The Environment Secretary also said Arla would ’have to relocate’ the manufacturing of Lurpak to the UK
Sheep farmers have reacted with anger after environment Secretary George Eustice has told sheep farmers they could diversify into beef production if the UK does not get a deal with the European Union.
Speaking on the Andrew Marr Show Mr Eustice was asked about the impact of tariffs on the agriculture industry.
He said despite potential tariffs of 35 per cent on dairy exports he did not think there would be an effect on dairy farmers because the UK would apply its own tariffs on EU imported goods.
“In a non-negotiated outcome companies like Arla, which is a big Danish company and sells brands like Lurpak in the UK that are manufactured in Denmark, they would have to relocate that production to the UK,” he said.
Lurpak is the number one butter brand in the UK, but due to legal protections can only be produced in Denmark. However, Arla said farmers in the UK ‘benefit equally’ from the commercial success of Arla products.
Mr Eustice also dismissed warnings from Dale Farm chief executive Nick Whelan the tariffs would wipe out total profitability from the industry.
He suggested Mr Whelan may have been talking about their ‘production outside of the UK’ despite Dale Farm being a cooperative owned by dairy farmers across Northern Ireland, England and Scotland.
In response to Mr Eustice’s comments, Mr Whelan said: "We are now less than 50 days away from the end of the transition period and still have little clarity on what’s next.
"There is still time for the UK and EU to agree a fair and balanced deal but that window is rapidly closing.
"As a farmer-owned cooperative, championing long term sustainability for dairy farm businesses is of vital importance.
"Dale Farm will always do everything in our ability to best protect the current and future needs of our network of dairy farmers and we urge both sides to reach an agreement that enables free trade.”
Mr Eustice said the reality was the only sectors which were net exporters were lamb and barley and the net importers would be protected by import tariffs to ‘make room’ in the market for British products.
“It is also the case that the UK is by far and away the largest producer of lamb in the EU. We would sell it but it would increase prices in the EU,” he said.
“That would also mean that demand in the EU would go down and there would be a fall in price here in the short term.
“Also, if we are not importing as much beef from Ireland those mixed beef and sheep enterprises would be able to diversify into beef.”
NSA Scottish region chairman Jen Craig said the idea was ‘quite frankly a laughable response’.
She said the industry had been calling for support packages to be put in place to compensate the sheep sector but there was a complete lack of clarity for the industry to plan for the next few months.
“If the UK government cannot reach a deal with the EU and if Mr Eustice believes we will be unaffected then I see absolutely no reason for the UK Government not to have a compensation scheme ready and waiting,” she said.
NSA Chief Executive Phil Stocker said the comments would have angered sheep farmers and failed to take into account the variety of the industry,
He said the assumption many were mixed farmers was wrong, angering farmers who have structured their farms to focus on sheep, particularly where the farm would not be suitable for cattle farming.
“The fact we have many sheep farmers, especially younger farmers and new entrants to the sector who run their sheep on arable farms and on short term grass lets was completely ignored – simply switching to cattle would be impossible for them,” he said.
He suggested Mr Eustice may not have believed what he said but could be creating a ‘we do not care’ attitude to bolster trade negotiations or it exposes an underlying willingness to see the sheep industry have to reduce its size, scale and diversity.
NSA Chairman and North Devon sheep farmer Bryan Griffiths added many people may not realise the UK was the third largest exporter of sheep meat globally.
“The machinations of Brexit may bring about changes to exchange rates, global supply chains and price fluctuations, but demand will not simply evaporate, highlighting why a deal is so crucial.
“We have long-term production systems and are an industry that is resilient and used to uncertainty, but Mr Eustice’s suggestion of a knee jerk switch to beef production is simply unrealistic.’
An Arla spokesperson said the comments may have led to some ‘misunderstandings’ about its UK operations.
“Whilst the global headquarters is situated in Denmark, Arla is a cooperative owned by dairy farmers based across northern Europe, including 2,300 British dairy farmers, equal to a quarter of all dairy farmers in the UK, who benefit equally from the commercial success of Arla and its products in any market.
“Over the last 15 years Arla’s farmers have invested £750m in the UK, building the largest dairy company in the UK. Arla is also the third largest overall food company in the UK and has played an important role in supporting the UK government’s ambition of feeding the nation, especially during the Covid crisis.
“It is disappointing to hear the comments made but we remain fully committed to supplying the UK with top quality dairy products and our position is that a free trade agreement that minimises the non-tariff barriers is the best outcome to minimise the impact of Brexit transition for our consumers, customers or indeed our British farmer owners.”
NFU Scotland (NFUS) president Andrew McCornick said the failure to recognise the huge impact of tariffs on agricultural sectors had caused significant anger and frustration in what is potentially a landmark week for negotiation.
“The Minister’s remarks ignored the commonly held understanding of the impact that a ‘no deal’ outcome would have on the thousands of farming and food businesses across the United Kingdom,” he said.
He added suggesting sheep producers could simply ‘diversify into beef’ to protect themselves from market disruption showed a lack of understanding of sheep production in much of Scotland.
“It should have been obvious to the Minister that sheep farmers, who will be hammered by ‘no deal’, cannot simply avoid this outcome by diversifying into another sector of production by January 1 2021.”
He added they had written to the Minister asking him to provide urgent clarity that the Westminster Government fully recognised the potential impact of a ‘no deal’ and to remind them to do all they can to agree a deal.
“If a deal cannot be reached then support must be made available to farming businesses which have their incomes impacted as a result of any arising disruption caused – we have received commitments from the UK Government on this in the past and I hope these commitments still stand.”
FUW President Glyn Roberts said the reality was the failure to reach a deal would have a ‘catastrophic impact’ on key agricultural sectors, the whole food supply chain and ‘complete anarchy’ at ports.
He added it would also have a devasting impact on EU businesses so it was in both parties favour to agree a deal.
Mr Roberts also rebuffed claims by Prime Minister Boris Johnson that the UK ’will prosper’ without an EU trade deal.
“You cannot cut yourself off from the worlds biggest economy and trading block in the height of a global pandemic, the worst recession for a century and having borrowed a quarter of a trillion to cope and think it’s going to go well,” he said.
“Not only would this amount to catastrophic self harm from an economic point of view, but at a practical level the country is woefully unprepared to cope with the flow of goods over our borders and all the paperwork and checks that this requires.”
NFU Cymru President John Davies said a year ago the industry was told the odds of a ‘no deal’ Brexit were ‘a million to one against’ but with a few weeks left in the transition period they were facing the prospect of high tariffs on exports.
He added Mr Eustice’s comments underlined why a deal was so important to Welsh agriculture and his comments on diversifying into beef would be of major concern to sheep farmers.
“The reality is that changing production methods involves long-term production cycles and for many the significant investment required makes it an unviable option.”
He added the comments on the dairy sector were also concerning and did not account for the fact we were net exporters of some commodities and profitability of areas such as liquid milk was tied closely to the export of co-products such as cream.
“The idea that many of the major EU dairy processors will have to relocate their operations to the UK is fraught with difficulties and is, in many cases, unviable.”