EU Exit Perspectives: What will leaving the EU mean for crops markets?

In this week’s blog, Vikki Campbell, our senior market specialists manager for arable, highlights the key implications of EU exit for UK cereals markets.

We are now a matter of weeks away from the EU exit deadline and as yet, the UK has still to agree a trade deal with the EU. While there has been much conversation over previous months (and years!) as to what impact a no deal exit could have on UK crop markets, I’d like to take you on a whistle-stop tour of some of the key points and challenges ahead.

First we have the threat of tariffs. For exports there are significant tariff risks – particularly for barley. With the UK producing around eight million tonnes of barley again this season, exports are essential to balance the UK market. Traditionally, the majority of these shipments have headed to the continent – more than 77 per cent of barley exports last season were destined for the EU. With no deal in place, these barley shipments would be faced with a sizeable tariff, of €16 per tonne within the quota and up to €93 per tonne outside of it. However, it could be that barley will not feel the full force of this tariff, with prices moving to the next cheapest destination.

Oat exports could also face a sizeable risk. With the UK looking at a crop of over a million tonnes for the second year running, and EU tariffs of €89 per tonne in place, the EU market would essentially become untenable. Last year, the UK exported 116,000 tonnes of oats to the EU, accounting for 97 per cent of oats shipments, so the need to find alternative homes if this tariff is levied is vital.

Imports are also not immune to tariff risks, especially with a small domestic wheat crop this season. While high-quality wheats are zero-rated, other wheat imports face a tariff of €12 per tonne within the quota, €79 per tonne outside of it. With some of the domestic milling crop not reaching specifications this year, this has meant more is available for feed markets, thereby softening the blow. The biggest uncertainty remains around tolerance levels for high-quality wheats. Currently, the EU has a 0.7 per cent protein tolerance at 12 per cent moisture but it remains unknown as to whether this will extend to the UK.

With this uncertainty in place, we could well see considerable maize imports next year, although maize prices are seeing some support at the time of writing.

Aside from tariffs, logistics and the delays faced here will be a weighty issue for the industry. Even if a deal with the EU is brokered, it is almost certain that there will be extra paperwork, checking and protocols. And time is money. How much these delays will cost the industry remains to be clearly quantified, although the range in impact will be widely varied.

For me, the biggest issue now is uncertainty. As any decision remains unmade, the industry has had to invest time, money and resources planning all eventualities. While this is prudent to ensure minimal impact during transition, it comes at a cost. Equally, there will be some who have yet to fully form plans, rather waiting to hear what any outcome could be. The only thing for certain the UK industry can do is to control what they can control. Know what your costs are, streamline where possible and ensure your business is fit to weather whatever might be coming over the horizon.

For more analysis and in-depth discussion on the implications of leaving the EU for crops markets, listen to our podcast.