Farmers warned that Brexit adds volatility to agricultural markets

A warning that uncertainty, resulting from the Brexit decision, is adding to volatility in the UK’s agricultural markets, has been issued by the Agriculture and Horticulture Development Board’s (AHDB’s) volatility forum.

“Volatility and Brexit have a common theme – uncertainty,” said AHDB’s Jack Watts (pictured above), who facilitates the forum. “Without wanting to speculate, it is possible that Brexit could leave UK agriculture more exposed to the opportunities and threats of global market volatility.

“We’ve seen this already in the form of a weak pound supporting farm output prices but risking an increase in cost of key inputs, such as fertiliser, which are themselves globally-traded commodities.

While adding that the longer term impact of Brexit on volatility will depend on a lot of policy detail, Mr Watts, speaking after a forum meeting at the recent UK Livestock Event, said the forum was “challenged” to think about how the industry looks at price, cost and profitability.

Forum members at the meeting agreed, for example, that the new rules allowing profits to be averaged over five years for tax purposes was a huge opportunity for the UK industry. By considering profitability and competiveness over a longer time frame, short term price and cost shocks may have less bearing on overall business performance.

It was also recognised, however, that this approach requires a fundamental culture shift at farm level and that cash flow can be an immediate issue.

AHDB also announced that, over the summer, it will be exploring what practical steps businesses can take to prepare for uncertainty driven by volatility, providing insight into the benefit of different management strategies.

“There is an argument that only looking at business management in the here and now can turn a period of low prices into a crisis,” said forum chair, Gwyn Jones. “We want to lay down a real challenge to the industry to think about how it measures performance over time and uses that information to strategise for the future.”

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