Until now, pig farmers in the USA and Canada have had very little access to the EU market because of tariffs, but the UK’s no-deal schedule could change this, says National Pig Association senior policy advisor Ed Barker.
At the time of writing, we are headed by default towards a no-deal Brexit.
In the past month, we have seen the Government has published its own tariff schedule in the event of no deal, and it seems chillingly possible that we will be enacting these measures via an independent trade policy.
The tariff announcement makes for interesting reading. Whereas the beef, lamb and poultry sectors would see quite substantial protections in place, and the egg and cereals sectors would have none at all, the pig sector would see what we can best describe as very modest tariffs.
Weighted averages would see tariffs ranging from €9.4/100kg on fresh pork, to €20.6/100 kg on fresh ham, with bacon somewhere in between.
As ‘ad valorem’ rates, these additional rates come to somewhere between 3-5 per cent according to AHDB Pork.
Given such low levels, it is hard to work out exactly what this will means in ‘real world’ terms.
Pork is generally closer to ‘actual’ world commodity prices as it is less reliant on state aid, and we believe this is part of the Government’s thinking on these tariff rates.
The AHDB has undertaken interesting analysis which looks at how much these tariffs would affect the availability of imported pork products.
Cost of production
At farmgate, British producers received around 22p/kg more than EU producers last year, but EU competitors generally have a lower cost of production.
How this would balance in the case of no deal is still difficult to predict. One of the most striking issues, however, is how non-EU countries could be accessing the UK market.
Until now, non-EU countries have had very little access to the EU market as a result of tariffs, price and product standards, but given a no-deal scenario would treat all other countries’ imports equally, it is quite conceivable that the USA and Canada would see the UK as an ideal market to target.
Their cost of production levels are far below that of the EU, with a much lower pig price domestically, and the USA’s trade restrictions with China mean there is certainly product available to export.
Meanwhile, producers will be keeping a close eye on currency. The pig price in the UK is influenced by the EU’s reference price, and as a result of this, the interaction of euro and pound is key.
When there is a strengthening pound, the competitiveness of UK pork is usually reduced, whereas a weaker pound usually gives the UK a better competitiveness to buyers in pork markets.
A diminution in sterling could offset the losses to producers as a result of losing EU market access in a no deal, though it is hard to predict, given so many variables.
Many pig producers will confess the most pressing issues are in fact non-Brexit related.
For many, the threat of African Swine Fever (ASF) is one of ongoing concern. The ease with which the disease can infect the feral pig population, as we have seen in Belgium, and the speed it can spread, as we have seen in Eastern Europe and China, has been striking.
One of ASF’s biggest victims has been China, which has been suffering hugely from its spread and scale over the past year.
As a result of this, it is projected that the Chinese pig herd will contract to deal with the disease. With increasing consumption of pork in China, there are huge opportunities for UK exports.
January 2019 was a record setting month for Chinese exports, and given the long-term trends, we are expecting this to continue.
We can say ASF is as much of a threat as an opportunity, perhaps much like Brexit itself.
Ed can be found tweeting at @edbarkerpig