Brexit will have major consequences for the Irish farming and food sectors. A hard Brexit, with re-erection of customs barriers between the Republic and the UK, will be very serious for the beef sector given half of these exports now go to the UK. In that market beef from the Republic would find itself competing with beef from non-EU countries at prices well below the EU price. Add in tariffs, and exports to our biggest single market for meat would become hugely problematic.
In the dairy sector, given a much lower gap between EU prices and the world price, the effects will not be as dramatic, although we will still face competition from lower-cost third countries.
In trying to redirect our dairy produce to other more profitable EU markets, we will initially be hampered by the fact that some of our dairy products, such as cheddar cheese, are geared towards UK rather than continental tastes. However, over the next number of years the dairy sector will adjust, changing its product lines and finding new markets.
In the coming decade Irish agriculture will continue to be underpinned by the Common Agricultural Policy (CAP) . While the Republic is likely to receive slightly lower transfers from Brussels, and the distribution of funding will shift towards encouraging environmental benefits, nevertheless the direct payments to our farmers, which are so important, will continue.
UK farmers, including those in the North, will, however, face a very different situation post-Brexit. At best, in the absence of a no-deal crash-out, direct payments to their farmers would continue until 2022. Then such direct payments will be rapidly phased out. By the late 2020s the only payments remaining would be solely related to environmental benefits.
Under the new UK trade regime all imports of agricultural produce will face tariffs, which will be lower than those in the EU. This will mean lower-cost third-country imports into the UK will grow, which will depress the prices UK farmers will receive for their produce. The implications of this cheap food policy for British and Northern Ireland agriculture have been analysed in a very interesting Institute of International and European Affairs paper by Con Lucey.
Direct payments
After Brexit most of the €4 billion lost to UK agriculture as a consequence of leaving the EU’s CAP will not be replaced by the UK exchequer. Neither will the scale of expected payments for environmental services compensate for the loss of direct payments under CAP. As low-cost imports of cheap food will lead to a fall in prices earned for UK produce, many farmers will go out of business.
The problems will be especially serious for beef and sheep farmers. Lucey underlines that beef farmers in England and Northern Ireland currently make no money out of raising cattle, with their only income in that respect coming from direct payments under CAP.
For Northern Ireland the situation will be even worse than in the case of England because of the greater dependence on direct payments from Brussels to farmers. Even with no change in the UK price level the loss of the direct payments would leave many farmers making losses – they could not continue in business.
Today 800 million litres of milk produced in the North are sent to the Republic for processing. Even without tariffs if this trade continues the resulting butter and cheese might not be saleable as an EU product, posing problems for Southern dairy factories. However, EU tariffs will make this cross-Border processing prohibitive. Until new processing capacity comes on stream in the North this will pose a huge problem for dairy farmers north of the Border
Very large subsidy
Agriculture is a devolved responsibility within the UK. This means that whatever payments are made from London to support Northern agriculture will be added to the current very large subsidy to the Northern Ireland economy, and then paid from the Northern Ireland budget.
With rising English nationalism the provision of additional funds for Northern Ireland farmers, on top of an already very large subsidy to the North, could be unpopular in Westminster.
While it would in principle be open to a Northern Ireland administration to supplement the payments to farmers by cutting local services, such as education and health, this would obviously pose big problems right across the community.
The leadership of the Ulster Farmers' Union originally sought to oppose Brexit, but the membership rejected this option. The result of Brexit looks like haunting Northern Ireland farmers for a generation. The best hope for us all is that Brexit proves "softer" than currently seems likely.
