Why medium sized farmers are the most exposed to Brexit
More medium-sized farms than small farms could exit agriculture as the risk of a no deal Brexit elevates, Teagasc’s Chief Economist Kevin Hanrahan has warned.
Mr Hanrahan said that small farms “almost certainly” have another income coming in so they may be able to ride out the challenges of Brexit and instead the biggest restructuring could happen amongst medium sized farmers who don’t have that extra income.
“Brexit will lead to lower prices for many elements of Irish agriculture and will lead to restructuring, i.e some farmers getting out. The magnitude of the adjustment is very unclear. We don’t know how farmers will respond. It may not be small farmers as they almost certainly have non agriculture income coming in already,” he said.
“Lots of adjustment could fall on medium sized farmers, where the incomes from farming are likely to see the biggest change and maybe they will exit if they cannot make a living anymore, I wouldn’t expect a restructuring in the short to medium term timeframe though.”
Mr Hanrahan pointed out that Speaker of the House of Commons John Bercow’s comments yesterday that British Prime minster Theresa May cannot bring a third Brexit vote back to parliament without “substantial” changes to the motion has “if anything elevated the uncertainty and the probability of a no deal has increased”.
Mr Hanrahan told a Teagasc Webinar on Brexit that Irish beef is still the most vulnerable in the event of a no deal Brexit compared to the dairy sector.
“Any negative hit to beef price as a result of Brexit would reduce margins to even smaller or negative margins. No single EU market can replace the loss of the UK beef market and it’s hard to conceive a non EU market that could that could take up those exports,” he explained.
“The dairy sector is less vulnerable. Many Irish dairy commodities are competitive at world prices, we do depend on the UK market but we can find markets other than the UK that aren’t dramatically lower in price.
“There’s not a lot farmers can do to influence prices, but they can hold off on investments until we have greater clarity on future trade relationships. Farmers are always trying to lower their cost of production and Brexit reinforces the need to continue to do that.
Mr Hanrahan added that “any hint of a bright spark for sheep farmers” will be lost due to higher gains from lamb prices in a no deal scenario will be offset by beef decreases as the majority of sheep farmers are beef farmers.
He stated that the almost 100pc of Irish mushrooms that go to the UK “have gotten a get out of jail card” as the UK isn’t proposing to put tariffs on them but that there will still be custom costs to be dealt with if a hard Brexit occurs.
The seminar pointed out that the large amount of pigs exported to Northern Ireland from the south, could also be reduced in a hard Brexit which would put pressure on slaughter capacity in the Republic.
In a hard Brexit, Irish tillage farmers are also expected to receive an increase in farm gate prices as tariffs could be imposed on UK grain imports to Ireland. While this would be positive for Irish tillage farmers, as the Irish agri-economy is in the majority is a livestock one that uses grain from the UK as feed for its animals, it could have an negative impact on the wider industry.