Mr. Patrick Kent:

I thank the Chairman for the invitation to appear before the Oireachtas agriculture committee. We welcome the opportunity to engage with the joint committee on the topic of the implication of Brexit for the agrifood sector.

The Irish food exporting sector is profoundly concerned by the potential impact of Brexit. This is not surprising, given that 41% of our total food and drink exports, worth €10.8 billion in 2015, went to the United Kingdom. Meat and livestock exports are a crucial component of total food exports, amounting to €3.7 billion in 2015. Of this, beef exports were worth €2.4 billion, of which 52% went to the United Kingdom, 46% to other EU markets and 2% to non-EU markets.

The process of Brexit has not even commenced yet, but its impact has been very tangible in terms of instability and exchange rate fluctuations. Fear of the unknown is the key driver of exchange rate problems, and it may yet be that the outcome is less destabilising than expected. Nonetheless, we must operate on the basis of hoping for the best but planning for the worst.

From an Irish agricultural perspective, Brexit is challenging on several fronts. We see the key issues as the sterling-euro exchange rate; trade deals and tariffs between the European Union and the United Kingdom; the implications for international trade deals and global movement of food exports; the need to diversify our exports profile and the possible need to pull back from expansion plans; consequences for the CAP; consequences for other EU and Government policies which impact agriculture; and practical problems surrounding the North-South Border. Meat factories reacted to exchange rate movement by cutting prices paid to farmers in response to the drop in the value of sterling against the euro. The fear of market outlooks has helped keep beef prices low in recent weeks, even though sterling has rebounded somewhat. On the one hand, the fluctuation in the exchange rate has caused much uncertainty and the situation has been volatile. On the other, we must guard against hype. Meat factories like to keep farmers nervous, but some facts are worth considering. For example, last night's closing rate was about £1 to €1.19.

It did fall as low as €1.10 in November, but the current level is similar to the exchange rate that prevailed throughout much of 2013. Farmers will recall that beef prices for R3 steers averaged €4.40 in June 2013. This is not to suggest they could be at €4.40 now, but it does illustrate that other factors such as supply and demand of cattle are perhaps more relevant than the exchange rate. However, when sterling is really strong against the euro, as happened in 2015, beef farmers do not get the full benefit. We need to reduce our over-dependence on the UK market, but let us not fool ourselves that there are silver bullets when it comes to beef exports. Despite the huge efforts to open up the US market, exports so far in 2016 amount to some 2,000 tonnes, well below what was anticipated, and with US beef prices down 20% on those this time last year, an opportunity may have been missed.

The ICSA supports every effort to open new markets, but we are perplexed that there is little appetite to do business with Iran, even though it has been an important outlet in the past and could be important in the future. Live exports must be prioritised. We need to see Northern Ireland farmers in our marts, but even more important is the need to have live exports to Britain. Currently, they are blocked by the UK supermarkets policy on EU country of origin labelling, but in a post-Brexit world the issue willl have to be looked at again. The Turkish market for weanlings must be capitalised on. Other possibilities for live exports, including countries such as Egypt, must be pursued. One slight benefit of Brexit is that the euro has also weakened against international currencies, albeit marginally, but further instability in the EU-UK process may lead to further weakness of the euro, as well as sterling. We cannot say for sure how the euro will do in 2017, with market sentiment likely to be volatile owing to elections in key EU states and concerns about the situation in Italy.

On trade deals and the Brexit talks, it is only when negotiations kick-off to determine what the future relationship should be between the United Kingdom and the European Union that the long-term outcome for Irish agriculture will emerge. Key in this regard will be the trading arrangements. The conundrum Britain has created for itself, arguably unnecessarily, is that the war was won on the issue of the free movement of people, but the peace could be lost on the same issue. Access to the Single Market is critical for British enterprises, but are the British willing to concede on the free movement of people, given the strong emphasis on immigration during the referendum campaign? The problem for Ireland is that the final trade deal must be negotiated between the United Kingdom and the European Union. This means that the more the United Kingdom insists on its demands being met in curtailing the free movement of people, the less likely it is that we will end up with tariff free trade between the European Union and the United Kingdom. This means that there will be tariffs on our exports to the United Kingdom. Tariffs, combined with a weaker sterling, would be the worst of all worlds, particularly as the curtailment of trade would potentially further exacerbate drops in the value of sterling in the longer term as markets would see the United Kingdom being more isolationist. Accordingly, Ireland must ensure its interests will be centre stage in any EU-UK negotiations. We cannot afford to leave such vital talks to the usual process by which the European Union negotiates trade deals, whereby the European Council gives a mandate to enter negotiations and then sits back while the European Commission does the negotiating. When a deal is hammered out, member states and the European Parliament will have a say on a take it or leave it basis, at which point it will essentially be too awkward and politically impossible to roll back the unpalatable. Irish MEPs will have to work to ensure our interests will remain centre stage in the European Parliament, but in reality the decisive interventions will have to be made at Council level by the Taoiseach and relevant Ministers. Overall, we need to carefully analyse the impact on how we will do business with our British neighbours in the future and the extent to which Britain will open up to do business with the world at the expense of Ireland and other European countries.

The beef trade - we export 90% of what we produce - is particularly vulnerable. Over 50% of our beef exports are to the United Kingdom. Therefore, the ICSA is extremely anxious to ensure a hard Brexit would not result in tariffs on EU exports to the United Kingdom. While the exchange rate may stabilise, Brexit is even more problematic in terms of international trade deals. The ICSA has been campaigning against EU trade deals which sell out the beef sector. We are especially concerned with the Mercosur agreement, the TTIP and particularly the CETA which appears to be a Canadian trade deal but is very much a North American trade deal and could be very problematic for us. All of these negotiations have been conducted on the basis of there being an EU 28, with the United Kingdom being the member state with the greatest import requirements. The ICSA pressed the EU Agriculture Commissioner for a cumulative assessment of the impact of these trade deals on the beef trade. In other words, what is the potential impact of having three tariff rate quotas for Canada, the USA and South America? As expected, the Commission's analysis painted a disastrous picture for Irish beef producers, with somewhere between an extra 146,000 and 356,000 tonnes of beef coming into Europe. However, the impact analysis was made without knowing the trade deals a detached United Kingdom could do post-Brexit with the rest of the world. A possible scenario is there would be two beef import deals. This would arise where the European Union did its own deals and then the United Kingdom agreed to significant imports of beef and lamb from all over the world. This could prove very detrimental to the future of the Irish agrifood sector. The ICSA believes the European Union should park external trade negotiations with the United States and countries in South America until the post-Brexit arrangements become clear. We also have to carefully look at the quota for New Zealand lamb which we think should be taken out of the European Union by the United Kingdom post-Brexit. Overall, Brexit presents a huge challenge and we all need to work together to ensure it will be managed in the best interests of the agriculture sector on both islands. Farmers, North and South, in particular, will be hugely affected. This must be kept centre stage in all negotiations.

On the future of the CAP and other policies, we are concerned about the future funding of the CAP, given that the United Kingdom is a net contributor. Ireland must fight for adequate funding for the CAP post-2020, but we also need to assess what the outcome will be in future CAP design. While the United Kingdom was opposed to the CAP as a matter of philosophy, it tended to be on the same side as Ireland on some of the detail such as decoupling and milk quotas. The ICSA suggests all policy decisions must be aimed at circling the wagons to protect the interests of EU-27 farmers. We need policies that will prioritise the viability of farming in Europe. This means fighting against bad trade deals. It also means fighting to ensure decisions taken on climate change and renewable energy resources will not undermine EU farmers. We need to examine to where Ireland could move in the post-sugar quota era and whether the European Union's U-turn on biofuels makes any sense in pursuing the goal of farm viability across Europe at a time when tillage farmers are suffering. Above all, we need to reassess the objectives of Food Wise 2025 which is all about expansion of output, especially in dairying but with a knock-on impact on beef supplies. Given the risks posed by Brexit and the uncertainty around new markets, it is surely time to look at sustainable down-sizing until it can be sees if prices will rise to a viable level. Expansion of beef output at this point looks like a crazy policy in view of the glut of beef expected in 2017.