UK sheep meat exports have been recovering since the 2001 outbreak of Foot and Mouth Disease. However, a reduced flock means they remain below levels seen before the outbreak.
Exports largely aim to address imbalances in demand for different cuts and the higher supply of sheep meat at certain times of year. Also, additional markets have had to be found to take items for which there is no or minimal demand on the domestic market, including offal and skins.
In recent years, sheep meat exports have fluctuated between 90,000 and 100,000 tonnes, equating to around a third of production. Over time, an increasing proportion of sheep meat has been exported as cuts (and particularly bone-in cuts), where much of the value added in processing is retained on the domestic market. However, carcases remain the largest proportion of UK sheep meat exports. Ovine offal exports increased sharply between 2005 and 2010, in part on the back of improved market access outside the EU, but have stabilised since then. Offal exports in 2015 amounted to 4,000 tonnes, more than double 2006’s level.
The value of UK sheep meat exports in 2015 was £302 million. This was the lowest figure since 2010, as the weak euro had an impact on both the volume and price of exports. However, there are some doubts over the accuracy of the data, with exports believed to be higher than the official data indicate. In addition, exports of ovine offal were worth £6.6 million. Sheep skin exports were worth an additional £60 million, although this was a third less than in 2013 due to declining prices
The UK currently imports around a third of the sheep meat it consumes, or around 100,000 tonnes annually.
In 2015, over 95 per cent of UK sheep meat exports went to other EU countries. France is the main destination, accounting for 45–55 per cent of all trade, although this is a lower share than in the past. The second largest market is now Germany, accounting for about ten per cent of trade, a share which has grown recently. However, uncertainty about the accuracy of export data means trade with all countries may be understated.
The UK currently imports around a third of the sheep meat it consumes, or around 100,000 tonnes annually. Imports have been fairly stable recently. The dominant supplier has always been New Zealand, with a market share of over 70 per cent. Australia is the second largest supplier, accounting for around 15 per cent. This largely reflects the different seasonality of sheep meat production in the Southern Hemisphere, which helps to ensure supplies are available throughout the year. The EU supplies around 10 per cent of imports.
Over 95 per cent of imports are in the form of cuts, mostly bone-in, which enables them to be targeted at the best value market for that cut (eg the UK for legs). Carcases account for less than five per cent of imports.
The split between fresh and frozen product is more even, with between 55 per cent and 60 per cent coming in the form of frozen product and the remainder being fresh.
Tariffs and trade barriers
There is a lot of talk around at the moment about Free Trade Agreements (FTAs), as if they are automatically a good thing. However, there does need to be caution as we do not want the UK flooded with meat from other countries that is either not as well produced as UK meat or simply swamps the market with the concomitant negative impact on British farmers and meat processors.
Most sheep meat imports to the EU fall within a quota, allowing tariff-free access to the EU market for certain volumes of sheep meat. New Zealand has the largest quota, accounting for approximately 80 per cent of the total but it has not come close to filling its quota to the EU since 2011. The current volume of lamb imports available within the tariff-free quota for New Zealand is 228,254 tonnes, with only 76 per cent of this being used in 2015. In comparison, Australia has a smaller quota of just 19,000 tonnes and, unsurprisingly, comes close to filling it. Of EU Member States, the UK is by far the largest importer from the global market.
Any sheep meat imports outside quota or from countries not covered by it, are subject to ad valorem tariffs of 12.8%, plus a fixed amount ranging from €902 to €3118 per tonne, depending on the cut. In many cases, this would be equivalent to an ad valorem tariff of 50 per cent or more, which seriously impacts on the ability of imported sheep meat to compete with EU meat. This, in reality, makes any sheep meat outside of the quota uncompetitive on the EU market, so virtually all sheep meat is imported through the quota.
Most other sheep meat importing countries also have tariff and non-tariff barriers in place. For example, China, the world’s largest importer, imposes ad valorem tariffs of 12–15 per cent on lamb and 23 per cent on mutton imports. However, China has FTAs in place with both New Zealand and Australia, the main suppliers, which mean that tariff rates on their imports are gradually being reduced and will eventually be eliminated.