Consumer acceptance and non-tariff barriers to strongly influence the future of the UK beef market
While Brexit trade negotiations are delayed, new forces are shaping the future of UK beef imports. COVID-19 continues to play out in the global beef market.
Brexit trade talks between the UK and EU continue to progress. As the UK is an attractive market for beef exporters, the current trade negotiations are drawing a lot of attention. “The UK represents a big, high-value market, and once outside the European bloc, we expect it to become the fifth or sixth largest beef-importing country,” according to Angus Gidley-Baird, animal protein senior analyst at Rabobank.
The UK government is also pursuing new trade deals with countries outside the EU. This includes Australia, New Zealand, and the U.S., all of which are major beef exporters. New trade deals could further challenge Ireland’s position in UK imports if it opens the possibility of broader low- or no-tariff access to the UK market for these other beef exporters. Currently, Ireland is the major supplier of beef to the UK, representing 70% of total UK beef imports in 2019. “While pure economic reasoning and geopolitics normally play strong roles in trade negotiations, we believe that, in the case of the UK, consumer acceptance and non-tariff barriers will play significant roles in determining which countries ultimately supply the UK beef market in the future,” Gidley-Baird said.
Regarding the global beef market, Covid-19 continues to play out. The main highlights are:
· Brazil – Some regions are experiencing second waves, and the number of new cases and deaths in July remained stable, with reductions in some regions. The foodservice sector has resumed business in some states, but with reduced capacity.
· U.S. – Weekly fed slaughter capacity has recovered to 97% to 98% of pre-Covid-19 levels, and as a result, comprehensive cutout prices have returned to more normal levels. US foodservice continues to show signs of recovery through July.
· China – Covid-19 is largely under control, but local government actions are slowing the recovery of foodservice. Given suspected connections between new Covid-19 cases and packaging of imported seafood and animal protein, imports and cold storage for imports are under surveillance, leading to delays and uncertainties.
· Europe – Foodservice has resumed operations, with restrictions. Demand for beef has not fully recovered. Covid-19 new cases are being managed at a regional level rather than having complete lockdown of countries.
· Canada – Following a drastic reduction in slaughter rates during April and May, weekly slaughter rates have recovered dramatically. Although a fed cattle backlog still remains, there will be ample opportunity to clear it in Q3.
· Australia – Restrictions in place for meat processing facilities in Victoria due to a second wave of infections. Disruptions to beef slaughter volumes are expected to be minimal due to lower livestock availability.
· NZ – Processing capacity returned to normal levels in May, although the backlog of cattle to be killed through June and July that has only just now been worked through.
Cattle prices around the world showed signs of recovery from May through July. Cattle prices (in USD) in most major exporting countries increased, while the U.S. saw cattle prices decline, resulting in an overall lift in the index.