union," Dr Hanrahan pointed out.
He noted the difficult climate beef farmers are already working in.
“The problem with beef figures in particular is their incomes on average are actually less than direct payments on average. So most beef farmers are using some of their direct payments income to cover their costs in production that they are not covering with their sales of cattle,” Dr Hanrahan said.
“The most optimistic Brexit scenario is one where the UK leave the European Union but somehow in the next 12 months we agree a deep and comprehensive agreement with the UK and European Union. Even if that was the case the British Government have said they are leaving the Customs Union and they are leaving the single market,” he explained.
He said in this case, even If there are no tariffs, “there is going to be regulatory barriers. There’s going to have to be checks on the border or somewhere in factories, there is going to be a lot more paper work by people who ship agri food products off the island into the UK, so costs of doing trade are going to go up,” he stated.
One beef farmer was unhappy that no-one directly impacted in the room will have any input in the decision.
“This potentially finishes beef farming at a family level in this country,” he remarked. “Do we all have to go milking cows?” he asked.
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