Does coronavirus offer a glimpse at the impacts of future policy?

Wednesday, 20 May 2020

MI Director Phil Bicknell says the UK's recent challenges could hint at the long-term impact of future policies, such as the Agriculture Bill and trade discussions.

Coronavirus has been a huge challenge for the agrifood sector – disruption to supply chains, big swings in demand patterns across different channels and switches in consumer behaviour to name just three.

Most would recognise that, on the whole, the industry has responded positively, particularly when measured by food availability and choice on shelves.

However, there are some fundamental policy developments still happening that will impact our industry in the shape of the Agriculture Bill and trade discussions. They may be overshadowed by coronavirus right now, but ultimately, I think they will have a bigger impact on farming prospects in the long run.

I can’t help thinking that some of the consequences of coronavirus we’ve seen in recent weeks, and those set to emerge in the next few months, give an indication of how future policies may impact our industry.

Trade disruption

In the early days of lockdown, the flow of goods into mainland Europe was disrupted due to additional checks. There were a myriad of factors that led to lamb prices plummeting, one of which was the additional friction with our biggest export customer, which poses the question: Does this underline the significance of our trading relationships?

Not only is it about ensuring there’s minimal disruption in trade with our current customers but also that non-tariff barriers feature alongside tariffs in future trade deals.

Financial resilence

In some sectors, we’ve seen farm revenues drop as prices have dipped. To date, the dairy sector is arguably the most impacted by price volatility.

However, we know direct payments to farmers, a revenue which has generated over £3 billion to agriculture, will be phased out. And while that doesn’t impact industry in the short-term, it triggers the longer term question about the financial resilience and profitability of our industry.

Values, or value?

Allied to the loss of direct payments is the potential for increased competition from new trading relationships. There’s a distinct possibility of trade deals resulting in increased access for cheaper food to the UK market.

The bottom line is that the UK is a relatively high cost producer of high quality food. Cheaper options are always available and that is arguably exaggerated right now, with coronavirus meaning some products have been left without a market and the subsequent oversupply is reflected in bargain prices.

Some will inevitably look at the food industry’s appetite for low cost imports in the coming weeks as a bellwether on their intentions to back British and the extent to which there’s support for long-term supply relationships versus the appeal of lower cost deals in the short term.

With an impending recession, an increased number of consumers may face the dilemma of price versus quality. Again, it gives us an indication of the future and particularly shoppers’ enthusiasm to sacrifice values for value.

The direction of travel for farming policy focuses on the public goods aspects of agriculture. Quite where environmental issues will figure in the consumer priority league table in challenging economic times will be significant for us.

Plan and prepare

As a farmer, I’d like to think that where food comes from and how it is produced remains at the fore wherever the nation buys its food. However, I know that price is a critical factor for many and that underlines the importance that, whatever the direction of farming policy, our industry also needs to be competitive.

The parallels between the big and permanent change of policy and the shorter-term impacts of coronavirus may not be immediately obvious. The big difference is that with coronavirus, our industry has had to react. By contrast, we know that changes are coming, and that gives us greater opportunity to plan and prepare for change.

Phil Bicknell

Market Intelligence Director

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