‘Double whammy’: Processors hit with export cost hikes of 40%

Meat processors and exporters are experiencing increases in export costs of up to 40% due to the loss of frictionless trade caused by Brexit, Meat Industry Ireland (MII) has said – while Covid-19 is also biting in a “double whammy” for the industry.

In a submission to the Oireachtas Joint Committee on Agriculture and the Marine, MII said the increased costs are due to new customs and sanitary/phytosanitary (SPS) processes, delays and disruption in logistics and direct transport cost increases.

Whilst the increase in direct sailings to continental Europe has helped provide exporters with an alternative to the UK land-bridge, MII says that it costs between €500 and €800 extra per truck to send exports to continental Europe direct.

In addition, where exporters are sending trucks to the UK, hauliers are facing difficulties filling their trucks for the return journey due to paperwork and logistical minefields – which means they are looking to increase the costs they charge per journey, the Ibec representative group said.

MII also expressed concern about the range of further Brexit measures coming in between April and July.

The group highlighted that, from April 1, all products of animal origin will need to be accompanied by a veterinary certificate.

This will require over 350,000 Export Health Certificates to be issued per annum – with serious potential to cause trade flow disruption and add more cost to exporting, the industry body warned.

The Brexit challenges compound the difficulties the sector is facing due to the Covid-19 pandemic which has decimated demand for Irish meat products from the food service and restaurant sector on which it is so reliant.

In the beef sector, this affects steak sales in particular as restaurant, catering, and food service channels account for some 60% of Irish steak sales.

Burger sales are also impacted as fast-food outlets throughout Europe are operating at significantly reduced levels due to national lockdowns in many of our key markets.

With summer barbecue season many months away opportunities to promote greater sales volumes through the retail channel are limited, the group representing processors noted.

Over the course of the pandemic, increased sales through retail have helped – but not enough to offset the decrease in foodservice.

The UK uplift in retail sales experienced in early January – which coincided with the announcement of new lockdowns – has returned to normal sales levels, processors are reporting.

UK customers are starting to work through the backlog of pre-Brexit stockpiles thereby reducing their immediate demand for fresh product.

Commenting, MII director Cormac Healy said:

“All agencies and those in the food supply chain have done excellent work to maintain the flow of trade since Brexit kicked in on January 1; but just because tariff and quota free trade has continued doesn’t mean the changes imposed by Brexit aren’t wide ranging and costly.

“And we have serious concerns about the potential for disruption when new export certification arrangements come into effect in the UK from April 1.

We are dealing with the double whammy of Covid-19 and Brexit – and both are relevant to the current market dynamics.

“Covid-19 lockdown restrictions across Ireland, the UK and Europe are leading to a major drop in demand throughout foodservice channels, and Brexit contingency stockpiles put in place ahead of the Brexit deadline are now being released and reducing demand,” Healy concluded.