With the UK a high-value market for NZ beef, and free-trade negotiations well advanced, NZ producers should be keeping a close watch on developments for potential additional export opportunities, Rabobank animal proteins analyst Blake Holgate said.
But while new post-Brexit trade deals are set to play a key role in determining the future of UK beef imports, local consumer preferences and non-tariff barriers will also heavily influence who supplies beef to this lucrative market in 2021 and beyond.
With trade negotiations between the EU and UK intensifying, Holgate said it is currently difficult to predict the outcome.
“Both parties have stated a clear desire to conclude a deal during the transition period which ends on December 31, but time is short, and there is a long list of issues to resolve,” he said.
The result of these trade negotiations will be particularly significant for Irish beef producers.
“Ireland is the major supplier of beef to the UK, representing 70% of total UK beef imports in 2019, and is currently one of a select number of major beef exporters to the EU-27, who are granted tariff-rate quotas which allow them to import certain quantities of beef at reduced or zero tariff rates.
“Once the Brexit transition finishes, these quotas will be divided between the EU and the UK, affording existing EU suppliers access to the UK at reduced tariff rates,” he said.
“However, if the EU and the UK fail to agree on future trade terms, it’s likely tariffs will remain high for most imported beef products and this would put Irish beef in a vulnerable position.”
Holgate said this potentially opens opportunities for NZ as the UK government pursues new trade deals with countries outside the EU, including NZ and Australia.
While the ongoing trade negotiations will be pivotal, these alone will not determine who ultimately supplies the UK beef market.
“Consumer preferences for locally-sourced product and non-tariff barriers, such as entrenched existing market relationships between food retailers and processors and purchasing standards, will also play a major role,” he said.
For NZ this means the industry must continue ensuring it can demonstrate that NZ beef is produced to the highest food safety, animal welfare and environmental standards.
“If the NZ beef industry can do this, it is likely to find itself in a privileged position compared to some of its competitors.
“However, if it’s unable to maintain these standards, it could find it increasingly difficult to get product on UK supermarket shelves,” Holgate said.
NZ Beef exports performed solidly over the last quarter, largely underpinned by demand from the US for manufactured beef.
But Holgate said NZ export returns are starting to feel the impact of challenging market conditions with average returns for the month down 2% year-on-year.
Export returns for beef exported to China have been weakening consistently since April with average returns from China down 12% during July.
As a result, NZ exporters are directing increasing volumes of exports into the US market and away from China.