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Sow the Seeds and Scatter: Will UK Farmers Reap What Profits They Sow in A Post-Brexit Britain?

Harvest thanksgiving services in many rural parish churches were for centuries well attended events in the church calendar which celebrated the harvest had been successfully gathered in for another year and the prospect of famine and poverty avoided.

British farmers, since the UK joined then called EEC in 1973, have had the comfort of the EU’s common agricultural policy (CAP) to provide direct subsidy to help them as the nation’s food producers fend of shortages and malnutrition, the former last experienced during WW2 and the latter feared afterwards during the period of post-war austerity until 1952.

After the successful leave vote in the UK’s EU membership referendum the British agricultural industry now needs to find a replacement for its annual CAP funding. In 2015 farming industry participants received direct funding of over £2 billion with a further £600 million given in rural development payments from the CAP.

Notably some tenant farmers complain about the direct subsidy being paid to landowners and not to farmers. Farmers’ derive as much as 50% of their income from direct or indirect subsidy depending on location and type of activities pursued by individual farmers.

The post-Brexit Chancellor Philip Hammond has given a reassurance the committed CAP funding will remain in place until 2020 and the government will consult farmers over funding proposals with the National Farmers Union canvassing its members over replacement funding solutions.

Many argue that ending CAP funding to farmers would be a good outcome as food prices would fall to world market levels as prices for EU produce are protected with import tariffs and guaranteed prices to sustain food production within EU member states.

Consumers would benefit from more competitive world prices and as a result of Brexit UK trade deals can be established with other nations around the world without being tied to EU trade restrictions. Although EU single market access would be relinquished.

Conversely, British food prices may rise to meet the requirements of national production at sustainable economic levels for farmers to survive, without price guarantees which kept prices lower for consumers, the purpose of the CAP, and also to continue countryside management schemes especially in remoter parts of the UK for the benefit of all in the preservation of the national heritage.

It’s also reasonable to assume the negotiation of bilateral trade deals will be lengthy and subject to existing protocols and world trade organisation (WTO) arrangements with existing trading blocs such as the EU and NAFTA.

Frankly, it’s all up for debate and the outcome at present is unknown and that may temper any further increases in the price of farmland which has enjoyed a substantial increase in recent years.

Crop prices have varied over the same period, with a peak in world grain prices in 2007/8 yet to be repeated, as input costs have remained high during the period of high oil prices which limits farms profitability as fuel is a major cost.  With lower fuel costs from 2015 profitability will remains subdued by dominant market participants such as EU intervention and UK supermarkets giants who dictate prices paid to farmers to maintain lower costs for themselves and prices to their cost conscious customers.  Not forgetting the old perennial of wet weather conditions which cause lower grade crops due moisture content and higher drying costs.

In a post-Brexit Britain the opportunity has arrived to replace and improve upon the subsidy system. Both food production and countryside management are worthwhile occupations of national importance however I doubt this or any other government will be able to support the agricultural industry to the degree it has been until now through the CAP.

Therefore, continued diversification into tourism or providing ground or rented accommodation for other rural businesses should continue and be supported by both central and local government with grants and/or tax relief where possible. Upland famers should be able to apply for tourism grants from various government agencies for countryside management improvement schemes to allow visitors and recreational users to enjoy the natural environment (regardless of what farmers think of trespass or urbanites).

Furthermore, Government should continue its support of improving communications in both broadband, road and rail extensions to support rural entrepreneurs although grants and funding will need to be co-ordinated across local, national and various departments and this can be a time consuming task.

Larger or highly efficient more profitable farms with higher quality soils will receive lesser subsidy than before as the UK political agenda will demand subsidy for other economic sectors too with ever increasing amounts required for healthcare and pensions.

The value of agricultural land will resume its upward trajectory as food demand for cereals, meat and poultry will continue to grow with a projected growing UK population and increase recreational use too.

However, the negotiations for future trade deals and governmental inter-department agreements for budgets and policies have barely begun so a degree of uncertainty lies ahead. New investors to the sector would be wise to be wary of entering uncertain markets after a rise in values as the politics could be changeable for the foreseeable future.

Oh! Plough the fields and scatter the good seed on the ground…..

LDC

Further reading

Financial Times; (2016); “The fate of farming post-Brexit lies with the UK Treasury,” by Edward Barker, Financial Times Ltd, London UK. Website accessed: 4th September 2016:
http://www.ft.com/cms/s/0/c00ef1ca-691e-11e6-a0b1-d87a9fea034f.html?siteedition=uk

Financial Times; (2016); “British farmers prepare for end to direct subsidies after Brexit,” by Scheherazade Daneshkhu, Financial Times Ltd, London UK. Website accessed: 4th September 2016:
http://www.ft.com/cms/s/0/f88a6556-5b0f-11e6-9f70-badea1b336d4.html?siteedition=uk

Financial Times; (2016); “Brexit likely to push up food prices, says NFU,” by Emily Cadman, Financial Times Ltd, London UK. Website accessed:4th September 2016:
http://www.ft.com/cms/s/0/25164a48-fb3b-11e5-b3f6-11d5706b613b.html?siteedition=uk

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