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What can food brand and production companies do to ensure sustainable and resilient supply chains?

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On the 12th September 2018 the government proposed a new Agriculture Bill to replace the existing provisions of the Common Agricultural Policy (CAP). This new bill is intended to come into effect as Britain withdraws from the European Union (EU) in 2019.  The Agriculture Bill focuses on sustainability but food brand and production companies will need to plan now to ensure sustainable and resilient supply chains.

What can food brand and production companies do to ensure sustainable and resilient supply chains?

The Agriculture Bill, which would not only present a fundamental change to the way the agricultural sectors receive funding but also proposes a new focus on environmental protections, is expected to have a substantial impact on many areas of farming and agriculture. As well as the direct impacts of subsidy reform on primary production, changes at farm level are equally likely to have knock-on effects on food businesses. As changes are made that affect the relative availability and costs of certain primary products, this will begin to impact on those businesses that rely on British food stuffs. With such significant change taking place in Britain over the next few years, it is anticipated that the landscape of British agriculture and farming will be very different in 10 years’ time.

As Brexit looms ever closer, the Agriculture Bill is expected to buffer the country against the potential uncertainties arising from Britain’s withdrawal from the European Union. We can expect in the years to come that this will present both challenges and opportunities. Most notably, the CAP payments that many farming businesses depend on for funding will be significantly affected by this change of policy. As these payments stop, albeit over a six year period between 2021 and 2027, many businesses may struggle to secure financial viability. This may mean some businesses will struggle to stay afloat and many others will have to look for increasingly innovative ways to farm. Reductions in funding also has the potential effect of encouraging farmers to move away from certain products and towards those that guarantee higher prices. This does, however, present opportunities in that farmers may now have a chance to be more responsive to consumer demands and move away from commodity approaches to farming and to adopt more bespoke value-added strategies.

Over the coming years we are likely to see significant changes in markets for British food and farming products. New trading relationships will open up opportunities to trade different products in new markets and bring with it exciting and novel opportunities for British farmers and growers. These evolving trade relations, however, may bring difficulties in that markets will likely become more competitive – particularly where we are trading with countries that we know enjoy lower costs of production than the UK for some food products, for example in the case of the US meat sector. This increased competition on price and quality may well in turn generate a greater need for UK self-reliance, potentially a challenge that British agriculture will struggle to cope with. However, greater competition may also present opportunities for British products to be recognised as a leading source of assured quality, traceability and animal welfare, all factors rated as highly important by consumers.

The Agriculture Bill is intended to bolster Britain against the potential shocks that Brexit could create for the sector. Regardless of how effective the Bill is in ensuring this, farming and agriculture will likely still feel the impact of Brexit. For food businesses who rely on British grown products, Brexit may present difficulties as companies cope with price increases of key ingredients. For supply chain stability, this will have a considerable impact on many businesses. It is important for these companies to develop elements of procurement flexibility that will protect them, not only for the immediate short term of withdrawal from the EU in March 2019, but also in the long term as the effects continue to be felt. For many corporate brands, it will become of paramount importance to consider where their ingredients come from, what alternatives are available and what the costs of these changes will be. One of the ways companies need to work to prepare themselves is through reforming their sourcing strategies.

At ADAS we are able to offer support and advice on supply chain security for both farmers and corporate businesses. Our risk modelling services also offer support for those who wish to understand how the Agriculture Bill and Britain’s withdrawal from the European Union will affect their business. For more information, please contact Colin Morgan, Business Development Director in the ADAS Sustainable Food and Farming team for support on working on the impacts of the Agriculture Bill on your supply chain.

 

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