With farmgate lamb prices in Australia and New Zealand hovering around half what is being paid in Europe, an avalanche of exports to the UK, France and other EU markets might have been expected in their peak selling season.

This hasn’t happened so far and with their season drawing to a close as northern hemisphere spring lamb starts to come on to the market in April, it is unlikely to do so this year.

As well as a huge price advantage, trading terms have never been more favourable for Australian and New Zealand sheepmeat exporters.

Both countries have huge tariff-free quotas for the UK market and, in the case of New Zealand, to EU markets as well.

Australia’s free trade deal with the UK came into effect from the start of June 2023 and from then until the end of the year, it shipped 12,958t of sheepmeat which is a 49% increase on 2022 volumes. This is a significant increase and puts Australian lamb exports to the UK just behind Irish volumes, which were 13,415 tonnes for 2023, down from over 15,000 tonnes in 2022 (Bord Bia).

New Zealand remained the UK’s top supplier of imported lamb in 2023 at 30,133t (Meat Industry Association New Zealand), but is down 7% on the previous year so both New Zealand and Irish exports were impacted.

New Zealand

New Zealand’s total export volumes increased by just 3% in 2023 to 384,239t, but Australian volumes surged to record levels, up 25% on 2022 to 535,592t.

New Zealand has had a huge tariff-free quota of 228,000t with the EU since the UK joined in 1973. This has been split equally between the UK and EU since Brexit came into effect.

However, this hasn’t been fully utilised at anytime in over a decade and, as Figure 1 shows, the EU – which still included the UK – ceased to be New Zealand’s most important sheepmeat export market in 2019 with China taking the top spot.

The most recent Beef + Lamb New Zealand (B+LNZ) lamb export data, which runs for the year between 1 October and 30 September, shows that China is now an almost 133,000t market, with the EU and UK taking 77,048t.

In less than a decade, China has gone from taking half the volume of lamb exports that went to the EU to almost twice the EU volume.

Australia

Australia’s sheepmeat export profile hasn’t included any significant volume to the EU or UK because it had a small 20,000t quota, less than 10% of the tariff-free New Zealand access. Since 2017, its sheepmeat exports, including mutton, to China have doubled to over 165,000t, with the US being its second most important market (Figure 2).

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The volumes exported to the UK and the EU were very small at the point of the UK leaving the EU single market in 2021, but the Australia-UK trade deal, which came into effect in June last year, has established the UK as a fast-growing, if still small, market at almost 13,000t for all of 2023.

Australia is also behind New Zealand in trading with the EU, because despite being close to agreeing a trade deal in 2023, it didn’t happen and therefore Australia is without a meaningful sheepmeat quota to the EU 27.

Given that Australia and New Zealand are both in the same southern hemisphere production cycle, it is expected that, in the coming years, Australia will provide strong competition for New Zealand exports to the UK market.

For Irish sheep producers and exporters, there is a benefit of operating in the opposite production season and, also, unlike beef, Irish sheepmeat exports are well spread across Europe.

Price comparison

While geography and delivery logistics will always be a barrier for Australia and New Zealand exporting to the UK and EU, they consistently have a price advantage and, as Figure 3 shows, this has been very significant over the past year.

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Currently, the price paid by factories in New Zealand is just half of the Irish price, at the equivalent of €3.42/kg compared with the Irish factory price of €6.81/kg at the start of February. The Australian price was slightly ahead of the New Zealand price at the equivalent of €3.93/kg but still a long way off what is paid in the main sheep-producing countries in Europe.

While New Zealand sheepmeat exports are overall stable, Australia is at the top of its cycle having completed a restocking period following a prolonged drought.

Future trade patterns

Ireland, as part of the EU, has participated in a single market to which access for non-members was strictly controlled with high tariffs on agricultural produce.

That has meant that with the exception of New Zealand’s large sheepmeat quota, Europe was not an attractive market because of tariffs.

EU trade deals have been increasing the level of access but the greatest potential change may come through the effect of UK trade deals. Australian beef and sheepmeat, plus New Zealand beef, have already grown market share in the few months that have passed since the deal came into effect.

So far, this hasn’t impacted the market for Irish exports and the different production cycles, combined with transport logistics, will always be a barrier for Australia and New Zealand accessing European markets.

While the price differential will also make Australia and New Zealand attractive to the UK and European buyers, Europe isn’t the first preference for Australia and New Zealand exporters. China and other Asian markets are closer than the UK and Europe. Also, North America is a long-established market.

All things being equal, Europe comes behind these options, particularly in the current era with threats to shipping in the Middle East.

As the markets for New Zealand and Australian exports have been transformed over the past decade with the growth in demand from China, this has meant a high level of exposure to that market. It is widely reported that China’s economic growth has been slowing and there has been a prolonged COVID-19 hangover on the economy.

This didn’t negatively impact the volume of beef or sheepmeat imported by China in 2023 but it paid much less per tonne than in 2022. If, for any reason, the Chinese market for imports were to decline in the coming years and new markets had to be found for Australian and New Zealand sheepmeat, then Europe, particularly the UK, would be very much in play.

Demand from China for Australian and New Zealand product is and will be Irish exporters’ first line of defence in limiting the volume coming to Europe and, in turn, maintaining farmgate prices at or around current levels.