Analysis: Brexit – the impact on poultry incomes

The NFU has run all the figures and concluded Brexit could either help or hinder poultry businesses depending on how the Government proceeds. So what scenarios would work in the sector’s favour?

The unknowns of Brexit still very much outweigh the knowns, especially when it comes to how different business sectors are likely to be affected.

Last autumn, the NFU worked with AHDB to produce a piece of work that explored the effect of three potential Brexit outcomes on various farm sectors. However, the poultry sector was not covered by this analysis.

The NFU therefore took the decision to produce an in-depth analysis focussing on poultry and egg businesses.

This has now been published in a document called ‘Potential Implications of Brexit for Poultry Enterprise Incomes’. Through modelling changes to labour costs, trade deals and regulations the study puts solid figures on the affect each scenario is likely to have on poultry businesses.

The Brexit Scenarios

The study applied three Brexit scenarios used in previous work for the AHDB. These have been named Evolution, Unilateral Liberalisation, and Fortress UK. Different areas where Brexit could bring about change were then considered, including labour, the UK’s trade relationship with the EU, the UK’s trade relationship with the rest of the world, and regulation.

  Evolution Unilateral Liberalisation Fortress UK
Labour Supply remains at current level. No change to labour costs. Non-UK regular labour restricted to 50% of current levels. Seasonal workers remain available. 50% increase in regular labour costs. Non-UK regular labour restricted to 50% of current levels. Seasonal labour reduced to 50% of current levels. 50% cost increase in both.
Trade relationship with the EU Comprehensive free-trade agreement (FTA) ensuring no tariffs between UK & EU. Increased 5% in UK prices to reflect cost of trade friction in a FTA. No trade deal agreed between EU and UK. Increase of 8% in UK prices to reflect cost of trade friction without a FTA. No tariffs applied to EU imports, but stiff tariffs on UK exports. No trade deal agreed between EU and UK. UK-EU trade relationship the same as with the rest of the world. Increase of 8% in UK prices plus cost of WTO tariffs.
Trade relationship with the rest of world UK has access to a share of the EU’s existing WTO tariff rate quotas (TRQs) and agrees FTAs with third countries which already have FTAs with the EU. Outside of this WTO tariffs apply. Increase of 8% in UK prices to reflect costs of trade friction. WTO rules apply. UK unilaterally reduces import tariffs to zero for all agricultural products. UK exports still face tariffs. Increase in 8% on UK prices to reflect this. UK adopts same common external tariffs as the EU and retains a proportion of its existing WTO TRQs. Increase of 8% in UK prices plus cost of WTO tariffs.
Regulation All existing EU regulations adopted into UK law. All existing EU regulations adopted into UK law, with the regulatory burden decreased over time. 5% decrease in costs of vet fees, plus other livestock costs All existing EU regulations adopted into UK law.


The poultry meat market

The UK produced approximately 1.73 million tonnes of poultry meat in 2015, around 80% of which was chicken. However, the UK is a net importer of poultry meat because of the demand for breast meat. These imports come in different forms – fresh, frozen, processed, cooked, and salted – but predominantly it’s breast meat.

Imports of poultry meat reached 790,000 tonnes in 2015. More than 90% of fresh and frozen imports came from the EU. However, this was only true for 50% of processed and salted poultry products. The rest came mainly from Thailand and Brazil which import within a quota at a reduced tariff rate.

The strong preference for breast meat and the relative lack of interest in the other parts of the carcase is what drives the UK’s poultry meat import and export trade. Largely, our exports go to the EU. This is particularly the case for fresh imports and exports because of the practicalities of storage, transport and shelf life. This is an important factor to consider when modelling the effects of tariffs and trade.

Another fundamental consideration is the value of each part of the carcase. Due to the preference for breast meat, the value of the whole carcase is split approximately 75% for the breast meat, and 25% for the rest of the carcase. This has been included in the analysis.

The UK egg market

In 2017 the UK produced approximately 10.8 billion eggs and consumed 12.9 billion, with imports making up the shortfall. 55% of the UK market is for shell eggs sold at retail and is supplied by UK producers. Shell eggs sold to foodservice businesses makes up 23% of the market and the remaining 22% is processed egg products used for foodservice or through wholesale. Egg producers are typically set up to serve one part of the market.

Egg imports are made up of shell eggs and processed egg products. The UK exports a very small number of shell eggs.

The impact of trade changes on prices

  Liveweight broiler meat price Free-range table eggs price Wholesale shell eggs price Price change for processed eggs
Evolution +0.49% +0.09% +3.35% +4.44%
Unilateral liberalisation +2.37% -0.08% +6.3% +3.73%
Fortress UK +15.18% +0.1% +37.91% +4.97%


Liveweight broiler prices: This price is weighted to reflect the prices changes in different parts of the carcase and the value of each. In summary, while each scenario sees a drop in the value of dark meat prices, the increase in the value of the whole carcase and breast meat makes up for this.

Free-range table egg prices: The very small percentage changes are driven by the fact that these producers are insulated from imports.

Wholesale shell egg prices: These eggs are still destined to be sold in shell, so there are practical transport constraints over where they can be sourced from.

Processed egg prices: additional tariff costs drive prices increases in two of the scenarios, but the removal of tariffs have a negative effect on prices. This affects a very small part of the output of eggs graded as seconds. It also provides insight into the potential prices changes producers of eggs for processing may face.

Feed prices

  Price change for egg feed Price change for broiler feed
Evolution +1.1% +1%
Unilateral liberalisation -0.2% -0.1%
Fortress UK -0.2% -0.1%


The chief components of feed for both broiler and egg farms are wheat, barley and soymeal, with all three being traded globally. The UK produces and imports and exports wheat and barley of different grades for different markets.

Egg feed

  • 72% wheat
  • 11% barley
  • 17% soymeal

Broiler feed

  • 65% wheat
  • 10% barley
  • 25% soymeal

However overall the UK imports a small amount of wheat to meet its requirements and exports barley. Therefore, as a broad principle when tariffs are present, wheat goes up in price. When tariffs are in place for UK exports, barley goes down in price domestically, and more so in scenario three than when tariffs for exported to the EU are not present under scenario one.

Soymeal is currently traded tariff free and it is assumed that in any future scenario this would remain the case.

Effect on broiler enterprises

Under the Evolution scenario, the income per bird drops from the baseline of 22p to 21p. There is a slight increase in the income of the enterprise from the sale of broiler meat. This is driven by imports being less competitive due to increased costs. These costs are present even in light of an UK-EU trade deal and are enough to add costs to imports and boost domestic prices. However an increase in the price of feed offsets this and overall the income per bird falls slightly.

Under Unilateral Liberalisation, income falls to 11p per bird. This is driven by the cost of increased labour. As described earlier, fresh poultry imports could only realistically come from the EU and they would be less competitive due to increased costs in the absence of a trade deal. However, the rise in labour costs wipes out this advantage entirely and leads to a large reduction in income.

In the case of a Fortress UK scenario, income per bird rises dramatically to £1.68. This is because tariffs make imports prohibitively expensive and leads to a significant boost in the price of UK product. UK dark meat becomes uncompetitive overseas due to increased tariffs and so falls in price in the UK. However rises in breast meat prices more than compensate. Labour costs also increase, but the increase in value for meat outweighs this.

The report notes that while the third scenario appears attractive, changes in retailer and consumer behaviours in reaction to price rises could be less positive. For example consumers may switch to cheaper cuts or even other sources of protein, and retailers might renege on commitments to British produce. It is important to question how realistic it is that the supply chain would pay greatly increased prices before seeking other sources.

Effect on egg enterprises

Under the Evolution scenario, income drops from £5.59 to £5.57 per bird. The price of eggs stays almost the same and the drop in income is because the cost of feed rises due to the increased cost of importing the required wheat.

In the case of Unilateral Liberalisation, income drops more dramatically to £4.46 per bird. Second quality eggs drop in price due to imports of eggs becoming cheaper. The main driver for the loss of income is the increase in labour costs caused by restrictions placed on migrant labour.

Under a Fortress UK scenario income reduced to £4.45 per bird, nearly identical to the second scenario. A further increase to the cost of labour is the main reason for this.

The report states how the modelling of the three scenarios on the free-range egg enterprise highlights the importance of the cost of labour. The minimal changes to the value of output reflects the fact free-range table eggs are largely insulated from changes driven by trade.

Overall conclusions

The study describes first order effects and does not account for adjustments made by businesses if such effects become reality. However they do show the potential starting points from which any adjustments may begin to take place.

The study demonstrates that labour is the most crucial issue for both broiler and free-range producers. Increases in the cost of labour will be acutely felt by operators in both sectors. In particular for broiler enterprises the increased cost of labour may wipe out any potential price increases caused by different trade situations. Efficiency, cost and level of labour employed is already a significant focus for poultry enterprises but Brexit outcomes that severely restrict the labour pool will sharpen that focus even more.

Tariffs on imports and exports can lead to significant price changes for different parts of the poultry meat and egg markets. While the free-range egg market is largely insulated from changes in trade relationships, the wholesale and processing markets are far more exposed.

Poultry meat prices could benefit substantially from high tariffs it is important to question whether retailers would be willing to pay, and if governments would tolerate higher prices for consumers.

Farm payments and regulations have less of a bearing on farm income for both broiler and free-range enterprises. While the modelling showed relaxing the rules may lead to a slight drop in costs, other factors far outweigh this. A reduction in area-based payments would affect free-range producers claiming subsidy on their ranges.

While the scenarios explored are extreme, they provide an insight into what could happen. The NFU said it hoped that despite uncertainty around the nature of the final outcome, the information may help inform business decisions and provide guidance to policy makers on the key areas of their work that will affect the poultry sector.

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