Brexit, Trade & Agriculture impact on rural Ireland SCSI Rural Seminar, 25 November 2016 Phelim O Neill

Transcription

1 Brexit, Trade & Agriculture impact on rural Ireland SCSI Rural Seminar, 25 November 2016 Phelim O Neill

2 Brexit, Brussels & Agriculture Impact on Rural Ireland 1. Brexit what might happen and impact 2. Brussels Unfair trading practice, impact of trade deals, US election 3. International USA, Canada, Brazil China etc 4. Livestock (cattle, sheep, pigs) 5. Dairy 6. Tillage 7. Land, grants and investment 8. Conclusion impact on rural Ireland economy

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4 Huge impact on Ireland Over half of beef, two thirds cheese sold in UK Sheep and pigmeat one third of sales to EU Sterling weakened by 20% from this time last year, recent modest recovery Brexit means border, means interference with trade inevitable Threat of tariffs if no trade agreement on exit, risk of market displacement if UK agreed trade deal with USA or Mercosur.

5 Possible trade arrangements after UK leaves the EU Join the European Economic Area (EEA) Norway model the EU single market all relevant laws, except those dealing with agriculture and fisheries, apply to Norway EU Agencies and programmes Norway participates in a number of them, albeit with no voting rights social & economic cohesion in the EU/EEA Norway contributes financially regular political dialogue on foreign policy issues at ministerial and expert level Doesn t fit current UK mood, esp migration Norway mountains, water And not much arable or pasture

6 Possible trade arrangements after the UK leaves the EU Join the European Free Trade Assoc (EFTA) Swiss model Similar to Norway EEA arrangement expect that EU legislation is transcribed into Swiss law through bi lateral agreements Doesn t work as well as EU would like EU unlikely to extend arrangement to UK on exit Christian Hitz, Swiss farmer

7 Possible trade arrangements after the UK leaves the EU Become part of the customs union Turkish model covers all industrial goods but does not address agriculture (exc processed) Have to accept trade deals agreed by EU eg TTIP As with others has EU liabilities without opportunity to shape Little appeal to UK Irish cattle export destination

8 Possible trade arrangements after the UK leaves the EU 5 possibilities Deep and comprehensive free trade agreement (DCFTA) Probably the preferred UK option would lower or even eliminate tariff buyers and give more regulatory freedom than the other arrangements. would be necessary to have postexit UK standards recognised and accepted as equivalent to the EU in order to trade. For example, in an exit situation the UK couldn t independently decide it would allow the use of hormones in beef production and trade that product into the EU.

9 Possible trade arrangements after UK leaves the EU 5 possibilities Most Favoured Nation status (MFN) WTO Option Fall back position if no arrangement is reached post exit Trade on a tariff paid basis Most expensive and mutually damaging option Unlikely to happen given the level of mutual trade WTO Fall back position

10 ESRI Report on hard Brexit analysis is based on bilateral trade flows between the UK and each of the 27 other member states 5200 products Tariffs at WTO 0-80% chilled boneless bovine meat which is 12.8% of the value of the product plus 303 per 100 kg 5/kg on steak meat from Ireland to UK

11 ESRI Report on hard Brexit Ireland makes up 5% of the UK s imports but would be charged close to 20 % of the total EU tariff EU s exports to the UK would fall by 30% representing a 2% reduction in its total world trade. Ireland and Belgium would be the most exposed, losing 4% and 3.1%

12 ESRI Report on hard Brexit UK s exports to the EU would fall by 22% but as these reductions apply to 27 trading partners, the aggregate effect is larger than that of the EU with the UK facing a fall in its total trade of 9.8% Assumes part of customs union ie Turkey model

13 BRUSSELS DEVELOPMENTS

14 Brussels UTP Unfair trading practices legislation EU instinctively opposed, preferred voluntary arrangements or national legislation like UK GCA Hogan set up task force Parliament voted in favour. Taskforce came out in favour last week

15 Brussels UTP cont. Strong recommendations Legislate for transparency after farm gate Ban with sanctions Eg delayed payments, last minute changes or cancellation, back dated changes to contracts Farmer groups can make complaint Will it make a difference?

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17 Brussels Trade Talks TTIP & Mercosur in particular present huge threat to beef Trump no interest in trade deals eg this week TPP Cumulative impact assessment potential for 350,000 extra tonnes of beef on saturated EU market Canada may be ok, other trade deals with Asia no threat.

18 LIVESTOCK (cattle, sheep & pigs)

19 Cattle and Beef More cattle Up to an extra 120,000 in system for up 68,000 Bord Bia estimate 1.63m final kill this year 2017 forecast up to 1.75m Driven by dairy growth

20 Dairy births up 170,433 head in two years Impact of higher numbers will hopefully be helped by fact in the region of 100,000 are Angus and Hereford cross calves. Plants claim demand continues to grow and market can accommodate higher numbers.

21 Irish export markets

22 International China - great hope for beef, key dairy and pig meat market USA prices back 2 over past 18 months Brazil entered China in June 2015, was their biggest export destination by December. 36,000t (43%) in October 2016

23 Sheep market update

24 Sheep prices 2016 v 2015 Prices held better in June to August than in 2015 lamb supplies were tighter due to weather Held steady in August and first half September Hit by Brexit in recent weeks but showing signs of improving.

25 Pigs Only 320 commercial farmers but supporting 7,000 rural jobs Third most valuable agri export after dairy and beef Huge growth in China Price melt down late 2015, early 2016 recent recovery

26 DAIRY

27 GDT Trends in Whole Milk Powder

28 Market Trends Fonterra predicting 4% drop in output this season Australia back 10% US supply up 1.6% to 96bn litres how much to go on the world market? EU down 1.9% Germany up 4% UK down 4.5% France down 1.6% Russia down 0.5% Holland up over 10% this year. Phosphate quotas?

29 The future Second units? All about the people. The people come first, then the farm. Need to be really simple. Ask yourself why? Zero grazers? Can be a short term solution if growing cow numbers but long term sustainability is questionable Robots? Overpriced at present but future possibilities are endless. System drift is the biggest risk with robots. Share-farming? Needs to be win/win. People skills critical, as is integrity, honesty and reputation.

30 Uncertainty Brexit Trump Oil prices Feed prices particularly in the US Currency

31 TILLAGE

32 Global grain production (Mt) Wheat Coarse grains

33 Global grain consumption (Mt) Wheat Coarse grains

34 Million tonnes World grain production and consumption Production Consumption

35 End of season Stocks (Mt) Wheat Coarse grains

36 LAND

37 Average price of agricultural land 1970 to 2015 ( /ac) 26,000 24,000 22,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Source: An Foras Taluntais, CSO and Irish Farmers Journal

38 Average prices ,000 /acre 20,000 20,238 15,000 15,867 10,000 10,222 8,741 8,708 9,954 9,400 9,890 8,914 5,

39 Average land prices /ac in the provinces 2007 and 2011 to ,000 20,000 21,483/ac 23,733/ac 17,039/ac 15,000 14,805/ac 10,000 5,000 0 Munster Leinster Connacht Ulster Since 2007, the average price of land is down by 55.9% nationally

40 Impressions of 2016 Late start because of weather.may Supply offered back maybe 10%, not as bad as thought Despite dairy and equestrian difficulties land demand steady, but less bite than 2015 Funding and getting approval is a barrier Some agents advising private treaty route Values back up to 1,000 /acre in places, plenty steady and a few at 15-18,000 acre!

41 Impressions of 2016 cont. Good demand for blocks up to 300,000; fewer buyers for larger parcels Cash rich local buyers necessary to drive sales NI and British buyers absent with drop in sterling, opposite last year Big demand for forestry land, up to 5,000 acre Despite difficulties plenty of deals concluded and several good auctions this autumn.

42 Farm Grants - TAMS Grant aid available: Grant aid is paid to an investment ceiling of 80, % for a young trained farmer. 40% for general applicant. Partnership - ceiling doubles to 160,000.

43 TAMS cont What s covered: many items including for example... Slurry storage Animal housing - Slatted sheds -Sheep sheds Replacing slats Silage storage Animal handling Farm safety Dairy structure young farmers scheme only Dairy equipment Sheep fencing Low Energy Emission Slurry Spreading Pig & Poultry

44 So what does all this mean for you? Rural economy driven by success of agriculture Drives land and property investment in rural and market towns TAMS encourages moderate investment Potential for structural investment in dairy, depends on continued price recovery

45 Brexit, Trade & Agriculture impact on rural Ireland SCSI Rural Seminar, 25 November 2016 Phelim O Neill