AHDB: How might the EU-NZ trade deal impact sheep meat trade?
Improved access for New Zealand goods includes:
The sheep meat quota in the New Zealand-EU free trade agreement (NZ-EU FTA) gives New Zealand further access to the EU market. It currently has access under the World Trade Organisation (WTO) quota, which is New Zealand-specific, of 125,770 tonnes. The EU-NZ FTA allows for a further 38,000 tonnes of tariff-free access after a seven-year transition period, which is split by fresh and frozen product. This allows for total tariff-free volumes of 164,000 tonnes per year (Jan-Dec), at the end of the transition period.
In comparison the UK-NZ FTA, which can only be filled when the WTO quota hits 90% fulfilment, allows for spare capacity without the FTA being enacted. The quota size is 35,000 tonnes from Year 1 (2024), increasing to 50,000 tonnes in years 5-15 after which it becomes fully liberalised. This means that the UK will be able to act if there is a higher-than-expected volume of New Zealand lamb imports under existing access.
The fresh-frozen quotas for NZ/EU are divided 35%:65%, which reflects the rough split seen in recent years trade data. These quotas are based on volume (tonnes) exported in carcase weight equivalent (cwe), with 4,433 tonnes of fresh sheep meat and 8,233 tonnes of frozen sheep meat allowed in Year 0 (pro-rata May-December). The first full year of the trade deal, from 2025, allows 5,911 tonnes of fresh, and 10,978 tonnes of frozen sheep meat to enter the EU.
The EU is the second largest market for New Zealand sheep meat, just after the UK, as total sheep meat exports to the EU have averaged 59,400 tonnes across the past 10 years. Exports totalled 54,000 tonnes in 2023, which doesn’t take into account any quotas or tariff-free access that may have changed.
Volumes of frozen sheep meat declined from a peak in 2015 to a trough in 2021. The six years in between saw an accelerated decline in frozen volumes, with relative stability in fresh exports. 2022 and 2023 saw growth from the low in 2021, to total 38,600 tonnes of frozen sheep meat exported in 2023. For fresh sheep meat, volumes are considerably lower than frozen, given the length of shipping time taken to reach the EU, volumes peaked at 19,600 tonnes in 2017, with a low of 15,400 tonnes in 2023. The largest cut exported from New Zealand include frozen bone-in lamb, assumed to be frozen sheep legs, at 47% of total exports.
With the increase in volume of sheep meat that can enter the EU from New Zealand, how could this impact the UK’s exports? The UK is the EU’s largest supplier of sheep meat, with 79,700 tonnes of fresh and frozen sheep meat exported in 2023. EU sheep production fell in 2023, and is set to fall further for 2024, which provides strength to UK exports.
The largest cut exported to the EU is fresh lamb carcases, which accounts for 84% of total UK sheep meat exports to the region. Under current trade volumes, New Zealand are not filling their current WTO quota for export into the UK, which means that the UK FTA for sheep meat has not been enacted so far. New Zealand’s exports into the EU are high-value cuts, such as sheep legs, and not whole carcases that the UK supplies to the EU. This would suggest that New Zealand exports, when the FTA is in place, will not displace UK exports into the EU, given the different products and markets of both countries.
Looking into price differentials across the EU, UK, and New Zealand, we can see that New Zealand lamb is considerably cheaper than its UK and EU counterparts. Growth in EU and UK prices in recent months has resulted from tighter supplies which are set to continue, compared to a decline in New Zealand pricing. Prices in New Zealand have seen declines as they try and compete with deflated Australian prices on the international market.
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