By now it is clear that the UK sheep sector could be significantly affected by a no-deal Brexit because of the high tariffs (40-50%) that would apply to sheepmeat exports to the EU, where around 30-40% of Welsh lamb is currently exported to.
The FUW continues to reiterate that a no-deal scenario represents a catastrophic risk to our sheep industry and local communities in Wales and we are now at a time whereby successful EU trade negotiations which secure unfettered access to the EU are vital.
Already we are seeing reports of EU retailers refusing to sign long-term contracts and offering ‘spot prices’ which would make UK lamb uncompetitive once tariffs are introduced. Hybu Cig Cymru suggests that 92.5% of our lamb export trade could disappear under a no-deal scenario.
Michael Gove, now the Chancellor of the Duchy of Lancaster, has stated that the “sheep industry would require government support to ensure its continued health”. The run-up to 31st March saw plans to offer some form of support payment to make up for such impacts, and similar discussions are being held for the new 31st October Brexit date.
DEFRA Minister, George Eustice made it clear that the culling of sheep is not a consideration and that the UK Government is working on two possible no-deal options:
Firstly a headage payment for breeding ewes to compensate for the loss in income, and secondly, a “slaughter premium” to make up for any fall in lamb prices at the point of slaughter.
Neither is perfect: A ewe headage payment, based on ewe numbers reported in the last annual sheep inventory (1st January 2019 in Wales), would not compensate finishers or others along the supply chain for losses, and takes no account of lambing percentages, breeds etc. However, such a system could be quickly established in order to ensure money is released to the industry quickly at a time of need.
Conversely, while a slaughter premium would provide important assistance to finishers and others along the supply chain, it would be very complicated to establish and administer, introducing the risk of delays, and may not lead to money finding its way back to farmers, in particular store producers. Such a system would result in less money being allocated to Wales, and some also fear that prices would be artificially suppressed to increase government make-up margins and that slaughterers may not pass this money back to primary producers.
Discussions with the Treasury are said to be “at an advanced stage”, and internal workshops have been held by Defra to investigate the pros and cons of the two options - or a combination of both.
The FUW will continue to update members as further information is provided.