Poised to begin its transition out of the European Union (EU) on March 29, 2019, the United Kingdom (UK) is entering a crucial period of trade negotiation in order to determine its future relationship with the trade bloc. The post-Brexit arrangement between the two polities will have serious implications for food prices in the UK.
In 2016, the UK produced just 49 percent of its food while 30 percent came from countries within the EU. The same year, the UK imported 10.3 billion euros ($11.4 billion using a 0.90 EURO/USD exchange rate) of fruits and vegetables, the country’s largest food import category by value. UK exports of fruit and vegetables sat at just 1.1 billion euros, creating a 9.2 billion euro trade deficit in 2016. In 2017, approximately 76 percent of the UK’s vegetable imports and 41 percent of the country’s fruit and nuts imports originated from the EU.
Given the geographic proximity of mainland Europe, the UK will continue to source a large proportion of its fruit and vegetable imports from the EU. In 2017, the UK imported 100 percent of its orange supply and was only 20 and 31 percent self-sufficient for tomatoes and apples, respectively. The UK import value of these three crops totalled 897 million euros in 2016, accounting for nine percent of the UK’s fruit and vegetable imports by value that year. While these crops are predominantly sourced within the EU, the UK has potential sources outside the region. Morocco and Egypt are increasing output of tomatoes and oranges, respectively, and both countries currently export significant amounts to the UK. Additionally, apple production in the UK has rebounded over the last ten years and has consequently reduced imports. So if the UK wishes to decrease its dependence on certain EU fruit imports, there are opportunities to do so.
Between 1996 and 2017, the EU exported (on average) 94 percent of the UK’s tomato imports annually. The Netherlands and Spain are two of the world’s leading tomato exporters. Access to the European Single Market and geographical proximity provide the two countries unfettered access to the UK market. The Netherlands’ and Spain’s combined exports of fresh or chilled tomatoes to the UK was worth 350 million euros in 2017.
While UK tomato imports are currently dominated by the EU, Morocco has exported increasing amounts of the commodity to the country over the past ten years. According to Her Majesty’s Revenue and Customs (HMRC), exports of Moroccan tomatoes to the UK increased from 7,148 tonnes in 2007 to 49,334 tonnes in 2017. Last year, by comparison, the Netherlands and Spain exported 161,056 tonnes and 107,640 tonnes to the UK, respectively.
Morocco and Spain both generally export more tomatoes to the UK during the northern hemisphere’s winter months. However, Morocco is showing signs of digging into Spain’s share of that timely export. Between 2011 and 2018, Morocco’s tomato exports to the UK in the month of January rose by 165 percent, while Spain’s exports fell by 24 percent. While Morocco likely can’t compete with the Netherlands’ greenhouse tomato quality, producer prices and yields for tomatoes in Morocco are already very similar to those in Spain.
The UK sourced 25 percent of its orange imports from the EU in 1996, but this share bloomed to 42 percent by 2017. Spain is responsible for about three-fourths of the EU’s orange exports to the UK. Between 1996 and 2015, Spain’s orange exports to the UK nearly doubled from 57,993 tonnes to 98,249 tonnes. Yet, the main reason for the EU’s rising share of UK imports was waning orange exports from Israel and Morocco. Due to falling production, Israel’s exports to the UK plummeted from 54,946 tonnes in 1996 to just 20 tonnes in 2017. Orange imports from Morocco declined until 2013 and are now steady around 8,000 tonnes.
After Spain, Egypt and South Africa were the two largest orange providers to the UK in 2017. South African orange exports to the UK recently slid from a record of 83,784 tonnes in 2008 to 68,182 tonnes in 2017. The emerging orange producer is Egypt, whose farmers increased their orange exports to the UK from 8,403 tonnes in 2000 to 61,193 tonnes in 2017. Egypt’s orange production has increased year-over-year (YOY) since 2011 and totaled 3.2 million tonnes in 2017. This is just 67,880 tonnes less than Spain’s output.
Unlike in the case of tomatoes, the UK’s demand for oranges appears to have leveled off, and it may be a volume Egypt can increasingly satisfy. In 2017, Egypt’s government announced it would resume a project aimed to convert 200,000 hectares of desert into irrigated farmland. Oranges are expected to receive about a third of the land allocation. This investment and blossoming production make Egypt a viable source of oranges for the UK in many post-Brexit scenarios. And with the value of the UK’s orange imports totalling 182 million euros in 2017, Egypt should be interested as well.
UK apple production fell throughout the second half of the 20th century, dropping from 596,200 tonnes in 1970 to 143,900 tonnes in 2003. More recently, output rebounded to 460,000 tonnes in 2017. The industry is benefitting from a revival in local apple interest among its citizens. However, producer prices for apples in the UK are well above those in other major EU producers, making it difficult for domestic apple farmers to sell to large retailers and grocery chains.
As a result of renewed output, UK apple imports declined by 21 percent between 2012 and 2016. Still, 61 percent of the 381,591 tonnes of apples that the UK imported in 2016 were from the EU. Commonwealth nations—most former territories of the British Empire—may be the place to start to decrease the UK’s reliance on EU apples. Outside of the EU, South Africa and New Zealand are the main apple exporters to the UK. South Africa’s apple exports slipped from a record 113,159 tonnes in 2008 to 67,203 tonnes in 2016. New Zealand exported as much as 85,826 tonnes of apples to the UK in 2000, but current annual volumes average around 45,000 tonnes.
Both of these nations have the capacity to help satisfy increasing proportions of the UK’s apple demand, even as British apple production revives. UK Prime Minister Theresa May has already expressed interest in a free trade agreement among the Commonwealth nations. In addition to New Zealand and South Africa, this arrangement would give UK access to fruit and vegetables from larger producers like Australia and India.
Given the geographic proximity of Europe’s Single Market, the UK has relied heavily on EU imports to feed its diverse fruit and vegetable demand. Barring the possibility of the UK remaining in the EU customs union, which Prime Minister May says will not occur, food prices will undoubtedly rise. Even if the UK maintains free trade and minimal non-tariff barriers with the EU, a House of Lords report finds post-Brexit prices of fruits and vegetables will rise by 5.1 and 4.8 percent, respectively.
Tomatoes, oranges, and apples are three examples of the UK’s dependence on the EU for fruits and vegetables. Still, each of these fruits have viable non-EU sources. Whether it is importing more grapes from Chile or peppers from Turkey, UK food procurement specialists should begin to identify external options for all fruits and vegetables predominantly sourced from the EU. Considering the uncertainty surrounding future trading terms, this will help UK suppliers mitigate potential problems experienced by leaving Europe’s Single Market.
In a broader context, pursuing these alternative sources will allow the UK to begin to develop bilateral trade. Trade agreements with large, developed agricultural countries like the US and China would likely be slow to come. If the UK intends to thrive post-Brexit, securing new trade deals will at least begin to open doors outside the EU. With Gro, subscribers can use our production and trade data to pinpoint new potential sources and markets for fruits, vegetables, and a broad range of other agricultural commodities.
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