A clear way forward?

Writers Posted 31/01/20
At least now we know where we stand.

The deed is finally done, rightly or wrongly, only time will tell; by the time this goes to press we will have formally left the EU. At least now we know where we stand, much of the uncertainty has gone and as an industry we can see a clear way forward, or can we?

In reality, we are now in the position where the real negotiations that will determine our future relationship with the EU begin. Fortunately we have an eleven-month breathing space, a transition period in which we should be able to begin to develop new global markets for our sheep meat. Hopefully we will have some sort of workable framework in place for our future trading position with the remaining EU countries. However, 11 months seems a perilously short time for detailed and meaningful negotiations to be concluded.

There is a potential to develop sheep meat exports in the wider global market, but these will take time and will inevitably come with some reciprocal arrangements, that’s how international trade works. It will still be the impact on our EU lamb trade that will have the most significant influence on the UK sheep sector over the next few years. There are those that seem to be of the opinion, that the EU will still need our lamb and that exports across the Channel will continue as normal (whatever normal is). To a certain extent this is true, the EU does not produce sufficient lamb to meet their current demands but and it is a big but, the EU market is very price sensitive. That sensitivity relates to even small fluctuations in the value of Sterling with a 1p fall in the value of the Euro equating to a drop of about £1 in the value of a lamb. The biggest threat to our EU market is price, unless we are able to negotiate tariff-free lamb trade into the EU post January 2021, there is a significant risk, that our lamb and sheep meat will simply be too expensive for EU buyers.

In addition, there will be competitors for our share of the lamb market. Internationally the EU market is an attractive prospect and we do have competition, British lamb may be the lamb of choice (after domestic production) in most EU countries, particularly France, it is however the meat traders that will ultimately make the decisions. For example in 2018 when we were enjoying high lamb prices, French importers actively sought alternative supplies, imports of Spanish lamb into France increased by almost 100%, this didn’t make up the shortfall, and certainly could not compete on quality, but actively demonstrates the willingness and ability of continental buyers to seek alternative sources. The Irish sheep industry is also evolving rapidly, no doubt with an eye on a future share of our EU trade. In some ways, particularly in terms of the use of technology and genomics they are moving ahead of the UK. There will also, almost certainly, be some lamb of UK origin that enters the EU market, possibly dishonestly, as Irish lamb, tariff free. Even a relatively small tariff could have an impact on a significant proportion of our cross Channel trade. Potentially this could have a substantial and negative impact on domestic lamb and sheep meat prices and industry profitability. This is supply and demand economics, if faced with WTO tariff rates our EU exports will be decimated.

So what does this mean for the industry? Should we all go away and sell all of our sheep? Absolutely not, the sheep sector in general, being a pragmatic and reasonably positive lot will find a way of dealing with the situation. We are accustomed to being in a position of cost/price squeeze, input costs steadily increasing year on year and output prices static or, taking last year as an example, actually decreasing.

We have a range of options. One option would be to increase output to offset any rise in costs but this is difficult. There are already rather too many producers excessively focused on performance, regardless of the costs of production and not just sheep producers. It is a matter of pride for some but we all at times have to be realistic and maybe swallow a little bit of that pride or we can accept a lower level of output and look to reducing costs. In general a more sustainable and less stressful alternative. Some may even be in a position to increase the value of output, in general more difficult, but not impossible. There are ways of adding value particularly for those smaller sheep producers who are able to direct market, such as lamb box schemes and farmers markets. This is particularly true for those that may have a unique selling point, rare breed lamb, organic lamb etc. A significant number of consumers, particularly those with disposable income, are prepared to pay premium prices for provenance, novel breeds, production systems etc. It is however very important to remember that you cannot make a silk purse out of a sows ear, producers pursuing a premium market must be able to deliver on promises. It is easy to sell a product once but profitability comes from repeat sales and satisfied customers. Nobody pretends that it will ever be easy but with an open mind, being prepared to consider alternative production and marketing strategies and a willingness to innovate and change it can be done.

It is very important to remember that you do not have to be young to be an innovator. Innovation and change is not the exclusive preserve of the young; it can be done regardless of age. A lot of producers are phobic about change, both young and old even some of the younger generation find change difficult. Just because you or dad have done it for the past 30 years (and probably granddad for 30 years prior to that) does not necessarily make it the correct thing to do. It (whatever it might be) may work, up to a point, but you do need to ask the question “could it be done better/cheaper/more efficiently?” The answer may be negative but at least ask the question. Change may be a challenge, but it is frequently a challenge that presents fresh and exciting opportunities.

The older generation, and I certainly include myself within that category have a responsibility to encourage new and potential entrants to the sheep industry. We need to encourage them to develop their sheep management and shepherding skills. We also need to encourage them to question what we do. It may, at times be an absolute pain in the neck, but we are moving into a significantly different production environment for all sorts of reasons (exit from the EU, changing markets, changing support measures, climate change, or changing weather patterns, whatever you believe, changing consumer demands and requirements, changing public attitudes etc). This will create a production environment in which an open mind and the ability to adapt and innovate will be just as important as the sheep skills.

Some of the older generation of sheep farmers may also be in a position to assist new entrants in a very positive and practical manner. I have recently encountered a number of situations where older producers find themselves less able to cope with the workload on the farm, they may have family who either do not want to take on the business or have developed farming enterprises of their own, so keep going alone. The response, in some of these situations has simply been to progressively sell sheep to reduce the workload as difficulties increase, sometimes to the point that the productive capacity of the farm is significantly impaired. There is a potential opportunity here to maintain a viable farm business and encourage a new entrant to the sheep industry, by entering into some sort of partnership or share farming agreement with a suitable young entrant. This provides benefit to all parties involved. Such an approach provides the opportunity to maintain and/or develop a viable sheep farming business, an enhanced income and renewed interest for the landholder. There is also the benefit of less commitment to day-to-day operations whilst a new entrant receives a springboard and some income. This is for the mutual advancement of both parties and a chance, not simply for a one way flow of knowledge but, to share experiences and learn from each other. It is a process that should not be entered into lightly but is certainly worthy of more than just passing consideration. We do need to encourage and support the next generation of shepherds and sheep producers.


Tweets from @southeastfarmer