Home / Commodities / Commodity News / U.K. Farmers Rush to Sell Produce Ahead of October Brexit Deadline

U.K. Farmers Rush to Sell Produce Ahead of October Brexit Deadline

British farmers are racing to ship this year’s abundant harvest out of the U.K. by Halloween, when Brexit could pull the country out of the world’s biggest free-trade trade zone overnight.

Leaving the European Union without a deal — as Prime Minister Boris Johnson has pledged to do at the end of October if the bloc doesn’t meet certain demands — would hit British agricultural exports with customs duties, extra paperwork and checks on animal and plant health.

Farmers aren’t hanging around, nor are the traders and brokers that sell their produce.

“We’ve got ourselves into a fire sale to sell everything to our normal customers in Europe by the end of October,” said Mike Tufnell, a broker who organizes malting-barley exports at CS Commodity Solutions Ltd. “The whole thing is a logistical…not a nightmare, but a challenge.”

Although the U.K. is heavily dependent on food from overseas, producing less than two thirds of what it eats every year, the country still sold GBP22 billion ($27 billion) of food, drink and animal feed overseas in 2018.

The U.S. is a major destination for these goods, but most are bought inside the EU, where food crosses borders tariff-free and without major delays. More than 60% of agricultural and food exports from the U.K. go to EU customers, according to government research. Lambs reared on the slopes of Snowdonia in Wales can be eaten in high-end Parisian restaurants and malting barley grown in the chalky soil of southern England is brewed into Belgian beer.

Brexit threatens to cut the U.K. off from this trading system. Rising demand for ships has driven up the price of freight and there have been delays loading grain onto boats at ports, Mr. Tufnell said. Traders say European companies have locked in almost no purchases of British grain and meat for November or December, for fear of delays and higher prices if the U.K. leaves the EU without a deal.

The EU charges steep tariffs on agricultural imports from outside the bloc, a policy that President Trump has attacked when seeking to prize European markets open for American farmers.

Barley and wheat, the U.K.’s two main crops, would face levies of EUR93 ($102) a ton and EUR95 a ton respectively, which equates to just over 50% at 2017 prices according to the Agriculture and Horticulture Development Board. Lamb, another major U.K. export, could be hit with tariffs of up to 60%, depending on the cut of meat.

“What we’re talking about in a no-deal situation is a paradigm shift in the way we trade,” said Peter Hardwick, a trade adviser to the British Meat Processors Association, who has been involved in recent discussions between EU and U.K. officials.

The rush to sell before Oct. 31 has been most urgent in grains, because the recent harvest was the U.K.’s biggest for several years. The rush hasn’t had a major impact on grain prices, which have fallen this year due to the strong harvest.

“The demand is short-term and beyond that, no one wants to buy it because we don’t know what the tariffs are going to be,” said Tom Bradshaw, head of combinable crops at the National Farmers’ Union.

Mr. Bradshaw grows barley, peas and other crops on a 1,200-hectare farm in Essex, in eastern England. He sold all his barley in September, whereas normally he would hold on to it until after Christmas.

“The unknowns, the risks were too high to keep it,” Mr. Bradshaw said. He added that it costs more to buy British grains for delivery in October than in November, because European importers are unwilling to risk paying a tariff on shipments after Mr. Johnson’s Brexit deadline. That means farmers aren’t compensated for the cost of storage if they sit on produce and export it at a later date.

Some grain and meat exporters are seeking to drum up business outside Europe, in case demand from inside the bloc drops. Farmers First Ltd., an abattoir business jointly owned by 2,500 farms, exports 80% of the million lambs it slaughters each year, most of them to Europe.

“We’re dipping our toes in other places and if we do need to ramp that up it would be faster to do if we already have a footing in those markets,” said finance director Dean Powell.

Finding new markets could prove a challenge and may not be as lucrative as selling into the EU. In the Middle East, Africa and China, for example, there is less demand for the high-value, fresh meat that the U.K. exports to the bloc.
Source: Dow Jones

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping