British farmers face uncertainty over EU tariffs after Brexit, says report
British farmers face uncertainty and potential tariffs on their exports from 2018 if the government fails to negotiate new free trade deals.
The depreciation of sterling since the Brexit vote in June has pushed up the price of food imports by as much as 16% but it has also helped exporters, with British grain sales abroad at their highest level for almost 20 years, which also benefits farmers.
The price of grains – including wheat and corn – are likely to remain under pressure due to large stocks worldwide, according to the Rabobank report. While this is good news for consumers generally, the UK continues to face higher import costs for other food products as a result of a weak pound, though there are signs sterling has begun to strengthen again.
Stefan Vogel, Rabobank's head of agri commodity markets and an author of the Global Outlook 2017 report, said: "Some farmers in the UK have undoubtedly recieved a boost from the weaker pound, making their exports cheaper to international buyers. But for British consumers the picture is more mixed.
"While we expect global prices to remain low as a result of large food reserves, most notably in China, in the UK much depends on how sterling performs, with a weaker pound increasing the price of food for a net importer like Britain."
Strong 2017
British dairy farmers are set to enjoy a strong 2017, with milk prices supported by both EU intervention in removing excess supplies and rising demand globally, particularly from developing nations.
The EU has boosted the milk market by removing 4m tonnes of liquid milk from the market, while prices are also impacted by strong global demand from developing countries increasingly consuming Western-style diets.
Globally Rabobank expects inflation to rise during 2017, meaning flatter food prices which offer a ‘hedge’ against increasing prices elsewhere. However, the bank warns that although food prices are likely to remain low, China’s huge reserves create uncertainty.
The world’s most populous country has large stocks of many key commodities, with estimates suggesting it holds 60% of global cotton supplies, over half of corn, 40% of wheat and 21% of soybeans. If China decides to begin exporting some of its reserves, this could depress the prices paid to farmers, according to Rabobank.
