Uncertainty surrounding Northern Ireland’s border in the Brexit negotiations is taking a toll on Irish farmers, posing an “existential threat to the sector”, sources in Brussels told EURACTIV.com.
Take beef, for example. The UK absorbs 50% of Irish beef exports but the declining value of the British pound, which recently hit another record low against the euro, is undermining exporters’ profitability.
“Irish beef farmers have taken a significant hit around the month of August, the price of beef has gone down from £4.05 (€4.40) about six weeks ago to £3.80 (€4.10) per kilogramme today,” said Eddie Punch, president of the Irish cattle and sheep farmers’ association (ICAS).
“Every time there is an adverse movement in the exchange rate, meat factories start to talk about prices going down. We think that while there is a slight weakening in the sterling, it is not justified, as UK farmers are still getting a full price for their beef.”
It doesn’t help that the Irish beef production line is a wide pyramid structure: thousands of small scale breeders competing to sell to a handful of meat manufacturers who hold a near-monopoly and dictate prices.
The market is effectively in the hands of meat giants ABP Group and Dawn Meats, who recently took over major competitors.
“There is less and less competition between the processors, which is making it very difficult for the farmers to have negotiating power,” said Punch.
ABC Group and Dawn Meats were contacted but had not responded by the time of this article’s publication.
Agriculture is Ireland’s most exposed sector to potential harm from Brexit. According to a study by the Irish department of finance, this sector will have the highest employment implications from Brexit and is the second most exposed sector in terms of turnover, where exposure is calculated as the share of UK exports as a percentage of the total.
Once the UK leaves the EU single market, new rules will regulate trade between the UK and Ireland. If, however, negotiations for a free trade agreement fail and no deal is reached, the default position could be “pure” World Trade Organisation rules.
WTO member countries commit to “binding ceilings”, i.e. maximum tariff quotas they will impose to other member countries on any given goods.
In the worst case scenario, under WTO schedules the UK could impose tariffs of up to 60% on Irish beef, according to a study by the Irish ministry of agriculture.
Unable to put up with high tariffs, Ireland would be squeezed out of the British market by competitors like Australia, Brazil and Uruguay.
This would, in turn, threaten Irish jobs, in a country where agriculture accounted for 5.6% of total employment, compared to the European average of 4.5%.
Irish Agriculture Minister Michael Creed has been looking to secure alternative export markets, with an “intensified programme of trade missions to promote Irish food and drink on EU and third country markets”, including Asia, North America and Africa.
It recently concluded a trade deal with Singapore to grow its exports of beef to south-east Asia.
But exports of Irish beef to the UK amount to 270,000 tonnes; a glut that is likely to flood the EU market, depressing prices, sources familiar with the Brexit talks warned.
To avoid a spillover of the ‘Irish problem’, the Irish Farmers Association is demanding tariff-free access to the UK market and direct income support measures for farmers hit by the drop in sterling.