FACTS FROM FIGURES WHITHER FARM INCOMES? By Roger W Dean, Dean Agricultural Associates


It is now more than fourteen months since the referendum that has set the UK on the road out of the European Union and more than five months since Mrs May invoked Article 50, thereby giving formal notice of the UK’s intention to leave the EU. From the livestock feed industry’s point of view, little has been achieved in terms of its future outside the EU. The Brussels based negotiators have insisted that the terms of the UK’s exit, including the vexed question of the border between Northern Ireland and the Republic and the amount of money that the UK will owe the EU once the ‘divorce’ has been finalised – the latter question punctuated by unhelpful remarks by the Foreign Secretary to the effect that the EU could ‘go whistle’ for its money. Only when these matters have been settled will the EU discuss future trading terms between itself and the UK. Agriculture is arguably the UK economic sector likely to be most affected by Brexit, together with the agricultural supply industry, including livestock feed. Roger Dean looks at the latest data of the industry and what might be its potential future.


The EU was founded on the basis of the European Economic Community, one of whose objectives was to ensure that the six founding nations were reasonably self-sufficient in basic foodstuffs. The Common Agricultural Policy was designed as the vehicle through which this objective was to be secured and it is arguable that agriculture is the economic sector that is most influenced by arrangements determined by Brussels. As such, it is the sector of the UK economy that is most likely to be affected by the decision of the British electorate to leave the EU. In 2016, the latest year for which figures are available, DEFRA


calculated the agricultural industry’s provisional Gross Output at basic prices as £23,149 million of which, predictably, the bulk originated in England which contributed 73.9 per cent of the total. From this total, intermediate consumption must be deducted in order to arrive at Gross Value Added at basic prices. Intermediate consumption consists of inputs to the agricultural sector; energy, seeds, fertilizers and, central to the present discussion, livestock feed. In 2016, intermediate consumption amounted to £14,953 million, leaving a balance of £8,196 million, constituting Gross Value Added at basic prices, of which 76.2


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per cent arose in England. The comparison between England’s share of the UK’s Gross Output and that country’s share of Gross Value Added is accounted for by the relatively higher share of productive agriculture in England, compared with the more marginal agriculture in parts of Wales and Scotland. While this is interesting, it does not give any indication as to the


effects that may ensue from the UK’s exit from the EU. If agriculture is the economic sector likely to be affected by Brexit, it is likely to be reflected in the outcome for trade. The EU and its lineal predecessors, right back to the days of the European Economic Community, was very much about regulation of trading relationships, including the objective of encouraging trade between the members of the Community and setting a Common External Tariff (CET) with regard to imports from non-community countries. This, indeed, was complimented by the reduction and eventual abolition of tariffs between member states so that the European Economic Community became a free trade area where, as it were, supply and demand became the sole arbiter of trade between member states. In economic terms, this removed the distorting effects of tariffs, long viewed as a barrier to economic efficiency and resulting in goods being manufactured in locations where the underlying conditions were less than optimal. Where the livestock feed industry is concerned, the key to


understanding the likely effects of the UK’s exit from the EU lies in the fact that, once outside the EU, the UK will be subject to as yet undetermined tariffs on its exports to its former fellow members of the bloc. This is unlikely to affect the livestock feed industry directly as there is little trade in animal feeding stuffs between the UK and other EU members, with the exception of some highly specialised and high value products. What is very likely to be affected, however, is the trade in livestock and livestock products, both from the point of view of the Common External Tariff being applied to British exports and the likelihood that the UK will apply reciprocal tariffs to imports from the remaining EU member states. The extent to which livestock and livestock products produced in the UK and exported to other EU member states and the extent to which the UK imports livestock and livestock products from other EU member states will clearly be influenced by tariffs and this will constitute the main area of interest in the present context. Before dealing with the likely extent of the UK’s exposure to the


sort of arrangements which are likely to be put in place following the UK’s exit from the EU, it is worth summarising the current state of the UK’s livestock feed industry. In 2016, the UK produced 12.91 million tonnes of compound animal feed, a figure which includes the very


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