These are challenging times for UK farmers. With rising costs, shifting policies, and mounting pressures on margins, the agricultural sector is facing one of its most uncertain periods in recent memory. Here at United Oilseeds, we pride ourselves on our deep understanding of market dynamics and global trade flows, which are critical to navigating these turbulent waters. However, many farmers may not yet be aware of the upcoming Carbon Border Adjustment Mechanism (CBAM), a policy set to have significant implications for the industry.
What is CBAM?
Announced on Budget Day, alongside changes to APR, NICs, BPS, and Double Cab pickups, the government confirmed that CBAM will be implemented on 1st January 2027. CBAM introduces a carbon tax on imports of goods with high emissions profiles, and for agriculture, nitrogen is the focal point.
This policy is expected to have far-reaching consequences, particularly for growers. The anticipated £50/ton increase in the cost of nitrogen would directly translate to an additional £15/ton in the production cost of rapeseed. For context, this works out at around a £35 per ton increase in the cost of rapeseed oil—roughly 4% of its wholesale value. With already razor-thin margins, these costs will inevitably be passed along the supply chain, leading to higher food prices for consumers.
Consider rapeseed’s critical role in the UK oil market. It constitutes two-fifths of the total, far surpassing olive oil at 13 times the scale. Such a significant price increase on a cornerstone commodity will reverberate through the food system.
Global Trade and Environmental Implications
Beyond inflationary concerns, the broader implications of CBAM are troubling. The global market is highly responsive to even minor shifts in economics. For instance, the tax impact on nitrogen would equate to over 70% of the freight cost of transporting rapeseed from Australia to Liverpool—around £22/ton for a journey of 10,000 miles.
Australia, like the UK, relies on nitrogen to produce crops, meaning the environmental benefits of this policy may be negligible when accounting for global trade dynamics and shipping emissions. In essence, CBAM risks offshoring environmental harm rather than reducing it globally.
This pattern is not new. Similar unintended consequences arose from policies such as the neonic bans. While the UK government’s intentions are laudable, the practical outcomes often fail to account for the adaptability of markets, which consistently find ways to circumvent these measures—frequently at the expense of UK farmers.
Food Security at Risk
The result is a growing reliance on imports and a continued erosion of domestic production. While CBAM might reduce nitrogen usage in the UK, it does so at the cost of UK agriculture and food security. It does not address the global environmental impact, instead shifting the burden elsewhere.
As an industry, we must engage with these proposals to ensure that well-meaning policies do not inadvertently harm the farmers they aim to protect or destabilise the food supply chain that underpins our nation’s economy.
Fertilizer pricing is taken from the AHDB https://ahdb.org.uk/GB-fertiliser-prices
Crop fertilizer rates are taken from Nix Farm Management Pocketbook 55th Edition
All calculations have been reviewed and verified by independent agronomists.