At the end of 2017, ATN launched AgriTrade Talkback, a joint AgriTrade News and Research Engine Ltd survey designed to “take the temperature” of the UK agricultural supply industry on a number of issues affecting the industry.
Brexit has dominated the headlines for the last 18 months, especially as negotiations over a future trade deal with the EU start in earnest. While all survey respondents were unanimous that Brexit will affect their businesses, like the country as a whole there was a split in perceptions as to whether this will be in a good or a bad way. At this stage, 47% of the sample believed the overall effect will be negative, with 54% expecting a positive Brexit outcome for their business. The same proportion – 8% – believes Brexit will be either extremely negative or extremely positive for their operations.
Among the comments were beliefs that less public support post-Brexit will favour the more entrepreneurial and innovative farm businesses. In turn, this will help sales of products designed to raise livestock productivity and health; soil health; reduce emissions and make better use of home grown forages and bought- in feed co-products. Others thought the relocation of production into the EU could be an option to ride the changes, especially if there are trade barriers between the UK and EU markets. The bottom line affecting trade businesses is farm profitability and ability to invest in the inputs to protect the yield and quality of farmgate output.
Currency volatility and its effect of commodity prices has been a given over the last two decades as the CAP moved away from production support and intervention buying, and it will continue to influence the UK supply trade outside the EU. Over half the survey sample thought these factors are positive (54% and 57% respectively); 45% said currency fluctuations were a negative influence; just over a quarter cited commodity prices as an adverse factor; with the remainder ambivalent. Some thought higher farm commodity prices would help drive investment in farm productivity, while trading businesses need movements in currencies and products to make an arbitrage margin.
Perhaps surprisingly, labour availability was not flagged up as a major concern. The dairy industry is very concerned about sufficient labour and, on the distribution side, ForFarmers cited post-referendum difficulty in recruiting enough delivery drivers in its latest financial statements. But skills availability is seen as a problem by 20% of respondents – a subject we intend to explore further in the next survey.
Farm and supply trade consolidation has been ongoing for decades, but moving from away from the CAP to a UK farm policy could bring a step change in its speed – respondents were equally split over whether producer consolidation would be good or bad for their businesses, but more (67%) thought trade consolidation would be a negative factor than a positive one (just over one third) for their company. But a huge 80% believed greater supply chain efficiency would help their businesses – 20% extremely so – with just 20% fearing a negative impact. In the same way, 77% of respondents thought that the adoption of new technology would help them, while just 10% stated the opposite.
The most immediate problem facing survey respondents is legislative change affecting the products that can be offered for sale, particularly in the crop protection and feed additive sectors. 80% of the sample saw the loss of products as a negative factor, with just 15% seeing this as advantageous to their operations.
The sample was unanimous that the adoption new technologies on farm would be good for the trade, both in the supply of new products and in training opportunities to ensure the investment is effective on farm.
Responding to other issues, 40% of the survey sample think climate change will have a negative impact on their businesses, with 15% a positive one; 39% expect genetic modification technologies to be a benefit, if available, with 20% citing a negative effect; and 40% are concerned that the ability to exploit available natural resources will constrain company growth with just 8% viewing it as positive.
At the end of the day markets are all – 62% of respondents think that end consumer influence is a positive factor, while 10% view it as a negative. Certainly social media and digital technologies can lead to swift changes in buying behaviours, and trade companies cannot ignore this. The food chain will need to use these channels to get its messages across more effectively.
To summarise, there is not enough clarity over Brexit to plan effectively, but the supply trades appear as split over its eventual impact as the rest of society.
The effect of legislation in restricting the range of agricultural inputs available is a major concern to all supply trade businesses. New technologies may help overcome these restrictions in time, with both sales and training opportunities for the supply trade.
Consolidation at farm and distributor level will continue, as it always has, although the rate of change may speed up as the UK leaves the CAP. This could lead to greater trade efficiency, although the sector will be expected to become more sustainable at the same time, and help farmer customers adapt to changing consumer demands.
Agritrade Talkback intends to measure changes in the industry’s assessment of the effect of these pressures on its businesses over time. We also intend to examine some of the issues in more detail, so please look out for and participate in future surveys.