Red meat exports: potential administrative costs of trade under WTO rules

Appendix 4: Scottish Red Meat Industry Exports

1. The contribution of cattle and sheep to total agricultural output is larger in Scotland compared to England (see Table 1). The difference is even greater when compared to the EU. A hard Brexit that jeopardises the market access of Scotland’s beef and sheep industry to European markets will have a greater impact in Scotland compared to the rest of the UK.

Table 1. Contribution to Agricultural Output (%) in 2017

Source: Scottish Government (2018), Eurostat (2018)

2. Excluding 5^th quarter products, sales of beef and lamb are made up as follows:

• 91% is sold in the UK (25% in Scotland worth £190m and 66% worth £506m in the rest of the UK)
• 9% (worth £73 million is exported).

Table 2 below highlights the value of red meat sales in sterling (£) alongside the corresponding percentage of total sales. No data was available for pig meat exports.

Table 2. Value of Scottish Red Meat Sales for UK and Export

Source: QMS Processors Survey 2018 (excludes 5th quarter)

3. Sales of Scottish red meat products are predominantly made in the UK. They are undertaken through a variety of channels^[4]. The main ones include:

• Sales of beef to multiple retailers valued at £329m, this equates to 55% of total UK beef sales
• Sales of beef to the food manufacturing sector valued at £132m, this equates to 22% of total UK beef sales
• Sales of lamb to multiple retailers valued at £61m, this equates to 63% of total UK lamb sales
• Sales of lamb to wholesale customers valued at £34m, this equates to 35% of total UK lamb sales

4. In addition to sales of meat products, it is estimated that one third of the lambs reared in Scotland are transported south of the border for finishing and slaughtering. These animals cannot be marketed as Scotch or Scottish.

5. Export sales out with the UK total £84m (this includes sales of 5^th quarter products, skins/hides). In proportional terms, Scottish lamb is more dependent on export markets (26% of sales) than Scottish Beef (6% of sales). Scotch Beef and Scotch Lamb both have Protected Geographic Indicator (PGI) status making them iconic premium brands in both UK and export markets.

6. Export markets have a role to play for the sector providing market diversity and opportunities for processors to maximize carcass balance.

7. In 2017 around 7.5%^[5] of total red meat sales were exported to the EU. Table 3 quantifies the sales of PGI and non PGI Scottish beef to a number of EU and other countries.

Table 3: Scottish Beef Exports (£’s millions) 2017

Source: QMS Processor Survey 2018

8. The EU is the most important market for beef exports accounting for around 93% of total export sales, valued at £44.5m. France is the biggest single export market with £11.7m of sales in 2017. Scotch beef PGI accounts for 51% of beef exports with Italy the most important market for this category. 5^th quarter products are traded in the EU and in other markets, including Asia and Africa. Price information for beef sales is detailed in table 4 below:

Table 4: Price Information

Source: QMS Red Meat Industry Profile 2018 (2017 figures)

9. For lamb, 26% of total sales valued at £34m are exported. Most Scottish product is destined for the EU, where France is the largest customer. Exports to new markets, particularly in Asia, are increasing and the market to Japan has recently opened.

10. Scottish red meat exports are dispatched in a variety of fresh or frozen formats. Fresh product can either be marketed as whole carcasses (for butchers or wholesale), or product that has already been processed and is ready for retail sale.

11. Fifth quarter products^[6] play an important role in maximising carcass utilisation and reducing waste. They are sold both in domestic and export markets, with total sales estimated at £33m. They are sold both in domestic and export markets and with total sales estimated at £33m. In 2017, 5^th quarter exports mostly originated from cattle/beef.^[7]

12. Feedback from industry during the project research indicated that EU customers will still want to purchase Scottish/Scotch Beef and Lamb post-Brexit. However, the market is competitive, and customers will not wish to pay more than going market rates. Any additional costs that may arise and which cannot be absorbed by Scottish processors will have to be passed along the supply chain. This will deter existing buyers and reduce the ability to find new ones.

13. It is probable that exporters will face the potential of making less money from exports to the EU and this could discourage them from exporting. If they wish to maintain throughput, they will have to find new markets, either in the UK, or in other export destinations.