Brexit Will Likely Drive Fruit & Veg Prices Up, No Matter Which Scenario Plays Out

Brexit could Drive up Fruit & Veg Prices

There has been a lot of information in the media about how Brexit may cause problems for UK consumers. At the moment lorries from the EU can move freely from the continent to the UK. Around 50,000 tonnes of food is imported from the EU every day. Many of the items are perishable, which has given rise to fears of fruit and vegetable rationing, or even shortages.

The chief executive of Greencore, Patrick Coveney, went on the record last week about the problems that his industry is facing.

“The one thing for sure that will create dramatic and immediate political instability post-March is two, three, four weeks or months of real food shortages in the UK, which is not inconceivable with the direction of travel particularly towards a hard Brexit,”

Mr. Coveney told the British Irish Chamber of Commerce conference in Dublin.



He added that his company was “pushing hard” on the British government, and warning them about the potential for large-scale disruption in the UK’s supply chain. Given the fact that Brussels has been resisting any sorts of guarantees on how future food trade might be handled post-Brexit, warnings like Patrick Coveney’s appear to be well placed.

The UK simply can’t produce numerous fresh food items, and is a net importer of food. The European Common Market (ECM) has been an easy fix for our dietary needs, and our markets have been a boon to European farmers in many nations. Now this economic symbiosis is on the verge being shattered for purely political motivations.

Complex Supply Chains

Last week James Hookham, deputy chief executive of the Freight Transport Association (FTA), warned that:

“Leaving the Single Market means an end to the automatic rights for trucks to drive and planes to fly between the UK and the EU27 countries, and the UK will lose access to EU flying rights agreements with other countries.”



The FTA’s members handle around 70% of the UK’s exports and imports.

Mr. Hookham illustrated the magnitude of the potential shortfall with hard numbers,

“The UK could only have permits for between 140 and 1,000 British lorries to travel to and from the continent per day. Currently up to 10,000 lorries pass through the Port of Dover alone daily — so this number is woefully short.”

The interdependence between the UK and EU has grown over decades, and now it looks like a huge amount of food may have to come from somewhere else.

The specter of food shortages has made for great headlines, but it is unlikely that any major shortfalls will last long. Even in a worst-case “Hard Brexit” scenario, the UK could import fresh food from a variety of other sources. Nasty weather in Spain last year caused the UK to import lettuce from Latin America, and most of the fresh fruits and vegetables that are currently sourced from the EU could be obtained from elsewhere.

Brexit Will Probably Distort Prices

The area where Brexit probably will change things for both consumers and producers is pricing. Today Spanish, French and Dutch farmers have a huge market for their produce right across the channel. If the EU decides to impose punitive restrictions on their member state’s ability to sell into the UK, there will be literally billions of GBP worth of produce that will have to be dumped into the European market.

It is likely that a sudden influx of perishable goods into Europe would drive prices down, and potentially harm an agricultural sector that has been under pressure for years. Consumers in the UK would be looking at a change in their suppliers, the potential for product substitution, and additional freight costs. Continental producers would face declining prices, and an uncertain future.

Lose-Lose Should Be Avoided

The existing European suppliers likely the offer lowest costs for UK consumers. UK consumers would face inflationary pressures from additional freight costs, should the EU decide to severely limit the amount of perishable goods that enter the UK post-Brexit. The long term potential for real damage in the European agricultural sector is also not to be ignored.

European farmers could be prohibited from accessing the UK market, and wouldn’t have another buyer who would pay similar rates. Destroying a market for perishable goods would likely lead to supply destruction. Even if the EU repairs the situation in the medium-term, it would be difficult to reassure UK importers that EU suppliers could be trusted. Once the trauma of politically inspired food shortages is digested by the UK, there could be a generational opposition to EU food producers.

A shrinking supply of perishable agricultural commodities could act as a source of structural inflation in Europe over the coming decades, if the European Union doesn’t take measures to ensure that EU food producers have access to their existing Market in the UK. Ultimately, some EU exporters have as much to lose in a “Hard Brexit” deal as UK consumers do, if not more.

Nicholas Say grew up in Ann Arbor, Michigan with a father that would read him the Wall St. Journal along side of other bed-time fare. He has traveled extensively, and been lucky enough to study a changing global economy in person. Nicholas spent many years in the Southern Cone of South America, sometimes in the middle of the countryside where livestock starts its journey to all points of the globe. Today he is thoroughly bemused with the stance that Central Banks have taken in the wake of the 2008 meltdown. There is no telling what will come out of the global financial system next, but he is glad that he lives somewhere that gold can be bought and sold readily!


nicholas@moneycheck.com
https://www.linkedin.com/in/nicholas-say-3a419a85/

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