Why does the UK import and export meat?
The world around us sparks up curiosities. Twitter is a mine for curiosity, throwing up some great questions which sometimes we take for granted. Recently, this question appeared: “Can someone explain to me why we import meat please?” Going beyond the brief, let’s look at why we export too.
In fact, the UK has rarely in recent history been self sufficient in meat. The most recent examples have been during the Napoleonic wars and during World War 2, the latter aided by rationing.
Different meats can be used to illustrate different issues and a good starting point is lamb, in which we have been technically self sufficient in four years since the 1980s.
The UK exports in the region of 100,000 tonnes of sheep meat annually, which is around one third of output. Curiously, imports have been heading to the same sort of level. Looking at the figures, imports peak around spring time for the UK, with the UK typically in deficit for the first half of the year. Thereafter, being in surplus until the end of the year. Overall, in 2017, values of imports and exports were roughly equal.
We seem to have an obvious answer, trade being seasonal which can be confirmed by looking at where imports come from. Typically, around 70% of imported lamb is from New Zealand, 15% from Australia. The gestation period of sheep is 152 days, lambing season being in Spring, the season being the opposite in each hemisphere.
So does that mean we export to New Zealand and Australia for the later half of the year? Apparently not. 95% of UK exports go to the EU, around half to France, Germany being the next biggest customer. The ANZAC producers have their own alternative markets, UK only being the 5th largest by value after USA, Germany, Belgium, Japan and France, just ahead of China. China are the largest by volume if not value.
It may be worth noting that the ANZAC countries export to China on more favourable terms than the UK, or perhaps we should say EU.
There are clearly other factors at work. It might be helpful to see what we import and export.
Drilling down into the figures, UK exports tend to be in legs and boneless cuts. Exports tend to be carcasses. We are now introduced to characteristics of different markets. Most of our trade seems to be in lamb rather than mature sheep.
It also adds interest to see where are the growth markets for exports. Significantly, China is increasingly a destination where a large part of growth is in offal. It is not clear whether this is due to the lower price or tastes in the Chinese market which is clearly not as affluent as the other markets mentioned.
As for tastes, it is clear that the UK market is towards the premium priced end of cuts. To economists, this might suggest that demand is key to what is sold. It may be that in other markets, supply is dominant, seeking to find places that otherwise unused meat might be sold, in order to maximise revenue from the stock.
So far, the answer seems simple, that consumption, therefore imports and exports meet the classical economic analysis that demand is determined by price, price of other goods, incomes and tastes, with the addition of seasonal factors around supply. We can return to other confounding issues later.
Can we learn any more by moving on to beef, a domestic market roughly three times the size of lamb?
Mince accounts for 38 per cent of our beef expenditure, with 25 per cent on steaks, 21 per cent on roasts and 13 per cent on stews. However consumers are buying more chilled ready meals and fresh pre-packed pies.
The balance of trade however is more disparate than for lamb. The UK imports around 275,000 tonnes of beef, exporting a little over 100,000 tonnes. Most imports and exports are to and from the EU, with Ireland then the Netherlands 1st and 2nd for both imports and exports, by far the larger deficit with Ireland.
Seasonal factors would appear to be less significant. Conditions for breeding and rearing cattle in Northern Europe would appear to be more consistent, particularly within the British Isles.
There may be more confounding factors, the UK having suffered from the CJD scare in around 2000, later foot and mouth in 2007. On the flip side of the coin, EU producers were hit with the beef and horse meat scandal in 2013.
Of course, until Brexit is delivered at least, the market is otherwise apparently well integrated within the EU yet perhaps those scandals may present something of a barrier to growth in trade, encouraging parochialism. Where trade takes place, the market may be more price sensitive, particularly in the 60% of supermarkets which actually stock Irish beef.
One aspect of price sensitivity might be in exchange rates. A stronger Pound against the Euro makes Irish beef cheaper, a weaker Pound increases the price. Otherwise, the EU provides a relatively well protected market from outside, beef imports from outside the EU appealing to relatively niche tastes.
Where we might learn even more is the market for pig products, having a unique place in economic thought, the hog market being the foundation of Mordechai Ezekiel’s Cobweb Theorem as well as being an easily made case for EU intervention in agricultural markets under Article 33 of the Treaty of Rome.
That all sounds fairly complicated so let’s make it simple. Ezekiel noted price volatility in commodity markets, especially in the market for hogs or pigs. The gestation period of a pig is 3 months, 3 weeks and 3 days meaning that supply can be relatively flexible.
If pig breeders see a high price, they can breed more, more quickly than other livestock. That leads to an over-supply, meaning the price plummets so pig breeders stop breeding. An under-supply leads to a high price, attracting pig breeders back into the market and the cycle continues.
Back in the real world, pig meat in Britain weighs in consuming around 1.7 million tonnes annually, roughly 60% being imported. In the meantime, the UK exports around a quarter of all pig meat produced.
Once again, we can look at cuts, domestic demand being predominantly in loin and leg meat. Imports are predominantly from EU countries, the market being protected by tariff barriers which make imports from other parts of the world more expensive.
The leading supplier is Denmark whose UK market share for imported pig meat has declined from over 40% to around 25% now, as other EU countries provide more, notably Germany since reunification and Poland. Elsewhere, the Netherlands provide the largest share of bacon imports, at over a third.
Exports paint a diverse picture. Around 40% is sow meat which is less popular. A portion of this is reimported as processed meat in a variety of sausage forms. In turn, of UK exports, around two thirds of processed pork is exported to Ireland.
Around one fifth of UK pig meat exports are to China, predominantly in cuts which tend not to be seen on shelves in the UK. These include heads, trotters, belly, liver and other offal. In fact, between them, China and Hong Kong account for approximately to thirds of pig offal exports, other South East Asian countries such as the Philippines being growth markets.
It remains to be seen how much the market will be affected by shortages caused by African swine fever, particularly in China..
In competing in global markets, at least for prime cuts, the UK is at a disadvantage through what at first sight may seem inefficiencies. At 40% a relatively high proportion of UK sows are outdoor reared. As a part of EU regulation, growth hormone is not used, as it is in the USA and some other countries.
Returning to the original question, it would be remiss not introduce an economist’s take on why such trade happens. David Ricardo developed the theory of comparative advantage, which in short is that nations will be better off by concentrating production on what they are comparatively better at. Put simply, the UK adds value in service markets better than other countries and even if we were more efficient, then other, perhaps poorer countries, may be better off diverting resource to meat output.
Future trends by definition, remain to be seen. When leaving the EU, tariff schedules may mean that exports to the EU become more expensive, similarly EU produced or processed meat may prove more costly to UK consumers. The latter may provide more profit motive to increase UK meat production, not least in processing capacity. Free trade deals may provide fresh competition but also other opportunities to export.
Finally, to summarise, why do we import (and export) meat?
As an affluent society, UK taste is for prime and premium meat products. Other countries can produce meat relatively more cheaply, albeit to different standards. In some cases, seasonal production plays a part The UK focus can be on other industries. In the meantime, we can still export low value meat to the rest of the world, even premium products in some markets where animal welfare, ethics and quality attract a value.