British flour suppliers to Irish bakeries are looking at importing and milling EU wheat and selling that flour into Ireland to lessen the impact of tariffs in a no-deal Brexit.
The contingency plan is just one being considered that would reduce tariffs on British flour sold into Ireland in the event of a disorderly UK withdrawal from the EU, according to bakeries and a British-Irish industry group.
The bulk of the flour used in Ireland is bought from either two mills in Northern Ireland – Allied and Andrew's – or other mills in Britain, raising the possibility of a sharp increase in the cost of a loaf of bread for Irish consumers in a crashout Brexit. The single mill in Ireland, in Portarlington, could not meet the demand for the whole Irish market.
About 4,000 tonnes of flour are imported into the Republic from the UK every week. The National Association of British and Irish Flour Millers estimates that World Trade Organisation tariffs, in the event of the UK leaving the EU without a deal, would be €172 per tonne of flour or the equivalent of 15 cent per loaf of bread.
Alex Waugh, the association's director general, said that if mills in Northern Ireland and Britain sourced and milled EU wheat and exported this flour to the Republic, it would reduce the impact of tariffs.
“It is a lower tariff but the overall cost is still quite a lot higher than it is today. It would reduce the tariff impact by two-thirds. It is a lot better,” he said, putting it at the equivalent of about five cent a loaf increase.
400 lorry loads
The large volume of flour imported into Ireland complicates contingency planning for stockpiling; there is just too much flour required every week that only a few weeks’ worth of supply can be stockpiled at any one time.
Waugh estimates that two weeks of a supply of flour for bakeries in Ireland would require 400 lorry loads.
“There’s just not the storage capacity. Flour is generally transported in bulk in road tankers and therefore you need either silos or spare tankers to store it in. You can stockpile a week or so but after that you run out of space,” he said.
Brendan Coghlan of Coghlan's Bakery, runs his mid-sized Co Kildare-based bakery that specialises in making burger buns, pastries and other soft bread products for the major supermarket chains and restaurants, along with his son David. He said he has plans for "buffer stock" of four weeks – about 200 tonnes of flour – to tide him over the October 31st Brexit date.
He does not see a “doomsday scenario” where bread shelves in shops and supermarkets would be empty: it is the cost of flour rather than the supply that is a concern, he said – and something that bakeries have no control over.
As he sees it, he will either have to pay tariffs on UK flour or higher transport costs to import flour from the EU.
“We are small enough to use bagged flour. I know some of the bigger guys are going to park trailers in their yard as a buffer stock if there is a delay in flour coming in. The product will get to the shelves okay but it is the costs around that,” said Coghlan who employs 116 people at his family-run bakery in Naas.
‘Rolling stock’
Mills on the island of Ireland are running at full capacity, he says. He does not believe there is "the rolling stock" available in Germany, France or Belgium if Irish bakeries switched all their flour suppliers from the UK.
Higher costs would inevitably have to be passed on to the customer, he says
“They have to be passed on. The trade works on very tight margins as it is at the moment, so any additional costs would have to be passed on but we have no idea what these additional costs could be,” he said.
The other challenge is that French flour, for example, is different to the flour used by most bakeries, says Coghlan, so for some products it would not be possible for a straight swap between suppliers.
“We have a range of products that we tailor our flour for. It is not like walking into the supermarket and buying a bag of flour off the shelf,” he said.
The logistics of delivering flour into Ireland has built up over years into a “very slick” operation,” says Coghlan – it is down to a two-day turnaround. Shifting to a mainland European supply chain would add a day and additional costs.
Waugh said that the flour millers’ association has been working with Irish bakers to try to find a solution but in the event of a no-deal Brexit, regardless of where the flour comes from, the cost will go up.
“Even if we managed to bring the tariff down by various mechanisms, it will still be higher and if the flour has to come from elsewhere, the cost of transport is higher so you just cannot escape it. It is a complete pain,” he said.
Currency fluctuations
Michael McCambridge, managing director of Dublin-based bakery McCambridge’s, said that because of the uncertainty around Brexit the company was adopting a strategy that it does not normally follow. “Because we are bakers, we don’t play with currencies or commodity prices – some do – so we like to fix those variables but in this instance we are not prepared to fix until we get better clarity on what’s happening in the UK,” he said.
He notes the unusual situation where a small bakery in Dublin is following events so closely in the House of Commons in order to plan ahead in business. However, he said he must do so given that he buys packaging and buttermilk from Northern Ireland. His company sources flour from within the State.
“Our risks are particularly around the all-island economy . . . the all-island Ireland works,” he said.
Waugh says the flour-supplying and bread-making market is stretching further; to the whole of the UK and Ireland given that many bakery goods manufactured in Ireland, made with British flour, are exported back to the UK.
“It is not just north-south; it is east-west as well,” he said.
Coghlan says that businesses like as much clarity as possible but, with the political uncertainty around Brexit, nobody can predict either what will happen or how much it will cost. In the meantime, significant investment plans are on hold.
“It is very frustrating. We are bakers. That is what we are supposed to be doing. We shouldn’t be trying to figure out what politicians are trying to do,” he said.
“We are trying to figure out our own business and the livelihood of everyone in the business. It is a difficult time.”
