US gives green light to EU and UK lamb exports after more than a 20-year pause

Published 2021년 12월 9일

At the beginning of December 2021, European sheep farmers received good news from the other side of the Atlantic. The USA gave the green light for the shipments of lamb and mutton from the EU and UK, ending the export ban that had been introduced more than 20 years ago. Although sheep meat consumption is not as high as pork or beef in the USA, it has demonstrated strong potential for growth in the past five years. The value of US lamb and mutton imports has exceeded $1 billion in 2020, 39% up from 2016. However, to enjoy the export opportunities in the US market, European companies will have to work hard to compete with Australia and New Zealand, which account for 99% of all the mutton shipments to the country.

From January 3rd, 2022, European farmers are allowed to export lamb and mutton to the USA. This decision has been made by the US Department of Agriculture (USDA) by adding amendments to a small ruminant rule, which contains safety and health regulations regarding exports of alive goats, sheep as well as sheep meat products. The ban had been put on EU’s exports of the mentioned products earlier in 1997 because of the detection of a fatal scrapie disease on some European farms.

The US sheepmeat market and its development opportunities

The elimination of the export ban creates a new window of opportunities for European players in the US lamb market, which is the second biggest importer of mutton in the world both in terms of value and quantity, following China. In 2020, the value of US sheep meat imports (HS Code 0204) stood at $1.01 billion, showing a 30% increase over the 2016 value. The same applies to the quantity, with import volumes reaching 133,000 tons in 2020, a 28% jump compared with 2016.

Source: ITC Trade Map

Although the USA cannot boast of a high per capita consumption of mutton products, overall it takes a leading place in the rank list of sheep meat importers, simply because it is the third most populous country in the world. The reliance on imports is also explained by the stagnant domestic production. However, the demand for sheepmeat has been gradually recovering in the country over the last 10 years following 5 decades of constant decreases. According to USDA, lamb meat consumption in the country totaled 0.53 kg per capita in 2020, a 39% rise compared with 2011.

Source: ERS USDA

The upward consumption trend has become even stronger during the pandemic in 2020 and 2021. After the closure of the catering services and the gastronomic sector in the country, which are the main sale destinations of US lamb, processing factories had to quickly reorganize themselves for retail sales. Most lamb buyers in retail chains were younger generation buyers, especially millennials, who strive to try new things. In addition to that, higher consumption of lamb is underpinned by high buying from the Middle East, south European and African population in the USA, who traditionally consume more mutton. US sheep meat imports in 2021 also back strong consumption and reliance on foreign sheep meat. From January through September, the US bought 116,000 tonnes of fresh and frozen lamb mutton, up 13% year on year.

Export prospects for the UK and the EU

Although the USA has lifted the sheep meat import restriction for the EU and the UK, the way to penetrate the US import market for lamb may not be so easy. The market is dominated by two other strong rivals - New Zealand and Australia, who have already cemented their presence in the US thanks to their absolute advantage in lamb production. In 2020, Australia exported more than 107,500 tonnes of fresh and frozen mutton to the US, accounting for 81% of the share. New Zealand’s sales to the mentioned country reached almost 23,400 tonnes or 17% accordingly.

Source: ITC Trade Map

Both Australia and New Zealand have established their import market shares and have lower production costs compared to those in the UK, Ireland, and other EU producers. In 2020, the production costs of lamb in Australia were $2.9/kg of lightweight, whereas in the UK this figure exceeded $4/kg, and in Ireland – $3.2/kg. In addition to that Australia enjoys the benefits of the free trade agreement, which has been in force since 2005, and reduced the country’s export tariff to zero. The UK or any other EU state will have to pay additional tax for entering the US market, which is applied according to WTO Most Favoured Nation tariff and is equal to ₵0.7/kg for lamb and ₵2.8/kg for mutton.

Sources:
Agriculture and Horticulture Development BoardFrom where does America currently import lamb?
Gov.ukUS market to open doors to UK lamb from 2022
UK ParliamentNational Farmers’ Union – Supplementary Written Evidence (UST0050)
BloombergHow the Pandemic Made Lamb More Popular in America
Management.comNSA welcomes lifting of ban on exports of sheep meat to US
Euromeatnews.comEU sheepmeat is ready to enter the US market
Irishtimes.comUS lifting of EU sheepmeat ban ‘paves way’ for Irish lamb exports
MecardoAustralia a good place for lamb production
ERS USDAFood Availability and Consumption