Wednesday, March 29, 2017

Agricultural Futures: Rabobank Has Some Thoughts On Brexit and the New Zealand Model

Over the years we've noted Rabobank seems to have a better feel for the ag stuff than most of the banks.
They're not always right but worth paying attention to.

From Agrimoney:
Article 50 could be a boon for non-EU agricultural exporters
Brexit could be good news for agricultural exporters outside the EU, if the UK government decides to prioritise low food prices, by adopting a so-called New Zealand model, the Dutch agricultural lender Rabobank said. 

But whatever the outcome of the negotiations, an increase in prices for some goods, such as fresh vegetables and olive oil, is more or less inevitable the bank said.

Still, the official launch of negotiations to leave the EU did little to disrupt UK markets on Wednesday, with the pound barely wobbling, and UK wheat prices trading both sides of unchanged.
Article 50 triggered
In a letter to EU president Donald Tusk, the British prime minister Theresa May official triggered Article 50, launching a two-year negotiation on the terms of the UK's exit.

Attention will now focus on the exact details of future economic and trade relations between the UK and the EU, whether these are an interim agreement, or a permenant trade deal. 

"Much of the current focus on how Britain will trade post-Brexit revolves around the UK continuing trade with the EU or providing additional protection to its farmers by imposing protectionist import tariffs," said Harry Smit, senior analyst at Rabobank.

"Yet in our view, a third possible scenario not being as widely discussed is the New Zealand model – essentially a 'present to the rest of world' in which it eliminates all food import tariffs, possibly as a quid pro quo for receiving more favourable terms for its key export sectors, like financial services."
Such a move could be "bad news for the EU," Mr Smit said.  Which has previously had preferential access to British buyers via the single market.

Price increases for some goods are inevitable
 But Rabobank warns that whatever deal is struck with the EU, prices for many agricultural products will increase....MORE