Brexit: Baa Humbug
Charlie looks at a different aspect of the effects of a no-deal Brexit.
This week my brother Alex got top price for Cheviot Lambs at Stirling Auction Mart. I also went for a run and listened to the BBC Sounds podcast 'Beyond Today - No deal: what’s going to happen to our food?'. Inspired by these two things, I thought I would write this week’s bulletin on sheep farming and the effects of a no-deal Brexit.
‘Beyond Today’ is a 15-minute podcast by the BBC, which looks at a story in the news and explores it in more depth. The one I was listening to was about food and a no-deal Brexit. One section was about Welsh sheep farmers and how a no-deal Brexit would mean the WTO tariff on lamb exports to the EU would be 40%. The presenter told a story about a friend of his who is a Welsh sheep farmer and had voted to leave the EU. He said his farmer friend was just waking up to the fact that he could lose his export market, as EU consumers will not buy Welsh lamb at a 40% mark-up. New markets are unlikely to be found quickly outside the EU. Even if the government bought the surplus which usually went to the EU in order to preserve prices, then there would be very limited refrigeration space in the UK, as it is normally at 95-97% capacity. There is a worry that the lamb prices might collapse, with farmers desperate to sell lambs at any price, as they would not be able to keep them on the farm over the winter.
Speaking to a farmer last night at my brother’s BBQ, she said that my brother was sensible to get his lambs sold early, as she felt that when closer to the time of a no-deal Brexit the price of lamb might collapse. As my brother managed to sell for the best price he has ever gotten, then this goes against predication's that prices will go down the more likely a no-deal Brexit is to happen, and the prices should already start to dip. The BBC podcast also suggested that the consumer would not see any difference in price of lamb in the supermarkets. As the supermarkets are on very narrow margins, if the cost of lamb did drop, they would use this as an opportunity to increase their margins and are unlikely to pass the price reduction on to their customers.
As I suspect not many are sheep farmers, what does this mean to the readers of the bulletin? We are still in the ‘phony war’ period of Brexit and many are hoping that the problem just goes away, so they have not started to think through the possible impact of Brexit on their organisation and have not started to prepare. In my opinion, the lesson of the Welsh sheep market is that Brexit will affect different industries in specific and substantial ways, whilst perhaps not having an impact on society as a whole. My brother’s top prices are flying in the face of conventional wisdom and what people thought might happen with a no-deal Brexit looming is not actually happening. I think the takeaway for all readers is that we have to remain flexible and resilient, plan as far in advance as possible and monitor the situation, as it could change quickly.