Milk Matters


By Christine Pedersen Senior Dairy Business Consultant The Dairy Group


christine.pedersen@thedairygroup.co.uk www.thedairygroup.co.uk


As readers will know, the 1 January 2021 heralded a post-Brexit dawn for the UK as we left the EU after 47 years of membership. After prolonged negotiations, the UK and European Commission reached a Trade and Cooperation Agreement on 24 December 2020 for tariff-free, quota-free trade in goods between the UK and EU. As the EU is the UK’s largest and closest trading partner, the news of a free trade agreement elicited a collective sigh of relief for UK businesses, particularly those in high tariff sectors such as food and agriculture. Arla Foods is the UK’s largest dairy company and the fifth largest


in the world. Arla imports about 15% of its products and had previously cautioned that without a deal, tariffs on dairy products could add as much as 30% to their prices. Unsurprisingly, Arla welcomed the news of the free trade agreement that removes the threat of tariffs and quotas but warned of an increase in administration, form filling and product checks. The increased regulatory burden also affects products leaving


Great Britain for Northern Ireland as the EU border is now along the west coast of Great Britain instead of the island of Ireland. The table below shows the UK Dairy Trade Imports, Exports and Balance in 2019:


Units: Thousand tonnes Cream Butter


Cheese Yoghurt


Skim milk powder (SMP) Whole milk powder (WMP) Concentrated milk


Imports 25 78


535 218 27 22 54


Exports 30 69


208 35 82 67 26


Balance 5


-9


-327 -183 55 45


-28


Source: AHDB, HMRC and IHS Maritime & Trade – Global Trade Atlas®


Cheese is the dominant trade sector with large quantities of


cheddar traded with Ireland. For all these movements and others not listed there will now be a higher regulatory burden, cost and a disincentive to trade. Why will importers buy British if there is a comparable product, more competitive on price with less regulatory burden available in the EU? There is already anecdotal evidence of EU companies refusing to


2020 £35,449 2021 £33,404 2022 £28,087 2023 £22,769


do business in the UK due to higher costs, while Federal Express/TNT are raising charges on goods shipped between UK and EU to cover increased administration. Change after almost 50 years of the evolving single market was


always going to be difficult and lead to higher costs. The question remains over the medium term will the gains be greater than the costs incurred in the meantime? Only time will tell and I’m sure the scars of the referendum vote will be apparent for some time to come, as politicians and economists argue about the costs, benefits and wisdom of leaving the EU Single Market.


AGRICULTURE ACT 2020 The Agriculture Act 2020 was given Royal Assent in November 2020 and became an Act of Parliament (Law) in the same month. More details about future UK, post-Brexit agriculture policy were released in the form of “The Path to Sustainable Farming: An Agricultural Transition Plan 2021 to 2024”.


Direct Payment Band < £30,000


£30,000 - £50,000 £50,000 - £150,000 > £150,000


2021 5%


10% 20% 25%


Scheme Year


2022 20% 25% 35% 40%


2023 35% 40% 50% 55%


2024 50% 55% 65% 70%


For example, for the 2021 scheme year, for a claim worth £40,000, a 5% reduction would be applied to the first £30,000 (a reduction of £1,500) and a 10% reduction would be applied to the next £10,000 (a reduction of £1,000). So, the revised payment would be reduced by £2,500 to £37,500.


On 1 January 2021 the agricultural transition period started. Direct


Payments in England (currently known as the Basic Payment Scheme) will be phased out over a seven-year period from 2021 to 2027. Higher reductions will initially be applied to amounts in higher payment bands. For the first four years of the transition (2021 - 2025), Direct Payments will be reduced by up to the following percentages: In 2024 BPS will be replaced with ‘delinked’ payments, in other


words it will no longer be necessary to farm the land to receive the payments. Gradual reductions in Direct Payments will be made across the transition from 2024 until the final year of payments in 2027. Consultations regarding the introduction of delinked payments and a ‘lump sum exit scheme’ to help farmers who wish to retire to do so are expected in 2021. Using our bespoke future payments calculator based on our


interpretation of the latest available information, we calculate that future annual payments for a typical, 225 cow, 152 ha specialist dairy unit as follows:


UK Scheme Year 2024


£17,452 2025 £13,089 2026 £8,726 2027 £4,363


2028 Nil


(Note: The Dairy Group provides this information for interest only and no liability can be taken for the information supplied or for any action taken on the basis of this information.)


PAGE 18 JANUARY/FEBRUARY 2010 FEED COMPOUNDER


Comment section is sponsored by Compound Feed Engineering Ltd www.cfegroup.com


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