Farming could yet prove a winner of UK election May-hem

12.06.2017

There are not many winners of the UK general election.

But agriculture could yet prove one of them.

Although the ramifications of the election - which failed to hand Conservative leader Theresa May a clear majority, let alone the expanded one she had sought – are still steeped in uncertainty, many outcomes point to some benefits for farmers.

Sterling effect

The sector is getting a short-term rush from a renewed decline in the pound, which plunged 2.5% against the dollar at one point as Ms May's reduced grip on power became clear.

Against the euro, it tumbled below E1.13 to £1, sterling's weakest level in seven months.

A weaker pound makes the UK's exports more competitive, including agricultural ones, such as meat and dairy, as well as crops including barley, for which the UK has been struggling to find sufficient buyers this season.

Furthermore, it raises the value in local terms of dollar-denominated assets, a factor for the wheat market, for which export demand is less relevant this season, thanks to strong domestic poultry and bioethanol demand, but import parity (ie the value at which imports become financially viable) is.

Soft vs hard

But the election result could have longer-term benefits too.

UK agriculture industry representatives have, in comments on the strategy for the UK's exit negotiations with the European Union, clamoured for a so-called "soft" Brexit, which would see trade barriers and tariffs kept to a minimum, rather than a more go-it-alone "hard" strategy.

The NFU (National Farmers Union) for instance, said that UK farming "needs an ambitious bilateral trade agreement with the EU that delivers frictionless, tariff-free trade".

'Into the rubbish bin'

A soft option now seems more likely, given that any deal looks like having to go before a Parliament which looks more moderate in its make-up on Brexit.

As George Osborne, the former Conservative chancellor of the exchequer, said: "Hard Brexit went into the rubbish bin tonight."

Although keeping trade with the EU frictionless would entail the UK making concessions on immigration limits, that too is only likely to be popular among a farming community which has become reliant on eastern European labour for the likes of picking strawberries and sorting eggs and potatoes.

Keep it on ice

That is not to say that farmers should crack open the champagne (or rather shampagne as the UK-produced alternative has become known) just yet.

There is a good chance that the UK may face a fresh general election later this year, if Conservative efforts to form a stable government fail, a poll which would inject fresh uncertainty.

A Conservative landslide at that poll could put a hard Brexit back on the table.

Or it could see the election of a Labour Party which many farmers fear for its history of championing urban, rather than ag, priorities and which has pledged, for instance, to reinstate farm wage controls, and to entrench a ban on neonicotinoid insecticides blamed for a collapse in UK rapeseed sowings.

Furthermore, the cloud created by the overnight result looks like hampering investment in agriculture, as in other sectors.

But at least farming has a silver lining to fix on that is not so evident to some other industries.


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