ForFarmers, Cargill, AIC react

BREXIT: Leave vote poses huge questions for Britain’s agricultural supply industry, says UK feed lobby

By Jane Byrne

- Last updated on GMT


Related tags European union United kingdom

The result of the Brexit referendum was announced this morning with a vote in favor of the UK leaving the EU, and the British prime minster, David Cameron, subsequently announcing he is going to step down. Sterling has hit a 30 year low and uncertainty now reigns in the UK feed and agribusiness sector.

We gauge reaction to the leave vote from the UK feed and farm sector and further afield:

The result issues in a period of uncertainty which may take months, or even years, to resolve, said the Agricultural Industries Confederation (AIC), which represents the feed, crop protection, grain and oilseed sectors in the UK. 

In 2014, according to data from the National Farmers Union (NFU), the main destinations of UK food, drink and feed exports were Ireland (£3.4 bn), France (£2.1 bn), USA (£1.9 bn), Netherlands (£1.3 bn) and Germany (£1.2 bn). During the same year the UK imported food, drink and feed mainly from the Netherlands (£4.9 bn), France (£4.2 bn), Ireland (£3.8 bn) and Germany (£3.7 bn).

In April, that trade group said a Brexit would not be in the best interest of its members. 

Commenting on the result today, David Caffall, AIC’s chief executive said: “As of today, the AIC, like the rest of the country, has no clear idea of how events will unfold. We will be seeking clarification on what this decision means in terms of market options; regulations and the timetable for the changes that will inevitably occur. 

“Then, as ever, we will lobby to ensure emerging policies and regulations are as practical and pragmatic as possible where it affects the agricultural supply industry.”

George Perrott, head of the animal feed group within the AIC, told FeedNavigator, the UK feed sector shares the same desire for stability and certainty as the rest of industry.

"At this point in time there are few if any clues about the negotiating priorities the UK will take into talks with the rest of the EU over the next few months, indeed it was one of the concerns we sought to highlight during the referendum campaign. 

"Irrespective of the outcome, the feed industry and the whole UK livestock sector must continue to be competitive and our requirements for imported feed materials, particularly vegetable protein remains the same,"​ he said

Perrott said the UK’s ability, therefore, to retain a similar trading position will be dependent on the forthcoming negotiations recognizing the requirements of its agribusiness sector: "Without that, the risks to food and feed security would be brought more into focus."​ 

ForFarmers won’t be changing strategy

Caroline Vogelzang, director of investor relations and communications at ForFarmers, one of the biggest players on the UK feed market, commenting on the vote said the company’s strategy with respect to the UK will not change.

“As ForFarmers publishes its financial results in euro, the devaluation of sterling following Brexit will impact our results as [those] achieved in the UK need to be translated into euros.

“I note that, with respect to our operations in the UK, our costs and revenues are in the same currency - sterling - which, in effect, means that, commercially, we have a ‘natural currency hedge’ and, therefore, are only exposed to the translation of the results into the consolidated results of [the] ForFarmers group,”​ said Vogelzang.

In the medium to longer term, however, she said the Brexit could lead to growth of ForFarmers’ UK operations:

“The self-sufficiency ratio of pig farmers in the UK is around 60%, which entails that some 40% of pork meat is imported.

“Given the devaluation of the pound sterling, this may lead to a growth in pig farming, which then also can lead to a growth in our business of delivering feed and nutritional advice to pig farmers,”​ concluded Vogelzang.

Cargill, which has had a presence in the UK since 1955, said though it believed there were distinct advantages for the UK and member countries to remain together as part of the EU, its priority now is to closely monitor the situation and ensure that its business interests are protected during the coming months, and as events continues to unfold.

Carolyn Fairbairn, director-general, of UK business group, the CBI, said: “The urgent priority now is to reassure the markets. We need strong and calm leadership from the Government, working with the Bank of England, to shore up confidence and stability in the economy.”

Competitiveness of UK farming

UK farmers said they want to know the impact of the vote to leave the EU on their businesses as a matter of urgency.

“We understand that the negotiations will take some time to deliver but it is vital that there is early commitment to ensure British farming is not disadvantaged. It is vital that British farming is profitable and remains competitive, it is the bedrock of the food industry – Britain’s largest manufacturing sector,”​ said NFU President Meurig Raymond

He said the Brexit will inevitably lead to a period of uncertainty in a number of areas that are of vital importance to Britain’s farmers.

“The NFU will engage fully and constructively with the British government to construct new arrangements. This needs to happen as soon as possible,”​ said Raymond.

He has called an extraordinary meeting of NFU Council, the union's governing body, for next Friday.

The NFU’s objectives, post-EU membership, are:

  • To achieve the best possible access Europe’s markets, which will remain extremely important to UK farmers.
  • To get access to markets in the rest of the world, while ensuring we are protected from imports which are produced to lower standards.
  • To ensure our farmers and growers can get the necessary supplies of labor, both seasonal and full-time.
  • To build a British agricultural policy which is as simple as possible, adapted to our needs and guarantees parity of treatment with European farmers, who will still be our principal competitors. There must be a common framework of a British policy, while allowing a necessary degree of flexibility to devolved governments.
  • Regulations and product approvals must be proportionate and based on risk and science.

Perspective of the EU institutions 

EU Council President, Donald Tusk, EU Parliament President, Martin Schulz, and Prime Minister of the Netherlands, Mark Rutte, met this morning with EU Commission President, Jean-Claude Juncker.

They discussed the outcome of the UK referendum and expressed their disappointment with the decision; they also called for a speedy start to talks in a joint statement:

“This is an unprecedented situation but we are united in our response ... We now expect the UK government to give effect to this decision of the British people as soon as possible, however painful that process may be. Any delay would unnecessarily prolong uncertainty."

Article 50 of the Treaty on the EU, they said, sets out the procedure to be followed if a member state decides to leave the EU.

“We stand ready to launch negotiations swiftly with the UK regarding the terms and conditions of its withdrawal from the EU. Until this process of negotiations is over, the UK remains a member of the EU, with all the rights and obligations that derive from this.

“According to the Treaties which the UK has ratified, EU law continues to apply to the full to and in the UK until it is no longer a member," ​noted the statement.

And MEPs..

Martin Bille Hermann, Danish State Secretary for Development Policy, Ministry of Foreign Affairs, said: “I am sad Britain has decided to leave. Instead of talking together about the issues that matter like job creation and controlling migration more efficiently, now we talk about Britain leaving.”

“The signal from the British is clear – politicians in the UK got the result they wanted – now they need to live up to it.

“Denmark is a member of the EU and we will continue to be a member of the EU. Polls show that the Danish want that. When you come down to the core - are we stronger together or are we stronger separately – they have said we are stronger together.”

David Lidington, Minister of State for Foreign and Commonwealth Affairs of the UK, said: “Huge disappointment. [We] now need to negotiate a new relationship with our friends and allies in Europe.”

Rocky road ahead

With the referendum done and dusted, attention will now increasingly shift to the direct impact on business, and the practicalities surrounding exit negotiations, said Euromonitor.

Sarah Boumphrey, global lead, Economies and Consumers, with that market research firm, said: “One key word will continue to overshadow the UK economy: uncertainty. The uncertainty will also flow-on to the EU itself - the UK plays a significant role in the EU, both economically and demographically.

“Economists were almost overwhelmingly united in their opinions about a vote to leave the EU – it would damage the UK economy. The extent of the damage has been harder to agree on. Despite heightened fears of recession in the immediate aftermath, our macro model shows a 2% fall in GDP growth over 5 years stemming from a Brexit, with the biggest impact being felt in 2017.”

She said the challenge is the length of the negotiations and, as this will be unchartered territory, it makes it very difficult to implement effective strategies.

Boumphrey added: “The ‘Unknown unknowns’ are a major challenge and this makes it difficult for companies to protect themselves. I think taking a cautious approach to investment decisions would be wise until the dust settles and we see the likely direction of the neg​otiations.”

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