Future trade deals: Australia - Livestock products

Like beef, Australia is also a substantial producer and exporter of sheep meat. Australia has a wide variety of products that it supplies to a range of markets. In recent years, exports to China have increased substantially. Between 2017-19 exports to China averaged 140,000t, however in 2019 exports totalled 180,000t. The US and UAE are also major markets for Australian sheep meat. Again, much of Australia’s sheep flock are finished on pasture only diets[1] and as such are subject to a cyclical nature of production following weather patterns. In recent years the sheep flock has shrunk, and is currently entering a rebuilding phase, which is a contributing factor to high global sheep meat prices in the past 12-18 months. Unit prices between UK imported product (predominately NZ lamb) and Australian exports are relatively similar across the product categories, with Australian lamb generally being slighty higher in cost.

Below, the top 10 export markets for Australian lamb, which shows the variation in unit price more clearly. It also shows how reliant on China Australia lamb exports have become. It is forecast that sheepmeat production in China will increase in the short term, to try and satisfy domestic demand. On top of this, it is likely that pork production in China will also recover after having been devastated by African Swine Fever. This will likely contribute to declining per capita consumption of sheepmeat as Chinese consumer pivots back to pork as prices become more affordable. This will potentially mean that Australian lamb, as well as other suppliers to the Chinese market may switch to other destinations in the not too distant future.

[1] MLA grassfed and grainfed: https://www.mlahealthymeals.com.au/faqs/grassfed-and-grainfed/#

At 410,000 tonnes, pig meat production in Australia is comparatively small compared to the other red meat sectors. Also, in contrast to beef and lamb, Australia is a net importer of pork products, importing around 182,000 tonnes per annum (2017-19 avg.). Australian pork imports, like many agri-food products imported to Australia, are subject to rigorous Sanitary and Phytosanitary (SPS) measures, with virtually all pork required to be imported off the bone as well as being required to go straight to a processing plant once in Australian in order to be cooked at a specified temperature and length. However import tariffs for fresh frozen boneless pork to Australia are 0% and the UK does have permission to export cooked pork to Australia as well.  

Currently, major exporters to the Australian market include the US, Denmark and the Netherlands. Denmark and the Netherlands predominantly send frozen boneless middle cuts of pork at around £2,400/t - £2,600/t (2017-19 avg.). The total Australian market is worth £368m/year and only a select few countries currently have access to the Australian market:

Uncooked pig meat:

Canada, Denmark, Finland, Great Britain (England, Scotland and Wales), Republic of Ireland, Netherlands, New Zealand, Northern Ireland, Sweden and the United States of America.

Cooked pig meat:

Canada, Denmark, Great Britain (England, Scotland and Wales), New Zealand, Sweden and the United States of America.

Cured pig meat:

Italy and Spain.

Australia dairy production is sizeable, averaging 9.2m tonnes (2017-19). However production has been steadily declining over the past decade as farmers struggle with climate and profitability issues. Again, weather is major contributing factor to cost of production and Australian dairy farmers are heavily reliant on water availability, which was lacking between 2018 and 2020. Forecasted production for 2021 is up on 2020 slightly. Recently, for manufactured dairy goods, cheese production has been increasing while milk powders and butter production have decreased. Whey powder production is flat.

Asian markets are the largest destination for Australian exports with cheese being the predominant export in value terms, followed by skim milk powders and milk, which tend to be in the form of added-value UHT milk. Cheese exports are relatively low in value due to the high proportion of unprocessed fresh cheese, much of which enters the Japanese market. China, again, is a key trading partner for Australia which takes a mixture of products.

In terms of imports, the Australian dairy market is worth around £725m per annum. New Zealand is a major supplier of dairy products, and is almost the sole supplier of butter, whole and skim milk powders to the Australian market. The US and a number of key EU suppliers also supply significant amounts of product; US (cheese and whey), Italy (Cheese) and Austria (Whey, whole and skim milk powder). Austrian exports are quite sporadic in value terms however other EU suppliers are recording strong growth in export value to Australia. The United Kingdom currently suppliers a small amount of cheese (£8m), butter (£2m) as well as some skim milk powder and whey.