UK farm exports: Opportunities in the Chinese market
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This year ends almost as it began for Defra secretary Liz Truss: either side of yet another trade mission to China, which is seen as a key export market for British food and drink.
The Far East has become the destination of choice for Ms Truss, who last month led a delegation of 80 UK food and drink businesses to China – the biggest trade mission of its kind yet – in a bid to turbocharge British exports to the world’s largest market.
It followed a similar but smaller trip in January. During that visit, Ms Truss signed a framework agreement to make it easier to export organic food – and made progress on longer-term talks to open China to exports of grain, beef, lamb and chicken feet.
See also: How to get your farm products into China
There is a good reason for looking east. With a population of 1.3 billion, a rapidly growing middle class and a total specialist food import market expected to be worth £39bn next year, China offers huge potential for Britain’s food and farming industry.
Unable to satisfy soaring demand for food – even with the construction of a 100,000-cow dairy and plans for a “beef factory” that will clone 1 million cattle embryos annually – China is turning from self-sufficiency to imports to feed its growing population.
The relaxation of China’s policy of one child per family will mean even more mouths to feed.
Grasping the opportunity
“We have seen a doubling in food exports to China over the last four years and I think there is much more potential in the market,” says Ms Truss. “If you think of areas like dairy, we’ve got big opportunities to increase our market share and pork is already exporting successfully.”
Kendal Nutricare: A formula for success
Based in Cumbria beside the Lake District National Park, Kendal Nutricare specialises in manufacturing infant formula milk – using milk from British farms.
As well as being the only British infant formula milk manufacturer registered to manufacture this product for the Chinese market, Kendal Nutricare is the sole British infant milk factory registered with CNCA, China’s national accreditation board.
The company travelled to China last month to promote its new Kendamil infant formula range, which has Red Tractor accreditation for using British farm-assured fresh pasteurised whole milk from a local dairy in north-west England.
“In China, distributors recognise whole milk formulations as superior to those made from skim milk,” says Kendal Nutricare chief executive Ross McMahon. CNCA accreditation will increase customer confidence and make exporting much easier, he adds.
Recent weeks have indeed seen trade agreements signed covering dairy, pork and cereal products – many of them brokered by the AHDB. It takes years to reach a deal – but industry leaders say trade deals mean big benefits for farmers.
“These sort of agreements are transformational,” says AHDB chairman Peter Kendall. “You have to look at where there are market opportunities. Some of these deals take years to land but they are absolutely critical for British growers and livestock producers.”
A protocol agreement signed this autumn with China for the export of UK barley, for example, came about only after five years of talks by AHDB Cereals and Oilseeds, as well as the involvement of the four UK governments and five government agencies.
In total, negotiations involved more than 30 organisations across the UK barley supply chain before the deal was signed. Preparations meant a nine-day inspection visit with four Chinese officials – and more than 50 people directly involved in the inspection alone.
The agreement, though, means such efforts are more than worthwhile, insists AHDB. With the protocol in place, the UK can now join the handful of countries worldwide that are able to tap into China’s 6m tonnes/year barley requirement, it says.
Potential yearly barley exports from the UK are about 150,000t, according to industry estimates – a figure valued at £20m/year. This means that over the next five years the Chinese barley agreement has the potential to be worth £100m to UK farm-assured growers.
Jess Sloss, technical manager at Red Tractor Assurance, describes the deal as momentous. “We were able to show the Chinese delegation how UK assurance schemes can be trusted to deliver compliance against both UK and EU legislation and good practice,” she says.
©Robert Harding/Rex Shutterstock
Other industry insiders agree that China’s sheer size justifies the effort. Already the world’s largest food market, Chinese grocery sales are set to grow 33% by 2020 and reach US$1.5tn/year, (£1tn/year), according to a recent forecast by the UK-based Institute of Grocery Distribution (IGD).
China will comfortably maintain its position as the world’s biggest grocery market for the foreseeable future, says IGD chief executive Joanne Denney-Finch. “Although the Chinese growth rate is slowing, it’s still very impressive,” she explains.
This means growing opportunities for retailers and Western brands – especially in China’s regional, medium-income cities which are undergoing rapid development. So although the market takes a lot of breaking into, it is certainly rewarding.
Beyond commodity products
It is not just about commodity products either.
Barley: AHDB deal brokers great grains
Growers and agronomists invited Chinese officials to “walk the supply chain” as they paved the way for an export deal worth a potential £100m to UK barley growers.
The Chinese delegation visited farms, grain stores and laboratories across England and Scotland. Cornish farmer Mike Hambly describes the deal as “without doubt, my proudest achievement” as outgoing chairman of AHDB Cereals and Oilseeds Exports.
“This has been particularly important if you look at the increase in barley production levels in the UK over the past two years. It is an exciting market opportunity for us and has taken a huge amount of work by the exports team over a number of years to enable this to happen.”
A team led by Karen Morgan at the British Embassy in Beijing provided support for the inspection visit – seen as instrumental in keeping up momentum so a deal could be reached with China’s General Administration of Quality Supervision, Inspection and Quarantine.
Dairy companies on the latest trade mission report big interest in added-value food items too. Having already built a good level of awareness of its brand in Hong Kong, Jersey Dairy is now promoting its luxury ice cream to buyers across China.
Export volumes have increased by 116% in just two years, says Bob Jones, Jersey Dairy head of marketing and export.
“Our farmers in Jersey are preparing to meet demand with increased milk supply. It is an exciting time for dairy farming.”
Similar agreements are already paying dividends, says Defra.
As well as using barley to produce beer, the Chinese also have a growing thirst for the UK-produced beverages, including brands such as Fullers and Meantime, with £15m worth of British beer exported to the country last year – a 186% increase since 2013.
Beer, tea and pork are among the products experiencing the fastest-growing demand, according to the latest Defra figures.
Announced just this week, the latest deal has seen two pork processors in Northern Ireland granted provisional approval to export pigmeat to China – a country expected to overtake the EU as the world’s leading consumer of pigmeat on a per capita basis by 2022.
Exports are expected to commence in the coming months. But again it took a long time to put pen to paper.
The deal involved a third visit to China by Northern Irish farm minister Michelle O’Neill in June and two inspection visits by Chinese officials to Northern Ireland in April.
The air miles are worth it, believes Ms O’Neill. “The commencement of pork exports to China will represent a major boost for the local pork industry which has been seeking to gain access to this market for several years,” she says.
If all goes to plan, the deal could provide lasting long-term benefits to Northern Ireland’s agri-food sector – as well as to its wider economy. And it could eventually provide a welcome outlet for products such as trotters, which are harder to shift at home.
Ms O’Neill says she is already looking forward to extending the trade to cover the export of pig trotters and additional pork products, which are not readily consumable on the domestic market.
“This will add value to the carcase for producers and processors alike,” she explains.