Summary
Given Brexit related uncertainties, since 2016 beef exporters in Namibia and Botswana have been diversifying away from the UK market in their trade with the EU28. In addition, Namibia has for many years been marketing its beef on the basis of its quality and natural production process. Given the Australian focus on serving the market for high quality cuts these product differentiation efforts should be continued, in order to insulate Namibian beef exports from commercial impact of a duty-free/quota-free UK-Australia trade agreement. While Botswana has now largely stopped exporting beef directly to the UK, it is unclear whether any onward trade via the Netherlands takes place. If the Botswanan beef sector in future intends to serve the UK market, then ‘quality’ based product differentiation marketing efforts will need to be intensified.
There are concerns in the UK beef industry over the possible impact of the proposed UK-Australia free trade agreement if it were based on full duty free/quota-free access. According to Australian Foreign Minister Downer, beef exporters would be likely to focus on ‘sending “high end cuts” to the UK’, under any such duty-free/quota free trade deal (1). This is significant since the market for ‘high end’ cuts is a relatively small component of the UK beef market.
If Australian exports were focussed on this sector a possible tenfold increase in exports (2), could take on considerable commercial significance. Pater Hardwick, Trade Policy Advisor at the British Meat Processors Association (BMPA) has pointed out how while ‘a 20-foot container load of beef with 17,000kg with a full range of meat cuts might represent the meat from just 60 animals’, such a container ‘containing only boneless sirloins (high value) would have come from over 1000 animals’, while if the container contained only fillet steaks, this would come from three times that number of cattle. He stressed how it was ‘not the amount of meat by weight that matters’ but rather ‘the amount of high-end, high value cuts’ since this would have a ‘disproportional impact on the marketplace’ (1).
It was noted that while initially ‘Australian product would look to displace Irish beef’, there are concerns about the commercial position of domestic UK beef producers. In terms of domestic UK production while ‘products like mince, stewing joints and even roasting joints …represent the bulk of the volume of what’s produced’, these are the ‘least profitable and, in some cases, are sold at less than the cost of production.’ The real value of the beef carcass lies in the ‘high end cuts’ (sirloins, rumps and fillet steaks). It is argued, if the full value of these cuts cannot be realised, the viability of UK beef production would be undermined, with some UK producers being driven out of business.
| Production Standards Concerns Around Australian Beef Imports to the UK In responding to the proposed UK-Australia trade agreement the National Farmers Union (NFU) has expressed concerns over Australian beef production practices. It has been pointed out, the ‘large-scale feedlots finishing up to 50,000 head on a single site would be unacceptable…both morally and environmentally’ in the UK. Some 40% of Australian beef cattle are raised under such production systems. In addition, the NFU has highlighted the widespread use of hormone growth promoters, antibiotics, feed additives and plant protection products which are banned in the UK. The NFU has therefore called for robust mechanisms to be set in place to prevent Australian beef raised using these production practices from entering the UK market. NFU, UK-Australia trade deal opinion: Read the response from the NFU livestock board chair, 25 May 2021 |
The BMPA has further highlighted how the loss of parts of the UK domestic market would not easily be replaced by overseas markets further afield (i.e., beyond the EU27), since intense competition would be faced on these markets from Australia, the world’s largest beef exporter by value (second behind Brazil in terms of volume). To put this in perspective the NFU has highlighted how the value of Australian beef exports are ‘double the total output of the UK’s beef sector’, with costs of production significantly lower (3).
This factor gives added importance to UK-EU trade relations. Recent reports suggest in March 2021 the UK exported 8,600 tonnes of fresh and frozen beef, down 30% compared to March 2020. Shipments to the EU fell by 35% year on year down to 6,200 tonnes, but still took 72% of UK beef exports in March 2021. The greatest fall was in UK exports entering the EU via the Netherlands which were down 67% year on year.
This decline in UK exports to the EU was not compensated for by increased exports to non-EU markets which were down 14% year on year. Overall, for the first quarter of 2021 UK beef exports of fresh and frozen beef were down 40% year on year, totalling a mere 20,100 tonnes.
Despite the deferment of the introduction of full UK border controls on goods crossing from the EU, UK beef imports from the EU were also down. EU beef exports to the UK were down 34% in March 2021 compared to March 2020, with this being driven by lower shipments from Ireland to the UK (-37%). While the decline in Irish beef exports to the UK was equivalent to 91% of the decline in EU27 exports, declines in export to the UK also occurred from Poland and Germany (but with an increase in imports from the Netherlands).
From 2015 to 2019 on average 1 in every 5 tonnes of fresh and chilled beef (0201) imported from Australia into the EU28 was directly exported to the UK. 68% of all EU27 beef imports from Australia during this period cleared customs in the Netherlands.
UK and EU fresh and chilled beef Imports (0201) from Australia
| 0201 | 2015 | 2016 | 2017 | 2018 | 2019 | 2015-2019 |
| UK % EU28 | 28.6% | 21.7% | 17.5% | 17.3% | 12.1 | 20.4% |
| UK | 6,441 | 4,515 | 2,887 | 2,658 | 1,666 | 18,167 |
| EU27 | 16,096 | 16,280 | 13,602 | 11,748 | 12,057 | 69,783 |
During the period from 2015 to 2019 94% of UK beef imports from Australia consisted of fresh and chilled boneless cuts (020130). However, since 2015 the volume of UK imports of fresh and chilled boneless cuts (020130) from Australia has been in decline, being some 74% lower in 2019 than in 2015. A ten-fold increase in UK imports relative to 2019 levels would then represent only slightly more than a 158% increase on UK imports of fresh and chilled beef from Australia compared to 2016 levels.
UK Beef Imports from Australia
| 0201 | 2015 | 2016 | 2017 | 2018 | 2019 | 2015-2019 |
| Volume | 6,441 | 4,515 | 2,887 | 2,658 | 1,666 | 18,167 |
| Value | 58,113,663 | 34,381,530 | 24,657,961 | 22,152,772 | 13,831,033 | 153,138,959 |
| Unit price | 9,022 | 7,615 | 8,451 | 8,334 | 8,302 | 8,430 |
| 0202 | ||||||
| Volume | 330 | 51 | 32 | 34 | 101 | 548 |
| Value | 2,850,426 | 283,117 | 250,816 | 284,867 | 877,790 | 4,547,016 |
| Unit price | €8,637/t | €5,551/t | €7,838/t | €8,320/t | €8,691/t | €8,297/t |
Any increase in Australia beef exports under an UK-Australia FTA thus needs to be kept in perspective, since even a tenfold increase over 2019 levels of UK imports would represent only 3/4 of the decline in UK imports of beef from the EU27 in the first quarter of 2021.
| Comment and Analysis
The impact on ACP beef exports of the disruption of the UK/EU trade in beef and a potential UK-Australia FTA needs to be kept in perspective. There are only two ACP countries exporting beef to the UK/EU27 market, namely Namibia and Botswana. While displacement of Irish beef is the first third country supplier which is likely to be affected, the question arises: how will this impact on Namibian, and Botswanan beef exports? Between 2015 and 2020 between 64% and a 94% of Namibia beef exports to the EU28 market consisted of boneless fresh and chilled beef (020130). Namibian beef exporters have a strong focus on quality differentiated beef exports, with a focus on the natural methods of production used in the Namibian beef sector and the health benefits of naturally raised beef. Providing marketing and product differentiation efforts are intensified, the commercial challenge posed by any increase in Australian exports of high-end beef cuts under a UK/Australia FTA are likely to be minimal. Indeed, in light of the impact of the Brexit process on Irish beef exports to the UK (which are only likely to get worse as full UK border controls are introduced in 2022) opportunities for quality differentiated Namibian beef exports could increase in the coming period, as Covid lock down restrictions are removed and the hotels, restaurants, and catering (HORECA) sector reopens in the UK. However, it should be noted, since 2016 a diversification of Namibian beef exports away from direct exports to the UK has been underway. The importance of the UK market for Namibian fresh and chilled beef exports has fallen from a 52% share of exports to the EU28 in 2015 to a 26% share in 2019 (a similar decline for the small volumes of frozen beef exported to the UK is also apparent from a 23% share to a 15% share in 2019). This is part of a longer-term trend in diversification away from the UK market to better priced, quality differentiated markets across the EU. Breakdown Namibian and Botswanan Beef Exports to the EU28 and the % Share Direct Exports to the UK
For Botswana, the balance between fresh and chilled beef and frozen beef exports to the EU28 market is more balanced, with in recent years, a slight preponderance of exports of fresh and chilled beef. Botswanan exporters have also attempted to differentiate their beef on EU markets on quality grounds, but with these efforts being less firmly established than Namibian marketing and product differentiation initiatives. However, since 2019 Botswanan direct beef exports to the UK have collapsed, disappearing entirely in 2020. In contrast exports to the Netherlands reached 84% of total Botswanan beef exports to the EU28 in 2019 (up from a mere 5% in 2015) and 56% in 2020. It is unclear whether there is any onward trade to the UK from the Netherlands from within these shipments. The decline in Botswana exports to the UK since 2016 is also part of a longer-term trends towards moving beyond the UK market. Against this background, it is unlikely the conclusion of a UK/Australian FTA will have any serious commercial consequences for Botswanan beef exports to the UK. This will be particularly the case if Botswanan marketing and product differentiation initiatives are intensified. |
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Sources:
(1) British Meat Industry, ‘Australian free trade agreement on beef the devil is in the detail’, Press Release, 21, May 2021
https://britishmeatindustry.org/press-releases/australian-free-trade-agreement-on-beef-the-devil-is-in-the-detail/
(2) The Guardian, ‘Australia’s beef exports to UK ‘could rise tenfold’ on free-trade deal’, 20 May 2021
https://www.theguardian.com/environment/2021/may/20/australia-beef-exports-uk-free-trade-deal-farmers
(3) NFU, UK-Australia trade deal opinion: Read the response from the NFU livestock board chair, 25 May 2021
https://www.nfuonline.com/sectors/livestock/livestock-must-read/australia-uk-trade-deal-opinion-read-the-response-from-the-nfu-livestock-board-chair/