< Digest Paper - Growing exports can it be done?

Synopsis - Pork exports into China and other world markets have grown significantly in recent years. We will look at how those opportunities were identified for British producers, what impact this has had on the industry and what lessons have been learnt. The success story of British Pork may help us find potential opportunities for UK beef and dairy products.

The agri-food industry is a major contributor to the UK economy. However, the industry is constantly under economic pressure – export provides an opportunity to balance out domestic preference for cuts by selling those products that do not have a strong market at home. For example, the domestic consumer has high demand for pork loin but low demand for liver. Exports often enable greater carcass utilisation, adding significant value to the UK agriculture sector (see Figure 1).

Figure 1: Monthly UK pig meat exports, 2002–2017 (tonnes)

In 2017, UK exports of pork and pig meat products surpassed the 300,000 tonne barrier for the second consecutive year. 2016 was the first time the volume broke through this barrier since the pre-2000 era and represents a near three-fold increase in total pig meat exports from the UK since 2002. During this period, shipments from the UK have increased by 71%. However, the main driver, particularly, in more recent years has been the increase in exports to third-country markets: This has been 14 times higher in 2017 than back in 2002. Having access to market has been a key driving factor in this increase, notably the UK gaining access to the Chinese market in 2012, which has been a game changer for the British pork sector.

Seeking global opportunities for UK products and having access to multiple markets is key in adding value through export. Achieving market access agreements with target countries is a prerequisite for trade. The process of securing access includes comparing controls currently in place and achieving ‘equivalence’ agreement that health (both human and animal) and hygiene are not compromised by imported products. Only then can Export health certificate conditions be agreed and granted (see Figure 2).

Figure 2: Annual UK pork and pigmeat exports by category, 2010–2017 (tonnes)

The growth in fifth-quarter exports has been a key driver behind the growth of UK pig meat exports in recent years. In the five-year period from 2012 to 2017, UK exporters increased pig meat offal exports by 68%, with all of the growth being driven by thirdcountry markets outside of the EU. In 2017, the value of these fifth-quarter shipments to the UK pork sector was nearly £80 million.

China is the world’s most populous country, with a population of 1.4bn. It is the fourth largest country in the world and the second biggest economy. China is also the world’s second largest importer of goods – taking 10% of all global imports.

Though it spans a large area, China has a shortage of land suitable for farming and many mouths to feed.

Although domestic agriculture is modernising quickly, demand outstrips supply in many sectors. The pork sector is no exception. Despite imports only making up a low percentage of total pork consumption, in 2017, Chinese imports amounted to nearly 2.5 million tonnes. Therefore, even as the largest global pork producer, Chinese import demand has a huge influence on global trade flows (see Figure 3).

Figure 3: Annual pig meat exports, EU, China and Third-Country markets (tonnes)

The UK gained access to China in 2012. By 2014, China surpassed Germany as the largest market for UK pig meat exports. Today, China remains the leading destination for UK pig meat exports with around a third of total exports being destined for Greater China. In 2017, shipments to China were valued at £70 million.

UK pig meat exporters have also been successful in a number of other Asian markets. Looking at the fiveyear period from 2012, shipments to the Philippines are significantly higher with strong growth also recorded to Japan, South Korea and Singapore. Growth in demand for high quality pork has also been strong from the USA: shipments over the same period have increased threefold and in 2017, the market was the fourth largest outside the EU for British pork exporters.

Exporters have invested considerable resource into developing export markets. The meat export market is built on relationships: people actually do business with people, which is particularly the case across Asia. Exporters have worked hard on all markets building strong relationships with key importers in a number of them. A UK presence at leading trade shows around the globe provides a great platform for companies to meet key in-market supply chain participants. This can just be the start of the journey to doing successful business: resource from exporters has had to be focused on developing and fostering relationships to build mutual trust, which will only then, lead to business being concluded. Even when relationships are cemented, it has been key that exporters have retained the hands on, face-to-face approach. China is a good example of this, where all UK exporters with approval for China have developed their business, and have team members based in market, dealing face to face with their clients. However, exporters will still make regular visits to market, to continue to build and maintain the personal touch. The global pork market is competitive space. The importance of this area of work, which is a credit to the professionalism of our UK pig meat exporters, cannot be underestimated.

Overall, global trade in beef has recorded significant year-on-year growth over the last five years. In 2017, 8.3 million tonnes of beef was traded worldwide, a 19% increase compared with 2012. Over this period, southern and eastern parts of Asia have become increasingly important destination markets for the world’s beef production with the rise of affluent populations in these regions supporting beef consumption. Shipments to the larger importing countries in these regions rose to almost 2.5 million tonnes in 2017, increasing their combined share of global imports from 15% in 2012 to 30% in 2017. Key destinations for beef imports in Asia in 2017 were China, Japan, Hong Kong and South Korea. Collectively they accounted for 83% of trade with Asia. Other important growing markets are the Philippines, Indonesia and Singapore, all recording year-on-year increases in 2017. The only exception was Malaysia where shipments fell by 4% year-on-year in 2017.

China continues to be the main driver behind the increase in imports for the region overall, with an increase of 115,000 tonnes in 2017, a 20% rise on the year. This is closely followed by Japan, who increased their imports of beef by 14% over the course of 2017 to remain the world’s third largest importer of beef.

Dairy exporters are also adding value to the UK sector. 2017 data shows a year of strong growth for UK cheese exports, volumes were 7% higher on the year. While the EU is still the main market for UK exports, it was encouraging to see increased exports to third-country markets. Shipments to Asia were 27% higher.

There are key growth opportunities for the British Agri-Food sectors. Authorities and industry must continue to work collaboratively to achieve access to as broad a range of markets as possible. Understanding and meeting the needs of the consumer in both existing and potential export markets will be key to the continued success of our sectors. Although producers are somewhat removed from export markets, they are well placed to provide context around how the product was produced. The UK’s agricultural heritage combined with high production standards through the supply chain is a key to the image of UK products overseas. This information is an important component of what the UK has to offer in terms of messages to communicate to consumers on internationals markets. For those further down the supply chain, understanding the context in which the consumer will come face-to-face with their products provides vital insight. Adapting to consumer needs is not just relevant for those exporters expanding existing markets, it is also relevant for new exporters, those entering new markets and those launching new products.

Jonathan Eckley, Head of Asia Pacific
AHDB, Stoneleigh Park, Warwickshire