How Australia can influence the UK beef market

The Australia-UK trade deal signed in December gives Australian beef and sheepmeat exporters exceptional access to the UK beef and sheep markets.

They will get a 35,000t beef quota immediately, rising to 110,000t by year 10 and 175,000t after 15 years, and 20% preferential tariff on any excess above that.

For sheepmeat, the quota is 25,000t immediately, rising to 75,000t by year 10 and 125,000t by year 15, again with a 20% tariff on anything above that.

This means Australia will be in a position to compete seriously in the UK market immediately when the deal signed last December is ratified later this year or early in 2023.

Perfect storm for Irish exporters

Australia’s entry to the UK market will coincide with a rapid expansion in the volumes of Australian beef in particular.

Prolonged drought caused a major cull in the national herd leading to record exports of 1.2m tonnes in 2019. These had fallen to a 36-year low of 918,000t, according to Meat and Livestock Australia (MLA).

However, in the year to the end of November 2021, the herd rebuilding process picked up pace.

There is a view that Australian beef exports are focused on high-value Asian markets and the US

According to MLA forecasts, this rebuild will mean a rebound in beef exports from a record low in 2021 to a record high of 1.243m tonnes in 2024, a 35% increase on the 2021 figure.

This means that Australian beef exporters will have an extra 325,000t of beef to sell at the time the UK beef market is opening up.

There is a view that Australian beef exports are focused on high-value Asian markets and the US. The example of declining New Zealand sheepmeat exports to Europe, no longer coming close to filling its huge quota as it switches to China, is used to support this view.

Complexity with China

However, this view does not reflect the increasingly fraught relationship Australia has with China, added to by recent comments from the Prime Minister Scott Morrison following the Russian invasion of Ukraine.

This strained relationship has been reflected in beef trade volumes exported to China, which were down from 300,000t in 2019 to 149,000t in the year ending November 2021.

Sheepmeat volumes were 116,500t, down 2% year on year

This was a time during which Chinese beef imports overall increased and while it coincided with a drop in Australian volumes available because of herd rebuild, it is nevertheless a significant shift in trade patterns and a number of factories had approvals withdrawn.

Sheepmeat volumes were 116,500t, down 2% year on year.

More product available for export parallel to a new tariff-free market opening creates a perfect storm for the dominant established exporter to that market. In 2021, AHDB, the English levy board, report that the UK imported 241,000t of beef with just under 80% of this supplied by Irish beef exports.

In evidence to a UK Parliament committee last year, MLA made it clear that it wasn’t UK beef production that it was targeting – it was the substantial import market that it planned to compete in. That will put it head to head with Irish beef and as the UK was one of Australia’s largest beef export markets prior to joining the EU in 1973, according to MLA, the expectation is that it will grab and grow a slice of that market again as the trade deal swings into effect.

Potential also exists for sheepmeat but, with strong positions in international markets as the only major global exporter along with New Zealand and the UK also being an exporter, the UK may be less attractive for sheepmeat than beef.