The announcement that our government has just concluded a trade agreement with Australia has rung alarm bells across the UK livestock farming sectors and not without justification.

In short, beef tariffs will be eliminated after ten years. During the transition period, Australia will have immediate access to a duty-free quota of 35,000 tonnes, rising in equal instalments to 110,000 tonnes in year 10 and to 175,000 tonnes by year 15.

Sheep meat tariffs will be eliminated after ten years. During the transition period, Australia will have immediate access to a duty-free quota of 25,000 tonnes, rising in equal instalments to 75,000 tonnes in year 10 and to 125,000 tonnes by year 15. In both cases a safeguard duty of 20% will apply between year 10 and 15 for imports exceeding a volume threshold above the annual yearly increment.

There is no hiding from the fact that this is a lot, and it is disappointing to learn that it is over and above what our Australian counterparts expected!

But the basic problem which our negotiators constantly overlook is that the absolute volume is not as critical as what is imported; that is those parts of the market such as boneless hindquarter cuts of beef and bone in and boneless legs of lamb which are critical to returns. Worryingly the deal concluded with Australia makes no reference even to carcase weight equivalent, fresh vs frozen or bone-in vs boneless. I really do feel it is a failure on our government’s part to have neglected the detail and to have failed to consult. The fact that they are doing this now may be too late.

To illustrate this 20’ container with 17 tonnes of ‘beef’ made up of all the fore and hindquarter cuts in balance would take as few as 60 animals to produce. The same container of striploins weighing 8.5gs each, or 17kg per animal, would take 1000. So, a simple extrapolation shows you that 7,000 tonnes, if it were only striploins, would represent 20% of UK annual prime beef slaughterings and 35,000 tonnes would be 100%!

No-one is suggesting that Australia would import 35,000 tonnes of frozen boneless striploins but they might import 7,000; quite plausible and the main operators will tell you that 40 or 50 tonnes of striploins turning up in one go is more than enough to upset the market.

The idea that Australian beef imports will conveniently displace those from the EU is also flawed. If Australian beef comes to the UK it will be because it can outcompete EU beef and/or UK beef. Whoever’s beef it displaces, it will do so through economics and that WILL push down the price. I totally accept that, right now, that isn’t the case, but markets change, and Australia didn’t push for access for the fun of it.

And what applies to beef also applies to lamb. If you were to take an average dressed carcase weight of 20kg (probably a little less but this is easier for the arithmetic) and a bone on leg around 2.25kg then 1000 tonnes of carcases = +/- 50,000 carcases/sheep. But if this were just bone in legs it would take over 200,000 sheep to produce. It doesn’t take much to extrapolate that if say half of the Australian 25,000 tonne quota were shipped as legs then it would equate to a little shy of 3 million sheep and that is half Australia’s year one access!

If anyone is thinking that this is all very hypothetical, then all they have to do is look at the profile of NZ exports to UK today. Some 50% of it is fresh and frozen bone-in legs. Less than 3% is carcases. So, this threat is very real.

More importantly, the observation made by many that NZ routinely undershoot their quota overlooks the fact that when the quota was established in the Uruguay Round of the GATT in 1992-93, a large share of the trade was carcases so the ‘animal equivalent’ volumes are undoubtedly higher today.

The problem here is not so much that this has happened as it reflects the demands of the market but what the picture looks like if an increasing number of players now compete for the same cake. Simple economics will tell you what will happen.

We must not get distracted by the current market situation exaggerated by low numbers in Australia and elsewhere and market forces driven by domestic consumption with an absence of food service. We have all been around long enough to know that this will change. The key point actually is that the moments of greatest vulnerability are when markets are weak when the UK might look like a ‘least worst’ option for exporting countries such as Australia.

Finally, these quotas, which are set to increase are only those agreed in our first non-legacy FTA. Others are queueing up and with this as the benchmark, the risk of the market being overwhelmed is very real. I don’t think we can realistically stand in the way of freer trade, but we do need our negotiators to pay attention to the detail and attempt to minimise the risk of imports creaming the top off the trade.