Scottish exports to the continent are still running at 60% of pre-Brexit levels, according to Quality Meat Scotland (QMS).
A combination of Brexit-induced logistical challenges and the impact of COVID-19 has reduced the volume of red meat sold to Europe from Scotland.
“Things have been difficult for exporters since the EU exit,” said director of market development at QMS Tom Gibson. “Due to Brexit and COVID, we are 40% down on export volumes of Scottish red meat.”
Gibson explained that companies are still struggling with the logistics of exporting under the new Brexit rules.
While companies are much better at getting the paperwork sorted for exports compared with earlier in the year, there are still challenges.
At the moment, bigger companies are better able to spread the costs of exporting over a larger volume. Smaller companies are having to group their orders together at distribution centres, which is a greater logistical challenge.
The cost of health certificates from vets, additional transport charges and driver shortages have all contributed to increased cost of logistics.
Time is also an issue, as companies are generally experiencing an additional 24 to 48 hours longer to get product to continental buyers. As a result, Gibson states that many small or niche red meat producers have simply stopped exporting product to Europe.
Producers who cannot fill entire lorries themselves need to collaborate with other companies. This in itself is a logistical challenge to get timings correct.
But on top of that, when grouped, loads get stopped at customs and if there is a discrepancy in any of the supporting paperwork, everything is prevented from entering the EU until the particular error is sorted.
So products can be left in limbo for errors made by other companies, with fresh products losing value by the hour.
On top of the increased red tape and logistical challenges, processors are also having to increase farmgate prices.
“This is making it harder for processors to make the numbers add up,” said Gibson.
“I know of one company which regularly sent product to the south of France that has had to stop as a result of increased costs after Brexit and higher farmgate prices.”
To help turn around the fall in exports, QMS is taking part in the Sirha food trade show in Lyon this week. On a joint stand with the AHDB and HCC from Wales, it is offering tastings of Scotch product cooked by a French chef.
Christmas demand on the way
Where COVID-19 and Brexit have affected processing capacity, many meat factories have prioritised domestic customers over exports. The next few weeks will see even more pressure on the slaughterhouse sector with the Christmas kill.
From now until December, the demand for lamb in Scotland will rise 10%, according to figures from QMS. The rise in England is more dramatic, with processors typically needing 20% more lambs. Similarly, cattle demand is scheduled to rise 10% between the start of October and the middle of November.
While this is good news for red meat prices, it could all go horribly wrong if there is not capacity to process the additional animals, believes economic analyst with QMS Iain Macdonald.
He said: “As we have seen in the USA during the pandemic, and in the pig sector in Britain, a surplus of livestock over and above the operational capacity of the processing sector can lead to a backlog of slaughter-ready animals on farm, pressuring the price paid for them, irrespective of the level of consumer demand.”
US farmgate prices are running around 20% above 2020 levels at £3.15/kg to £3.20/kg. But this is significantly less than the wholesale price, which has risen by closer to 40%. The limited processing capacity means that abattoirs are not having to chase cattle and drive the price.
Scottish Association of Meat Wholesalers (SAMW) has issued a public statement on the labour crisis, with many meat factories forecast to struggle in the run to Christmas and beyond.
“The notion that the degree of staffing issues affecting the whole food industry at present will magically disappear once we accomplish Christmas is fanciful,” said SAMW president Alan McNaughton.
“Member after member reported labour problems during the meeting, with one major company owner commenting that this problem could continue throughout 2022 and possibly beyond. All this means is that businesses are trapped in a staffing merry-go-round, with workers moving from one company to another and back again.”
Half of all employees in the meat trade in Scotland are from abroad. SAMW is calling on the UK government to allow meat factories to hire foreign workers for at least 12 months to prevent factories from running out of staff.
McNaughton explained: “It is easy for government ministers to point to the high number of people looking for work but the bottom line is that those who are available on the local jobs market either do not have the particular skills we require or are simply not interested in working or willing in a meat production environment.”
The fall in the value of sterling against the dollar will compound the rising costs of raw materials, components and parts for both farmers and abattoirs.
At farm level, input cost inflation has also been surging, with fertiliser bills up over 75% on many farms, with some products simply being unavailable.
Feed barley has risen to £170/t from £130/t this time last year. Red diesel has risen from 41p/l this time last year to closer to 70p/l today.
Steers between six and 12 months are up 2.5% to £899 and those sold at 12 to 18 months have risen by 6.4% to £1,099.
Blackface lambs averaged 14% more expensive than last year at an average of £57, while Suffolk lambs were up by 15% at £79.
At the other end, prime cattle are around 12% above the five-year average at £3.15/kg and lambs are currently 30% above their five-year average at £4.90/kg.
Meanwhile, in retailers for the 12 weeks until the start of September, market research company Kantar states that fresh beef and fresh pork is averaging 1% to 2% cheaper than a year earlier across GB, although lamb did average 4% more expensive.
Scottish farmers are being offered over £200/t for malting barley this October, which is up £20/t from the spot price four weeks ago. The grain market looks to be rising across the world, bringing prices up for cereal farmers in GB.
The AHDB has completed its final harvest survey, which concluded that the end of the GB harvest saw most crops combined at, or very near, storage moisture. A month of largely settled warm and late-summer sunshine assisted with the tail end of the cereals. As we move into October, there will be a few fields of spring barley on upland or northerly farms left to harvest, but GB has completed over 98% of crop.
Yield estimates for GB are: