The Australia-UK Free Trade Agreement (FTA) has significant implications for the sheep meat market, as observed in recent trade and tariff data. Under the FTA, Australia has allocated 4,144 tonnes of sheep meat for export to the UK from the end of May to December 2023. This figure aligns with the five-year average for total imports from Australia to the UK.
Tariff Rate Quotas and Import Volumes
The FTA permits a specific volume of sheep meat to enter the UK without additional export costs, such as tariffs. For the tariff year running from 31 May to 31 December 2023, up to 14,726 tonnes can be imported at a 0% tariff rate. As of 18 December, the Department of Agriculture, Fisheries and Forestry (DAFF) in Australia has allocated 4,144 tonnes, which includes products still in transit, given the six-week lead time on imports.
In the next tariff year (January to December), the tariff-free volume will increase to 30,556 tonnes, marking the largest year-to-year quota increase in the ten-year agreement.
Australian Sheep Meat Imports to the UK
Trade data for October 2023 shows that the UK imported 1,349 tonnes of fresh/frozen sheep meat from Australia, the highest volume since March 2022. This increase could be attributed to changing global trading conditions.
However, the total volume of exports under the TRQ from June to December, at 4,144 tonnes, is slightly below the five-year average for this period.
Australian Lamb Prices
Australian deadweight lamb prices have experienced fluctuations, with a notable drop to 220.9p/kg in September, followed by a recovery to 325.8p/kg by 17 December. These price movements are linked to drought conditions in Australia, leading to flock destocking and increased market supply, thereby impacting prices. Future prices will depend on the extent of these drought conditions and the stabilisation of the sheep flock, particularly the breeding flock, into 2024.
Implications for the UK Market
While sheep meat imports from Australia have grown, they haven’t reached unprecedented levels. The UK market has remained relatively stable, but the situation is dynamic, with New Zealand also feeling the impact of Australian exports on the world market.
Lower prices in Australia have led to increased imports into countries like China and the Middle East, traditionally markets for New Zealand products. With intense competition between Australia and New Zealand, the UK and EU markets may see an influx of New Zealand products seeking new markets.
This analysis highlights the evolving dynamics of the sheep meat market under the Australia-UK FTA, with implications for pricing, market competition, and future trade patterns.
