Tuesday, December 11, 2018

Brexit poses major challenge for UK millers and maltsters

October 1, 2018 by  
Filed under Crops

The milling wheat and malting barley sectors face major challenges after the UK leaves the European Union, warns a study by the Agriculture and Horticulture Development Board.

Brexit will have a considerable impact on the UK’s milling industry under a range of trade scenarios, says the document – although the malting barley sector is in a far better position to weather the storm.

The what-if  analysis was commissioned by AHDB to help millers and maltsters with their business strategies ahead of Brexit. It also aims to help give insight into long term implications on planting and highlight potential impacts on grain prices.

Three scenarios

The study – Brexit scenarios: Impacts on the UK’s milling and malting sectors – assesses the impact of three post-Brexit trade scenarios on supply and demand for milling wheat, malting barley, flour and malt.

It examines the effect of a Free Trade Agreement (FTA) with the EU; a unilateral approach where imports are tariff free but exports are subject to tariffs; and the reversion to World Trade Organisation (WTO) import and export tariffs in the event of a so-called hard Brexit.

Martin Grantley-Smith, AHDB strategy director for cereals and oilseeds, said: “There could be some tough decisions to be made by UK millers and maltsters in the near future depending on how Brexit pans out.”

UK flour trade is likely to experience significant disruption post-Brexit, even if a FTA is negotiated, says the study. This is partly due to UK mills’ reliance on global imports of high-quality milling wheat, which may disqualify UK flour from preferential access to EU market.

This will impact mills on the British mainland if they lose free access to this market via the cross-border trade. By far the biggest impact could be the loss of trade with the Republic of Ireland, which currently receives two thirds of its flour from mainland British mills.

The outlook is more positive for the malting sector. With almost all UK malt exported to non-EU countries, trade with the EU would have little impact. Brexit may also provide an opportunity for UK growers to displace malting barley imports by growing six-row malting varieties.

More English malt could be sold into the Scottish market as there would be less competition from EU imports if tariffs apply, says the report. The lack of competition could even result in Scottish maltsters purchasing English malt at a higher price, it adds.

Opportunities

There could also be the opportunity to build a new large-scale malting facility near the deep-sea port of Southampton. This would open up supply potential to the USA and Japan – although it would take time to increase the UK’s share of the premium US market.

Dr Grantley-Smith said: “This is a timely report providing some early warning of how the challenges may play out, so that businesses can revisit some of their options for post-march 2019.

He added: “Up to now our trading arrangements with the EU have been of critical importance and this report clearly shows, whatever the outcome of Brexit, business-as-usual is not going to be an option.”

To download the report, visit www.ahdb.org.uk/brexit

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