Specific Details
Brexit Adjustment Reserve (BAR)
Intended results
To highlight the adverse impact of Brexit on the Irish Agri Food Sector and to demonstrate how this adverse impact has occurred.
- Lost Revenue
The underlying weakness and volatility of sterling negatively affected the competitiveness of Irish food and drink exports in our main export market, reducing the value of trade, as estimated by Bord Bia, by approximately €570 million2. Given the relative weakening of the UK economy overall the weakness and volatility of sterling remains even today but at higher plateaux.
IFA estimate that c.€1.55bn has been lost to Irish Food & Drink sector in subsequent years (2017-21) solely because of a weakened sterling – see Appendix 2 – highest among the beef and dairy sectors at €337m and €330m respectively.
The Mushroom sector was one of the most immediately impacted sectors following the Brexit vote, with exporters incurring price reductions of up to 18% within a few weeks as marketing companies, which sell Irish mushrooms on behalf of Irish growers, typically negotiate contracts in sterling.The industry impact of a weakened sterling alone relative to pre-Brexit levels for the Mushroom sector is estimated at c.€47m.
Elsewhere, output prices across most sectors fell almost immediately and failed to recover to similar pre-Brexit levels until only recently, with calf prices dipping c.10-40% below pre-Brexit levels. Spanning Sept 2018 – March 2019, the IFA estimate the cumulative impact of lost trade for the beef sector was c.€101m.
Atypical seasonal market demand trends and stockpiling of product, aligned with cliff-edge EU/UK negotiations, continued sterling devaluation/fluctuations and the threat of a Hard Brexit, have also impacted output prices and consequently revenue returns received by Irish farmers.
For end-of lay birds, a 30-day quarantine period is required before export to the UK, however doing same would mean birds would lose their ‘free range' status and 10c/bird premium.
Increased Agri-Food exports have understandably been directed to non-GB markets since the Brexit vote, with a significant drop-off in the level of trade evident in 2021
Pigmeat exports to GB dropped almost 60% in value and volume terms in 2021 vs. 2020, with the GB market contributing only c.10% of total pigmeat exports (value & volume).
Beef exports to GB declined 17% in 2021, with GB now accounting for 36% of Irish beef exports in volume terms vs. 48% in 2016 (36% vs. 45% in value terms).
Similarly, sheepmeat exports to GB dropped 25% in 2021 vs. 2020, and have dropped from 26% to 17% in volume terms 2016 vs. 2021 (19% to 15% in value terms)
Dairy exports to GB dropped 44% in 2021 vs. 2020 (-20% in value terms), with only 9% of Irish dairy exports destined for GB markets in 2021 (vs. 23% in 2016) – 12% vs. 19% in value terms;
Similarly, Poultry exports to GB fell 40% in 2021 (-30% in value terms) vs. 2020 levels, with overall exports to GB having fallen from 43% to 36% in volume terms in 2021 vs. 2016 (54% to 33% in value terms).
Increased cost of production
- The introduction of non-tariff administration/declarations has increased administration time, checks, paperwork and costs for trading businesses, which directly/indirectly has implications on agri machinery, machinery parts and input prices sourced directly from the UK or those from Continental Europe or elsewhere that use the UK as a landbridge.
- This is particularly true for concentrate feed, where Ireland is particularly reliant on the UK market for key feed inputs. In 2021, Ireland secured 11% (128.8k tonne) of its maize imports from the UK; 41% (82.7k tonne) of its wheat imports; 89% (150.7k tonne) of its barley imports; and 97% (2.4k tonne) of oats imports from the UK (Source International Trade Centre, 2022).
- In the case of mushrooms, on average, it is estimated that each load is costing an additional €80/load to export out of Ireland, and import into the U.K. Heat treated pallets must also now be used instead of traditional pallets post Brexit, more than doubling the cost involved (i.e. €3.70/pallet vs. €1,70/pallet) and equating to c.€52 extra per load. Delays at ports & haulage/transport challenges since Brexit are also reducing an already short shelf life and increasing costs even further.
- New regulations post Brexit prevent the return of ‘day-old chick crates' to the UK, costing Irish producers an additional 7c/chick, but also the cost of disposing the non-recyclable crates.
The increased cost of production is eroding the competitiveness of Irish produce on UK markets, compounded by increased sense of nationalisation or ‘Buy British' campaigns post Brexit which has resulted in many retailers preferring British product and/or stipulating British only produce.
Forced exit / loss of jobs, skills & expertise / dent to future Farm Succession
- Given the low profitability levels typically reported across many farm sectors, Brexit, with all its associated uncertainty and challenges, particularly when combined with other catalysts of change (e.g. Climate Change; CAP Reform etc.), undoubtedly forced many to reconsider their future in farming.
- Such perspectives span both existing operators in terms of pursuing alternative business interests / potentially exiting earlier than anticipated, but also future farm successors and whether or not they wish to pursue a career in farming when operating within new operating realities. The latter, unless corrected, is of particular concern given the already challenged aging demographic trend, across all farm sectors, since the Brexit vote in 2016.
With few alternative markets for mushrooms given its very delicate & perishable nature, it is estimated that about 40% of mushroom growers have exited the industry after the Brexit vote, with only 34 mushroom growers3 remaining in 2021. In the context of promoting greater food security / food sovereignty, it is essential that the resilience and productivity of remaining producers are protected and supported in all and every way possible.
Reduced on-farm investment
- The nature of farming is such that farmers are continually investing/re-investing in on-farm facilities, infrastructure, stock and/or machinery so to improve on-farm performance and/or efficiencies. Failing to do so, in the context of an ever-changing consumer, political and volatile market environment can quickly prove detrimental and to the disadvantage of the long-term sustainability of the farm business.
- Many of the more Brexit impacted sectors (in particular the Beef sector), as a result of associated market uncertainly or eroded margins, did not seem to have the same level of confidence or available finance to invest in / grow their businesses during this period.
Loss of Seed Potato Market
- Approximately 9,000 hectares of potatoes are sown each year. Ireland is heavily reliant on the United Kingdom (UK) market for seed potato. Ireland has been importing approximately 6,000t of seed potatoes from the UK each year, with 60% of the certified seed that is planted in Ireland coming from.
- As a result of the UK's decision to leave the EU and following the end of the Brexit transition period on 1 January 2021, the import of seed potatoes from Britain for seed propagation purposes into the EU has been prohibited under EU plant health regulations.
- While in the medium - long term, there is a real opportunity for the revival of domestic seed production in the absence of imported seed from the UK, it will take significant time (possibly years) and investment to achieve.
- In the short-term, it creates significant challenge for producers, who realistically will be forced either to bring in more continental seed potatoes which will prove more costly, both in terms of added transport costs and also the increased risk of importing diseases such as brown rot, which present in some European countries.
Increased bureaucracy for exporting operations
- Since 1 January 2021, consignments of live animals and hatching eggs exported to Great Britain (GB) must be pre-notified to the new UK IT system - Import of Products, Animals, Food and Feed System IPAFFS and accompanied by an export health certificate (EHC) issued by the Department of Agriculture, Food and the Marine (DAFM).
- In addition, new regulations stipulate minimum pre-notification periods and defined residency periods pre-export (e.g. live animals minimum 40 days residency pre-dispatch; 30 days poultry for slaughter). In the case of equine, where a significant number of equine animals travel to and from the UK for breeding
- In the case of equine, where a significant number of equine animals travel to and from the UK for breeding & racing purposes given its close proximity and strong cultural linkages, in the case of importing equine from non-EU countries (i.e. UK), there may be a requirement to hold a comprehensive guarantee – i.e. a form of security to cover potential or existing customs debt, typically in the form of a cash deposit or an undertaking from a financial institution.
- Given actual/estimated transactional fees involves, the level of comprehensive guarantees required can be significant, particularly for superior quality animals and those exporting large volumes. 1.1.7
Increased consumer prices
- As reported earlier, Ireland is not self-sufficient in cereal production, with the UK market one of the most important sources of imported cereal/feed ingredients. Aligned, there is currently only a very limited capacity for industrial flour milling, with only one mill capable of resuming production in the Republic of Ireland.
- The percentage of flour requirements imported by the commercial baking sector now stands at over 80%, the vast majority of this sourced from the United Kingdom. According to CSO data, flour imports from 2017 to 2021 have averaged 232,000T per annum, which represents a rise of 55% over the period 2010-20 14. By comparison in 2003, only 25% of flour used in Ireland was imported. Today, approximately, 180,000T of this is British milled flour enters the Republic of Ireland annually.
- Since January 2021, the Rules of Origin criteria in the EU/UK Trade Cooperation agreement have applied a number of conditions to the import of flour and product failing to meet these standards are liable to a tariff of €172/tonne. The Rules of Origin protocols state that flour containing more than 15% wheat from third party countries (non-EU/UK) is liable for an export tariff of €172/tonne.
- Depending on the UK and European growing season, British milled flour often requires the inclusion of Canadian wheat at a level >=15% to improve its quality and consistency (UK Flour Millers). According to the Agriculture and Horticulture Development Board (AHDB), the proportion of imported wheat used by British flour mills has averaged 16%.6 The ESRI estimates that the price of a loaf of bread has increased by 9% as a result of Brexit.
- Since January 2021, the direct consequences of Brexit have been partially avoided by the Irish bakery sector sourcing its flour needs outside of the United Kingdom. UK Flour Millers estimates that 25% less flour was imported from Britain into Ireland in the first half of 20217. However, in addition to Brexit induced costs, the Covid-19 pandemic has placed supply chains under pressure and both France and Germany are a greater distance away than Britain.
Potential adverse impact of Brexit on the Irish Agri Food sector
- The UK exited the customs union on January 1st, 2021 and the terms of the withdrawal agreement – which removed the risk of tariffs but left in place the need for Sanitary and Phytosanitary (SPS) and customs checks – came into force. However, this agreement remains only partially implemented.
The introduction of pre-notification and of physical check requirements on imports from Ireland has been delayed a number of times by the UK government, but will come into play by the end of 2023 as the UK concessions wean. Similar to that encountered with UK / EU trade (where total EU imports from the UK declined 16% on 2020 levels (€101.8bn vs. €121.2bn)8 as traders adapt to these new customs and SPS checks required under the TCA), it is very likely that there will be some trade disruption.
Although farmers won't be unduly directly affected by the additional checks, the real impact to them will be the additional costs the regulations will incur, which will be pushed down the line on to the food producers. Industry estimates suggest that the costs associated with these as well as other non-tariff barriers arising from Brexit are equivalent to a 6-13% tariff.
These costs are not limited to goods exported to Britain, but also to goods that use the UK as a land bridge. Meat Industry Ireland suggest the cost can be €500-€800 per truck.
Risk of a Hard Brexit still remains
- Brexit is far from over. The recent UK action and announcement by UK Foreign Secretary to potentially, if passed, override agreed elements of the Northern Ireland protocol into domestic law bring added tension and frustration to an already volatile negotiating (or lack thereof) environment.
There remain concerns of possible EU retaliatory measures, including under Article 770 the suspension/termination of the TCA entirely in response – meaning a return to deal / no-deal negotiations; the possibility of an EU/UK trade war and economic disadvantage where either side could impose tariffs and an end to the now seamless trade on the island of Ireland.
- The crippling tariffs on meat and dairy products would effectively make continued trade unsustainable. A Government report identified that import tariffs on Irish food into UK could cost €1.35bn to €1.5bn, based on value of 2019 Irish exports.
- A number of studies have been carried out since the June 2016 Brexit referendum by independent economic bodies to assess the impact of various Brexit scenarios on the Irish food sector. All agree, it will have a negative impact, particularly in a Hard Brexit scenario where, relative to a no-Brexit baseline - Beef exports to the UK could be more than halved (down 53%) by 203010 - Dairy exports to the UK could be down almost 76%.
Market share displacement
- More medium term, adopting similar fully liberalised agriculture trade to the UK market as in the framework of the UK-Australia Free Trade Agreement (FTA) and UK-New Zealand Free Trade agreement would lead potentially to major market displacement on the part of Irish Food/Drink exports.
- This is particularly true if the UK government achieves its stated ambition of joining the “Comprehensive and Progressive Agreement for Trans-Pacific Partnership” (CPTPP) by the end of 2022, with countries including Canada, Japan Mexico, Malaysia and Chile as well as Australia and New Zealand.
- Looking specifically at the free-trade agreements with Australia and New Zealand, both envisage a completely duty-free and quota-free import regime once initial transition periods for the most sensitive products have run their course.
- For beef and sheep, this period extends for 15 years, while the transition period for most dairy products there is a six-year phase-in. Gradually increasing tariff rate quotas (TRQs) will apply during these periods.
- The date of entry into force for the two agreements remains unclear, and their overall impact on displacing Irish produce will depend, of course, on the extent to which Australia and New Zealand take up the opportunities that the new FTAs offer them, but they are significant.
- Taking the TRQ figures at face value, the quotas could theoretically lead to Australia and New Zealand between them supplying 25% of the UK market for beef by the late 2030s, and 100% of the UK market for sheepmeat. Just to emphasise, that's in reference to UK market in its entire, not purely imported produce
- Although highly unlikely to reach such levels, with increases more incremental in nature, the FTA presents the UK as a convenient ‘overflow' market for Australia and New Zealand if political tensions with Beijing were ever to lead to the loss of critical Chinese export markets, therein eradicating any opportunity for Irish producers.
- Given the UK market is one of the more higher value markets, any market share displacement of Irish produce, in the absence of obvious alternatives of similar scale and value, would be detrimental to all stakeholders involved in the Irish Agri-Food sector, particularly when one considers this potential risk alongside the threat posed by the Mercosur agreement.
Regulatory divergence
- In the medium-long term, there is a risk that the UK migrate from the significant regulatory regime that Irish agri-food producers have to comply with in areas such as pesticide regulation, animal health and welfare regulation, environmental regulation and consumer regulation, including food safety, packaging and labelling.
- In particular, animal health and welfare is a key area of cross-border co-operation between Ireland and Northern Ireland, enabling the free movement of animals throughout the island. Future divergences in these regulatory areas could negatively impact the competitiveness of Irish agricultural products in the UK and distort trade.
IFA proposes the following measures to mitigate Lost Revenue
• Direct, targeted financial aid, in the form of De Minimis aid, to compensate for lost income incurred as a result of the weakening of sterling; atypical seasonal demand and/or other direct Brexit related reasons as outlined above.
• Measures to secure/develop in the context of reduced UK market reliance new markets and/or viable niche/premium products across all impacted sectors to deliver highest possible on-farm output prices and increase operator resilience.
IFA proposes measures to mitigate increased cost of production
• Subventions on the cost of production at Producer Level, related to increased costs incurred due to Brexit
• Capital grants to improve on-farm efficiency; reduce the cost of production and increase operator resilience post-Brexit
• Most potato growers suppliers stocked up before the end of the Brexit transition period so they could plant their crops last spring (between Sept – Dec 2020, nearly 5,000 tonne of seed potatoes were imported). Naturally this brought with it added storage costs, which where evidenced, may be eligible for financial support under BAR where existing operations sourced seed potatoes from the Continent, or devoted increased native seed potato plantations.
BAR may also finance the additional cost of securing Continental seed potatoes, again where evidenced, relative to past expenditure.
• The Department of Agriculture need to continue its efforts in promoting the advancement of the native seed potato, offering financial supports/incentives where possible. The area of seed potato crops for certification in Ireland increased to 299 hectares in 2021, helping to fill a gap left by a Brexit ban on imports from non-EU countries.
This was a 29% increase in Irish seed potato production, over the previous five years, but is still considerably below past levels and indeed requirements. In 2000, over 2,000ha of seed potatoes were grown in the Republic of Ireland.
IFA proposes measures to reduce the reliance on inputs by directly supporting farmers to implement measures that improve soil health and animal health leading to higher production and on-farm efficiencies
• A liming and soil structure support programme to include soil aeration equipment to maximise the agronomic and environmental benefits of good soil structures. Good soil fertility and structure is a fundamental requirement of resilient and sustainable production systems but only around 15% of Irish soils have good overall fertility.
It should be a priority to address this issue as soils at optimum fertility and pH recycle nutrients more efficiently and should lead to a reduction in inputs for the same or increased levels of grass or crop production while also reducing nutrient loss
• The introduction of a protected urea incentive scheme – boost uptake which will bring environmental benefits where conventional urea is displaced
• Supports for grass measuring equipment and paddock establishment – support better utilisation of grass and helps alleviate winter fodder costs through grass optimisation
• Reseeding and over-sowing supports
• Improved Animal Health and Performance measures such as supporting more targeted use of antibiotics and antiparasitics - better faecal egg sampling schemes to reduce anthelminthic use and farm cost on medicines
• Supports for animal performance measuring and recording leading to more efficient production systems
• Nationally funded genotyping programme of breeding livestock. Measure would also provide unique selling point and price premium on international markets (including UK) and support also environmental ambitions.
IFA proposes measures to mitigate reduced on-farm investment
• In the context that improved on-farm efficiencies represents one of the greatest possible mitigants against Brexit, periods of low income and/or any other market volatility source, it is essential that a series of targeted support measures and low-cost financial products are provided to preserve and promote existing on-farm operations across all farm systems. Some examples might include
o Capital grants / the provision of low-cost term finance and working capital solutions to primary producers to support improved performance, efficiency and/or sustainability of the agricultural holding;
o Capital grants to support the improvement of the natural environment, hygiene conditions or animal welfare standards, provided that the investment concerned goes beyond Union standards in force;
o Capital grants to support the creation and improvement of infrastructure related to the development, adaptation and modernisation of agriculture, including access to farm land, land consolidation and improvement, water supply and energy-saving investments;
IFA proposes measures to promote increased income diversification
• Promotional campaigns and financial supports to preserve and grow the supply of native grain / cereal production
• Capital support to develop new farm enterprises and/or viable niche/premium products across all impacted sectors
• Scale up renewable energy (RE) sources and their adoption/application on smaller scaled farms – e.g. anaerobic digestion, biorefining and biomass supply, and solar PV; focus on energy efficiency; and examine potential barriers to the roll-out of RE at farm level, including necessary support for microgeneration and grid access.
• The establishment of capital grants of approximately 50% for farmers to invest in microgeneration, with separate funding and investment thresholds to existing TAMS programme.
• On broiler farms, costing €20-€30/t to dispose of litter. NI project ongoing, that by adding BioChar, makes litter suitable & more +200-300% more effective as a grassland fertiliser 10-12 days later. Creation of pelletisation plant in RoI may also be considered. 2 plants in NI currently
Proposed measures to mitigate Intergenerational Renewal
• Measures to attract, sustain & diversify skills/expertise in the Irish Agriculture sector, across all farm sectors
• A State-funded mentorship type programme for new entrants involving some of the most progressive farm operators as active mentors
• An Installation-aid or similar type support measure should be made available for new entrants to support entry / transition into farming activity and to undertake required action to transform existing farm operations into more resilient models of production
• Educational, research & financial measures to support greater income diversification/ value-add opportunities on farm
• Funding to introduce a Sustainable Development Programme (SDP) to co-ordinate the delivery of price supports for farm-scale and community-based renewables and to ensure the maximum delivery of the Teagasc Marginal Abatement Cost Curve (MACC) climate roadmap
• Greater promotion and development of collaboration type arrangements involving single/multiple farm holdings within individual/multiple farm sectors
Proposed measures to mitigate – increased consumer prices
• Establishment of a feasibility study on the full resumption of flour milling nationally
• Planning and construction of a new flour milling facility
• Modification of existing infrastructure to be repurposed for industrial flour milling.
IFA seek clarification on support measures - Department of Agriculture, Food and the Marine (DAFM) agree with IFA to focus on 'on-farm efficiencies' and 'income diversification' (with conditionality and some form of environmental benefit)
IFA seek compensatory payments to support short -term sustainability which, if complemented with other efficiency/diversification measures might satisfy medium to long-term sustainability.
That the Department of Agriculture, Food and the Marine (DAFM) focus on quantifying verifiable adverse impacts, from 100% solely Brexit related events (i.e. not potentially caused in whole/part by energy crisis ;Ukraine conflict; Covid -19 etc) as they feel this would not stack up to challenge of being directly Brexit related. IFA challenged whether there is a need to quantify adverse impact at all, instead only to demonstrate and adverse impact has occurred.
IFA sought to discuss the ability of the Brexit Adjustment Reserve (BAR) funding for a scheme to prevent income gap year for those farmers coming out of the Green Low Carbon Agri-Environment Scheme (GLAS) /Results based Environment Agri Pilot Project (REAP) and not getting into the Agri - Climate Rural Environment Scheme (ACRES) .