A study published this week by the Economic and Social Research Institute (ESRI) in Dublin has confirmed that cross border movements of milk could be seriously jeopardised in the event of the UK securing a ‘hard Brexit’ deal with the EU.
Currently, large volumes of milk move from farms in Northern Ireland for processing south of the border on a daily basis.
“One of the options that we have considered is a scenario which would see the UK settling for a World Trade Organisation Tariff structure,” said the ESRI’s Morgenroth. “Under these circumstances each cross border shipment of milk would be eligible for a 30% tariff, based on its value.”
The economic modelling options investigated by ESRI are intended to cover a range of potential agreements between the UK and the EU. Morgenroth also pointed out that, in a post-Brexit scenario, London could choose to reach bilateral trade deals which provide other countries with tariff free access to the UK market. And these arrangements may well include food products.
Meanwhile, the prospects for global dairy markets to strengthen over the coming months continue to heighten. AHDB Dairy has confirmed that China imported nearly 20% more Whole Milk Powder (WMP) this January-September than it did last year, totalling around 342k tonnes. This is similar to the annual volumes imported in 2010-2012, but well below the exceptional levels seen in 2014, when imports hit 670k tonnes.
This increase appears to be driven by reduced supplies in China, rather than rising demand. Consumer demand growth actually slowed during the first half of this year compared to 2015. This is according to Rabobank. However, China’s domestic milk production has struggled due to low farmgate prices and high summer temperatures, helping trigger additional demand for imports.
AHDB is also confirming that China’s ability to buy in bulk and stockpile, as required, is likely to continue to contribute to peaks and troughs in global dairy pricing.