Blog: Brexit bites into profits of UK cheese producers – POLITICO.eu

Brexit is taking a bite out of the profits of U.K. cheese producers who export to the EU.

It’s left one small, family-owned farm near the village cheesed off as it comes to terms with increased paperwork and last-minute uncertainty that has hit the dairy sector particularly hard.

The “very late notice of a deal was hugely problematic,” said Ben Hutchins, sales and marketing director at the family-owned Cheddar cheese producer Lye Cross Farm near Bristol, in the village of Cheddar in the west of England. That’s because, ahead of the deal struck on Christmas Eve, the firm’s “EU customers needed to stock up” as they didn’t know if there would be a deal or not by January 1.

“Trucks were caught in the border chaos which has added significant cost to some shipments. If the deal had been done earlier this would not have been necessary,” Hutchins explained, noting that the pandemic also “exacerbated” the situation.

Yet this isn’t the only slice Brexit has taken from the businesses’ bottom line. While the cheesemaker is “grateful that there are no tariffs” on the firm’s products as part of the Brexit trade deal, “there is significant new customs paperwork,” Hutchins said. 

A vet now needs to sign an EU Export Health Certificate for each of their shipments and there is also new paperwork and requirements for organic products. “These all cost money,” Hutchins points out, and “administration will be a significant new burden on EU exports moving forward.” That’s not an insignificant cost since 91 percent of the U.K.’s dairy exports currently go to the EU. “[There] will inevitably be impacts on pricing to our customers and/or to our margin,” he said.

“It remains to be seen how many customers will maintain their purchases given the new arrangements that we have needed to put in place,” Hutchins said, adding the firm has already lost some EU business due to the uncertainty. 

They are not alone. In late November, arm’s-length government body the Agriculture and Horticulture Development Board (AHDB) warned in an analysis that dairy markets in both the U.K. and EU “look set for some disruption” in 2021, no matter what kind of trade deal was agreed.

The analysis warned that increased friction at the border will create an imbalance in the trade of fresh dairy products used to make butter or powdered milk. Inability to get bulk cream or skim concentrate quickly across the border will create surpluses and put pressure on prices on both sides of the border.

It also won’t be possible for products like yogurt, which usually leaves to cross the border on trucks just after production, to be handled in the same way, said Olivier Thouard, customs and fiscal representation director at the logistics firm GEFCO.

The time that’s taken to make customs declarations and follow the new border procedures means they “will lose time” and need to store the goods, Thouard said, in a way that keeps them at the right temperature. “So they have some issues to solve,” he said.

Border disruption has so far been minimal because the EU buys stockpiled goods ahead of the new year. “We would expect to see border pressure at the end of January/early February,” said Hutchins, when stockpiles run out.

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