WITH BREXIT looming and hopes of a new trade deal with the European Union fading, Quality Meat Scotland has warned that Scotland's red meat sector could be exposed to market disruption from January 1.
The latest edition of the Scottish Red Meat Industry Profile, covering the 2019 calendar year, reports that farm output from cattle, sheep and pig production totalled £1.17bn in 2019 and accounted for just under 35% of Scotland’s agricultural output, with the beef sector accounting for just under 24% alone.
Survey information also highlighted the importance of the rest of the UK market to the Scottish red meat processing sector, with an estimated 64% of revenue generated from the domestic market, compared to 25% from a first point of delivery in Scotland.
“With the end of the Brexit transition on the horizon, it is important to note the value of export markets to the Scottish red meat processing sector, with 11% of total revenue estimated to have been generated overseas,” said QMS senior economics analyst Iain Macdonald.
“However, the sheepmeat processing sector is particularly exposed, with 29.5% of revenue earned outside the UK, highlighting its potential exposure to any market disruption from the beginning of 2021."
QMS director of economics, Stuart Ashworth, added: "It is a definitive that we will be leaving the EU this year, the biggest cloud that lies over us is the conclusion of Brexit, there are so many uncertainties involved with the main one being tariffs!
"There is nothing stopping us trading on January 1, despite mass amounts of paperwork," he continued. "The debate is whether trade will be profitable. If we do have high tariffs, someone is going to have to take the financial cost from it, whether it be the home country or the export consumer," said Mr Ashworth.
"However, with the demand in other European countries there is the potential to continue to trade as opposed to getting nothing for our produce for no demand in our own country," he added, with survey evidence highlighting that around 97-98% of beef and lamb export sales were generated from customers in the EU in 2018/19.
The final touches of 'health certificate recognition' present the biggest threat, with all of the final technicalities being left to the last minute, which will add bureaucratic challenges from the first day post-Brexit.
"We are a robust industry," continued Mr Macdonald. "We take a long term view of the world, prices are currently strong across all sectors of the industry, however, the elephant in the room is what finishing prices will be like early next year. It is an uncertainty to everyone, and will depend on the agreements made in the next few months."
After significant growth in beef imports to the UK in recent years, weak demand and rising domestic production resulted in lower requirements in 2019. Reduced lamb imports were the continuation of a longer-term trend, with New Zealand shifting focus away from Europe towards China.
“Domestic production growth, sluggish home demand and a weak sterling continued to support the profitability of the export trade in 2019, with pork exports benefitting from a meat shortage in China,” added Mr Macdonald.
Driving this growth has been the African Swine Fever outbreak in China which first appeared in August 2018 and has since wiped out around a quarter of the worlds pig population.
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