Brexit and the agrifood sector

What are the possible consequences of Brexit on international food & agriculture? While the impact can still only be guessed at, it is clear companies must prepare themselves for a new reality.

The impact of Brexit on the international agrifood sector is difficult to predict. One thing is sure, however: despite all the obstacles, interest in Britain will not decrease, according to Harry Smit, Senior Analyst Farm Inputs & Farming at Rabobank Food & Agribusiness Research & Advisory.

“It’s the second biggest economy in Europe and it depends on imports for a third of its food needs,” he says. “That’s quite exceptional, as 80% of food production in the world is local-for-local, produced and consumed at source. Britain deviates from this pattern because historically it was not concerned about its own food production. It could import freely from its former colonies.”

How disadvantageous is Brexit for European agrifood companies?

“Border checks will soon be the biggest obstacle for European companies. Once Britain is no longer in the European Union (EU), products must be checked at the border. Are they safe and produced according to British standards? And were they really produced in the EU, or do they come from the USA before being brought in via a European country? Other standards apply to US products. Administrative costs due to border controls will add an estimated 5 to 8% to agrifood companies’ overheads.”

Which producers will be most adversely affected? And which ones might benefit?

“In the case of fresh produce, there will be little change: you can’t fly in tomatoes, cucumbers and peppers from Brazil. These will still come from the Netherlands or Spain, as Britain has no alternatives, but prices will increase slightly due to the border controls. The impact on dairy, meat, grains and oilseeds is less clear as nobody knows yet what Britain’s trade policy will look like. There may be a ‘preferential trade agreement’ with the EU. The old ties are broken, but could be replaced with new ones. Free trade with the EU could remain intact. Business as usual, you might say.”

“Nobody knows what Britain’s trade policy will look like”

- Harry Smit, Rabobank Food and Agribusiness Research and Advisory

“The other option is for Britain to open its borders with the rest of the world. If it buys its food on the global market, European agrifood will face stiff competition, with British food prices falling. Without European import tariffs, and cheaper beef from Brazil and dairy from New Zealand, European food producers will lose market share. The country most affected will be Ireland, which has an intensive trade relationship with Britain, particularly for beef and dairy.”

More and more innovation is expected from the agrifood sector in order to combine sustainability with increasing demand. To what extent will that be thwarted by Brexit?

“Production capacity will not change in Britain or Europe. However, the optimization of the value chain becomes more difficult when it passes through several countries. Food is increasingly a composite product. For a pizza, you get the cheese from the Netherlands, the meat from Italy, the base from Britain, the tomato sauce from Spain. With Brexit you’re not operating in the same market anymore. British food companies will have to import the products they need for their value chain.”

What can we advise players in the sector?

“The urgency isn’t that high yet. ‘Wait and see’, seems to be the motto, while a number of things are already certain: Britain will no longer be in the EU, but will be a third country, and we will get customs checks. European flower exporters and pork merchants who currently export to Britain have no experience of exports, as selling to Britain is no different from selling in their own country. Soon, the export of agrifood products will become a hassle, because of different veterinary and phytosanitary requirements, for which specialists will need to be employed to organize the administration.”