U.K. farmers eye Ontario after Brexit
Waterford realtor says he is fielding inquiries from prospective migrants
In the lush country of southern Ontario, Waterford, a town of 3,000 or so, may soon be welcoming British farmers pushed out by Brexit.
“We will see some British farmers coming,” said local realtor Murray Gibbons, a specialist in rural property. “We’ve had inquiries from them.”
It is not surprising that farmers are not yet fleeing Britain’s rolling meadows en masse. The way of life in the U.K. is different from that in Canada — vast spaces and bitter winters aside. But the financial incentives of leaving the U.K. are likely to be large, and the costs of staying are even larger. For many farmers, it will be a departure forced by loss of income.
So, a trickle of inquiries now, Gibbons said, and more to come.
Lucia Zitti, an economist for the National Farmers Union, the largest farm research and lobby group in the U.K. said the numbers tell the story: 55 per cent of U.K. farmers’ total income comes from support from the European Union’s Common Agriculture Policy.
“That means less than half of farm income is from sales in markets. In heavily subsidized sectors such as livestock and grains, if EU income supports are removed, farms will not be viable,” Zitti said.
Those subsidies won’t be paid post-Brexit. How farmers are compensated will depend on the scenario adopted by Parliament, she added. But it’s not just prices at stake — investment flows into farming and credit conditions offered by U.K. banks to farmers are also on the line. Not only would lower crop prices hurt farm incomes, but even the uncertainty of what comes next tends to make conventional credit for machines, seed and fertilizer harder to get. Add to that possible new visa rules for itinerant labour from Eastern Europe to pick fruits and vegetables if the U.K. is outside of the EU and the outlook for farming becomes as murky as a London fog.
In one scenario, based on unfettered free trade and zero direct payments by the EU, farmers in the U.K. would have average losses of 24,000 euros ($34,600), representing 50 per cent of their total income, Zitti said.
“If a World Trade Organization model of price stability is adopted, British tariffs which penalize imports would be cut by half,” she said. “With no direct subsidy payments to British farmers, losses rise to 36,000 euros per farm. That would be about 75 per cent of present farm incomes.”
At these numbers, farming of many crops in the U.K. would be doomed, she adds.
The other side of the subsidies coin is that much of what is lost could, at least on paper, be made up by what the U.K. will no longer pay into the EU’s farm subsidies program. The trouble is that farming accounts for only one per cent of British GDP. Geographically large but financially puny, farming does not have a lot of political weight, and no one is sure that the British government can cover the costs of what will be lost by the abandonment of EU subsidies.
Leaving their homes in the U.K. would be a wrenching decision for many farmers, but they may have no other choice if they have to compete with still subsidized farms of nations remaining in the EU. Worse, British farmers are already seeing the market price of their land tumble in anticipation of farms having lower income and profits.
The cost of prime arable land in the U.K. fell this year for the first time in 13 years. In anticipation of the uncertainty of the Brexit vote. The decline was 3.2 per cent in the three months ended March 31 compared to Dec. 31, 2015, according to real estate agency Knight Frank. That was the largest drop since the end of 2008 and the end to a bull run on farm land, the Financial Times reported seven weeks before the Brexit vote on June 23.
Savills, a global property agent based in the U.K., expects farm property prices to fall over the next few years: by 4.5 per cent in 2016, 3.8 per cent in 2017 and 1.7 per cent in 2018. But the sale price of farmland does not reflect the full cost of getting out. Farmland, like real estate in general, tends to be illiquid.
Abundant land in Canada at what are often fairly low prices is likely to be an attractive option for British farmers who fear their incomes will fall, said Dan Mazier, president of Keystone Agricultural Producers, a Manitoba farm lobby and policy research organization based in Winnipeg.
“British farmers may come to Canada seeking a more stable business model,” he said. “The irony of a move from Britain to Canada is that they would be exchanging complex quotas in that system for Canadian supply management, which is a quota regime of its own.”
The price of Canadian farmland varies with the crops it supports, location, fertility and other variables. But even with the recent decline of British farmland to an average equivalent of $36,170 per hectare (about $15,070 per acre), a British farmer could have a good deal of cash to buy Canadian farmland, which varies in price from $15,000 in areas of southern Ontario to just a few thousand dollars an acre for western cultivated grain land.
“For pasture or grain growing in western Manitoba and Saskatchewan, you can find land at $2,000 an acre to $6,000 an acre, said Don Forbes, a farm financial planner in Carberry, Man. “It would be hard to move from a farm in Britain to one in Manitoba — there are relocation costs, immigration issues and differences in farming practice — but our laws are similar. A British farmer could do it. After all, many did it in the past.
With no direct subsidy payments to British farmers, losses rise to 36,000 euros per farm. That would be about 75 per cent of present farm incomes.