Edith Mary Gayton Lecture

  • Written by Andrew Davis
  • Posted on Mar 01, 2018
  • Articles

There has been much said and written about the future of British farming after secession from the European Union. Indeed, Defra published its consultation paper last week. But, in this country at least, there has been little consideration given to the impact on farming in other member states. This was addressed by the recent Edith Mary Gayton Memorial Lecture at Reading University given by Professor Thia Hennessy.

Professor Hennessy is the Dean of the Cork University Business School and Chair of Agri-Food Economics at UCC. From a family of dairy farmers in County Cork, she received her PhD in Agricultural Economics at Reading in 2005. She gave a fascinating view of the Irish food and farming sector and the dramatic impact that the withdrawal of the UK from the EU will have.

The Irish landscape is primarily pastoral, used to graze ruminant livestock. There are 140,000 farms responsible for 8.6% of employment, 7% of the country’s Gross Added Value and 12% of exports bringing in 30% of net foreign earnings. These exports have risen by 60% since 2009, driven by Government expansion and investment, in an attempt to recover from the catastrophic effect of the banking crisis that hit the Irish economy hard. That is an outstanding achievement by any measure. Of those exports, approximately a third comes to the UK, one third to other EU states and the final third to other countries, increasingly China. But two thirds of all exports are transported through the UK, making this an essential trade route.

Of those Irish farms, only 37% are economically viable. 31% are described as sustainable as the farmers have other jobs or diversified enterprises, whilst the remaining 31% are essentially not viable and are particularly vulnerable to outside economic forces, not least any reduction in direct payments from the EU. Beef is the biggest sector with 51% exported to the UK, followed by dairy which has expanded significantly since the abolition of milk quotas. Here the emphasis is on adding value, for example Ireland has taken a 15% share of the world market for infant milk products, and performance protein drinks for sports and fitness fans. Cheddar cheese is another major product, much of which is exported to the UK. Mushroom production is also substantial with 80% exported to the UK.

Although food exports to the UK are worth €4.4 billion, Ireland also imports produce worth €4.1 billion from the UK, much of it prepared food. Disruption to this trade gives the opportunity for the Irish to process more of their own produce. One third of milk produced in Northern Ireland is processed south of the border whilst another third is processed in Northern Ireland by Irish companies. The re-imposition of a hard border between the two is unthinkable.

The recent Copenhagen Economics study on the impact of Brexit on the Irish economy indicates a reduction of 3% to 7% in GDP with a loss of 17,000 to 30,000 jobs in the agri-food industry, depending on the precise trading terms agreed. The UK’s future trade policy is relevant here. If, for example, we cut tariffs to bring down food prices, Brazilian beef might undercut Irish imports. In the worst case scenario, the report suggests that Irish farm incomes might fall by 30% to 40%, which could cause widespread bankruptcies. Mushroom and cheddar cheese production would be hardest hit because of the dependence on exports to the UK.

An interesting idea arises in terms of sheepmeat production. If we fail to have a free trade agreement with the EU and revert to WTO tariffs, the 40% to 50% tariff will effectively end exports of UK lamb to the EU. Perhaps that gives the opportunity for struggling Irish beef farmers to switch to sheep to meet the demand, especially from France.

However apocalyptic the prospect of Brexit may be for Irish farming, it is not the only challenge it faces. Ireland is committed to reduce its emissions of greenhouse gases by 20% of 2005 levels by 2020, 30% by 2030, facing huge fines if it fails. But 30% of Irish greenhouse gas emissions come from agriculture, essentially methane from ruminant livestock. A carbon tax to be levied on farmers has been proposed with beef farmers particularly at risk.

One impact of Brexit to the remaining EU countries is that the budget will be reduced or that net contributors will have to pay more, or a combination of the two, to cover the lack of a British contribution. This could well see a significant reduction in the Basic Payment to farmers perhaps by 10%.

In my last column, I described the potential implications for British agriculture of the differing trade arrangements that might emerge from our negotiations to leave the EU. If we leave without a comprehensive trade agreement, the impact on British farming will be significant, catastrophic in some sectors. What Professor Hennessy showed in her lecture is that the implications for other European countries could be equally severe. Indeed, whilst the agrifood sector in Ireland is thriving, agriculture is under pressure and the result of a hard Brexit could be even worse in Ireland than in the UK.