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It was apparently said in the debates at the Committee stages of the current Agricultural Bill, that without the amendments, UK consumers could end up with a two-tier market: lovely sustainably-farmed British food for the rich, and cheap foreign muck for the masses.
While searching for the exact quote in Hansard I was stunned to read the debates on the Bill in May where the words ‘cheap’ meaning inferior, not less expensive, and ‘imported’ appear synonymously again and again, used by members of all the major parties representing many parts of the UK. There appears to be some universal truth in Westminster that foreign food must be produced to lower standards if it is less expensive than the equivalent UK product.
One Conservative MP, Simon Hoare, even warned that imported food would only be cheaper until the good farmers of the UK were driven out of business – this is a clear accusation of organised dumping by those cunning foreign farmer devils. Meanwhile, UK farm production is still heavily subsidized and this bill will allow this to continue until 2028 with little real incentive for UK farmers to improve their efficiency. The EU only agreed to stop subsiding its food exports at the WTO Ministerial Conference in Nairobi in December 2015. So, it is those much-maligned foreign farmers who have had to become more and more efficient producers to avoid being wiped out by heavily subsidised European ones, including the UK.
How can the people governing the UK have so little knowledge of the rest of the world? Hoare’s speech in parliament manages to insult not only the British population – who apparently are so indiscriminate that they would happily buy whatever ‘foreign muck’ is made available to them – but also most of the UK’s potential new trading partners many of whom have a geographical comparative advantage in the production of agricultural goods.
Supply, Demand and comparative advantage
Australia, for example has a massive land mass, 3 million square miles, a small population, 25 million people, and a relatively lower currency. Despite the large deserts, 70% of Australia’s land mass is used in agriculture – predominantly for grazing. Australian farmers don’t need to use lower standards to undercut UK farmers – simple economies of scale will do that.
But UK MP’s can rest easy as Australia can’t feed the entire world even though it now exports to much of it. All farms whether in the UK or Australia or the US have upper and lower limits on their production. UK politicians are well aware that below a certain price a farmer cannot afford to produce goods without subsidies, but there is also an upper bound of the maximum production per acre of farmland that no increase in price can raise. This is one of the reasons why feedlots were developed for rearing chickens and pigs, as feedlots divorced the production of meat from the amount of land required. Feedlots are a farming system that has swung comparative advantage in pork and chicken production back towards countries with smaller land masses and larger populations – like the UK.
However, cattle feedlots in the real cattle world are different – most of the time the cattle are in the field. In a large country with a temperate climate, keeping cattle in a field is cheaper – rain permitting – and the cattle are only put into feedlots for up to 6 months to fatten before they go to market. But even in a feedlot, the feed must be grown somewhere so there is still a limit to the size of a herd that can be housed.
Nevertheless, it would appear that a lot of UK politicians believe in the simple supply and demand curve where supply can be extrapolated without limit if the price is high enough. Hence their baseless fears that countries with lower production costs will be able to supply unlimited quantities of beef to the UK, wiping out UK farmers.
Baseless because even though the UK has had free trade with the EU for 47 years and Irish beef is cheaper than UK beef, the UK still supplies 80% of its own beef. How can this be? Why haven’t the Irish driven UK farmers out of business? More importantly, how many MP’s have ever stood up in Parliament and made a speech about ‘cheap Irish muck’ being dumped in the UK?
The unfortunate irony is that if these politicians knew anything about the real world, they would know that almost the exact opposite happens. If your trading partners are wealthy developed countries – such as the UK – then most countries export their highest quality food stuffs to the wealthier countries who pay the most for them and then they eat the cheaper cuts, the so called ‘muck’, themselves.
For example, the EU quota system limited the amount of Australian beef that could be imported into the EU with only a modest 20% tariff, to a tiny seven thousand tonnes. Consequently, the UK bought only the most expensive Australian beef, paying almost double the average price paid by the US, South Korea and Japan. According to Meat and Livestock Australia, ‘The strong premium is due to the high proportion of chilled high quality product traded – in 2015, 41% of Australian exports [to the UK] were rump and loin cuts, with higher valued secondary cuts accounting for the remainder.’ So the UK has not been inundated with the ‘cheap foreign muck’ that some MPs fear, but the best cuts of Australian beef.
Another example is Kenyan rose exports to the UK – roses can be grown so inexpensively in Kenya that even after airfreight to Europe it is still a viable business model that competes with UK grown flowers. But I would be very surprised to learn that any of the women who tend, cut and pack those roses exported to Europe, has a bunch of roses in a vase in her small hut. Kenyans are definitely not exporting the cheap flowers to the UK while they keep the better ones for themselves. UK MPs just need to get out more.
Standards and Trust
A key element of a successful trade deal is trust. Trade is most effective if people accept that their trading partner – whether across the road or across the world – can be trusted to produce the standard of good that they want to buy – if you didn’t trust them, you wouldn’t trade with them. When it comes to food – it is never in the interest of a producer or retailer to poison their customers. Regardless of the morality, it is simply bad business: a live customer eats more than a sick or dead one.
The United States Food and Drug Administration (USFDA) is the world standard setter for pharmaceutical drugs and the UK pharmaceutical industry certainly accepts their judgments when hoping to be able to sell their products into the US market. The US FDA is well known for being very cautious at handing out approvals. There are many cases where drugs that were sold in Europe were not approved for sale in the US by the FDA – Thalidomide being a good example but there are others.
So it may surprise some UK politicians that the same US FDA is also the authority that determines: the types of hormones that can be used in beef production; how they are administered; the dosage that can be used; and even monitors the amounts that can be left as residues in the meat.
The USFDA has approved 6 hormones for use in cattle, and hormones have been used in beef production since the 1950’s. The approved drugs are naturally produced in humans and animals, such as estradiol (oestrogen), progesterone, and testosterone while the others are synthetic versions of the natural hormones, such as trenbolone acetate and zeranol.
As with all medicines, before the FDA approved these drugs, they required toxicological testing in laboratory animals to determine safe levels in the edible tissues. Furthermore, FDA requires that manufacturers demonstrate that the amount of hormone left in each edible tissue after treatment is below the appropriate safe level where there are no harmful effect in humans. Also, all approved steroid implant products must have a zero-day withdrawal in the US. This means that the meat from the animal is safe for humans to eat at any time after the animal is treated.
The USFDA has not approved any steroid hormone implants for growth purposes in dairy cows, veal calves, pigs, or poultry. The USFDA routinely monitors residue levels to ensure safety of the beef being produced using hormone implants.
On the subject of farming standards: In 2016 EU farmers suffered from Avian Influenza, African Swine Fever, Bovine Tuberculosis and incredibly even ANTHRAX . Are these diseases a reflection of the high animal welfare standards that MPs were championing in their speeches? Are hormones in beef more dangerous than Anthrax?
Hormones and Farming practices
So, why do UK politicians believe that the USFDA is omnipotent when it approves the latest cancer drug approval but a fool when it approves the use of hormone treatments in cattle? Does the honourable member for Swansea West, Geraint Davies, really believe that US beef is ‘hormone-impregnated’ as he stated ? Does he even understand how hormone implants are used in beef production or why?
For a start, obviously beef is not impregnated with hormones. A small cylindrical pellet containing androgen or oestrogen is inserted behind the animal’s ear which slowly dips small amounts of hormones into the animal’s blood stream. Farmers use the ear for this process as it is not part of the food chain and the pellet under the skin can be easily seen so that it is obvious which animals have been treated.
Hormones are mainly given to steers – castrated males – and non-breeding heifers – young females – destined for market. The Steers are castrated to stop them fighting or impregnating their sisters while in the field, but this slows down their growth and reduces their muscle mass. So, the hormone implants replace just enough of the naturally occurring hormones to overcome the loss of muscle mass without making the cattle aggressive.
Serendipitously, hormone implants also produce leaner beef for a smaller amount of feed – so it is a more efficient farming practice as well. This also allows feedlot beef to be cheaper than grass fed beef. However, hormone implants only improve the animal’s growth rate if there is ample feed and the animal is still growing so even when hormone implants are allowed, it may not make economic sense to use them.
Which Countries use hormone implants?
Hormones implants have been used in the US for over fifty years and are now approved in about 30 countries, including Canada, Japan, Australia, New Zealand, South Africa, Mexico and most of South America with the exception of Brazil. But that doesn’t mean that hormone implants are given to all cattle produced in these countries. In the US about two thirds of cattle are given hormone implants. Countries require strict monitoring of which cattle have been implanted with hormones and which have not.
Most beef cattle in the UK, the US and Australia will spend most of their lives out in a field. Many will spend their entire lives in a field if there is plenty of feed and a temperate climate. But on land that is drier or rougher, the cattle will often be sent to a feedlot for 4 to 6 months to fatten up before going to market. In feedlots the animals will be given a diet heavy on grains and possibly a hormone implant that slowly dissolves, over 100 to 120 days, releasing small amounts of hormones into the cattle’s bloodstream.
Does everyone do this? – No. Feeding hormones to cattle is expensive – not only buying the hormone implants but also rounding up the cattle, putting them through the crush and injecting the pellet into the ear. Some countries also require additional marking to determine which cattle have been treated, for example in Western Australia, the ear of the treated animals must have a triangular notched clipped in them to make an indelible marking. Consequently, if farmers can fatten their cattle before going to market without resorting to hormone treatments they would most likely do so.
There will also be market or customer preferences to consider. Obviously not everyone likes the leaner meat produced by hormone implants– some countries and some chefs prefer beef that has fat marbled through it. However, if the farmer is selling to people who prefer leaner meat, the use of hormone implants is a way of ensuring this.
In Australia, only about 40% of beef will be given hormone treatments and they will tend to be herds in the dryer country in Western Queensland and Western Australia or where the rainfall is seasonal such as the Northern Territory. By contrast, the state of Tasmania has banned the use of hormone implants – but Tasmania has a high rainfall and plenty of grass, so hormone implants are unlikely to ever be necessary.
In Australia, the use of hormone implants is closely monitored by the Australian Pesticides and Veterinary Medicine Authority (APVMA). As beef is a major export industry for Australia and it sells beef to markets that prefer hormone treated beef, such as South Korea, to markets that allow it but prefer marbled fat meat, such as Japan, as well as markets that don’t accept it, such as China – so in Australia it is important that the use of hormone implants is effectively monitored and recorded.
Interestingly, although the EU now bans hormone use in meat production, this was not always the case, and both the UK and France once allowed the use of hormone treatments in cattle. The EU proposed banning them in the 1990s because some Italian farmers were apparently giving hormones to chickens in unmonitored quantities, and this was believed to be carcinogenic in humans. However, instead of simply banning hormone use in chicken production, as the rest of the developed world has done, or monitoring closely the type and amount of hormones given to cattle, the EU decided to ban their use completely. Apparently, it was the British and French farmers who lobbied the hardest to be able to continue using hormone treatments, but they were out voted by the usual suspects.
The EU’s ban on hormone implanted beef has been contested by the US with the WTO, and the WTO duly upheld the US’s complaint. The EU was asked to produce scientific evidence that hormone implants posed a problem to human health. The EU was unable to do this but continues to oppose the use of one hormone, Estradiol-17B on ‘potential’ human health risks. This dispute has run for over 20 years. The EU has had to offer remedies to the US allowing the US to add tariffs on EU imports and the EU has had to grant a Hilton Quota for 45,000 tonnes of grain fed (i.e. feedlot) beef with 0% in-quota tariffs to be shared on a first-come, first-served basis with 5 countries .
For the EU to block hormone treatment on any health grounds can only be seen as protectionist. The tested hormone residue allowed in beef is infinitesimally small and the hormones used are naturally occurring in many foods. A 500g steak from a hormone implanted steer contains only 7 nanograms of estrogenic activity while an adult woman produces 513,000 nanograms each day, an adult man produces 136,000, and a pre-pubescent child 41,000. In case you are wondering – a nanogram is one billionth of a gram. i.e. 0.000000001gm and a 500g steak is a large steak, even in the US.
Not only do the hormones used in cattle production occur naturally in many foods including soybeans, Pinto beans, peanuts, eggs, butter and milk, they also occur at much higher levels. There are four times as many hormones in milk as in the same weight of beef from a hormone implanted steer, 40 times as much in the same weight of butter, 80 times as much in eggs, 14,000 times as much in peanuts and 130,000 times as much in Pinto Beans. But the big hormone containing food is soybeans – tofu contains 113.5 million nanograms of estrogenic activity per 500g from isoflavones and defatted soy flour has more than 750 million nanograms per 500g.
Consumer Choice and food poverty
As I mentioned earlier, not all US beef is raised using hormone implants. The US also produces naturally raised beef which must be verified by the United States Department of Agriculture (USDA) and the US produces organic beef: no implanted hormones are allowed and the cattle must be fed an organic diet and this must also be verified by the USDA. The USDA requires all naturally raised and organic beef in the US to be ‘labelled to verify that hormone implants have not been used in its production’.
However, just as in the UK, US naturally raised and organic beef is more expensive than feedlot beef. And yes, the UK has feedlots too, although meat from UK feedlots is generally called intensively reared and this is rarely mentioned on the packaging but can be found on the retailer’s website if you search for it.
It is a very self-defeating argument for members of parliament to claim that ‘foreigners’ use ‘lower’ standards to produce meat when the UK is not self-sufficient in beef production and imports roughly 20% of the beef it consumes each year .
Although several MPs spoke eloquently in the debates about protecting UK farm exports – when it comes to beef production this is an illusion. Although the UK produces over 900,000 tonnes of beef each year, it also imports about 350,000 tonnes and exports less than 150,000. While in the EU, the UK’s imports have been predominately supplied by Ireland because the EU adds high tariffs and restrictive quotas to beef imported from outside the EU. To remain competitive in world markets the effective ad valorem rate based on UK 2016 to 2018 average prices ranged between 29% and 91%. This is hardly the sign of a market with exceptional world class products, if they must add such high tariffs and tight quotas in order to keep out the competition.
And while most of the MPs were singing the praises of the UK’s farmers, a few also mentioned the need for food security, a couple even mentioned food poverty but none seemed to add the two together and come up with the solution. If the UK can import meat for less, why won’t MPs encourage this rather than complaining about food poverty yet acting to keep prices high?
There appears to be a general belief that there is a fixed amount of beef that can be consumed in the UK. But unlike the supply – which is limited by farm size – the demand for beef is very price sensitive. Many people would eat more meat if it were cheaper.
The Prime Minister has recently put the whole country on a diet. But none of the Waitrose Protectionists in Westminster, including the Labour MPs in this debate, wanted to mention one of the major causes of the UK’s ever expanding waist line – cheap carbohydrates.
It was incredible that no politician in the debate on the 5th of May mentioned that a section of the UK population can afford the chips but not the fish or the steak to go with them. Yet still these Waitrose Protectionists on their high protein diets, want to keep the cost of protein so high it is out of reach for many UK citizens – Just so they can protect the myth of ‘UK world class farming standards’.
Although, EU policy reforms have moved EU agricultural subsidies away from production, policy instruments remain in some sectors that disconnect prices paid to producers from world market prices. Import and export licensing, Tariff Rate Quotas (TRQs) and special safeguards continue to apply to a number of products. These policy instruments push farmer support up when world prices decline, to the detriment of EU consumers, while non-EU consumers benefit from the lower world prices.
According to the OECD Agriculture Policy Monitoring and Evaluation 2017 , ‘while the average prices received by EU farmers were 5% higher than those on the world market in 2014-2016. Domestic prices for rice, beef, veal and poultry were more than 20% above world prices’. Beef and veal received 25% of gross farm receipts from Market Price Support and single commodity transfers. So, EU consumers are paying more for protein than they should be.
Why are UK MPs happy to allow UK consumers to buy less expensive clothes made in countries with lower wages without an outrage in parliament that UK clothing companies will be driven out of business by inferior foreign products? And yet, food – a commodity that is just as important to life in the UK as clothing or shelter – imports are restricted. UK consumers are forced to pay higher prices for imported meat even if that means that they must live on cheap carbohydrates and refined sugars.
Let the best farmers win
All farmers, including UK farmers, use the standards that suit their climate, their customs and their customers. EU meat producers don’t need to castrate their cattle and then drip feed them tiny amounts of hormones because Europeans in general eat younger meat, often very young, milk fed, veal calves. So, there is no need to castrate animals that will never live long enough to reach sexual maturity.
Many EU beef farmers use cattle breeds that grow very quickly, are late to mature and can be ‘finished’ at 20 months. While in the US the top two price grades of beef, Prime and Choice, that account for over 50% of all US beef, are for 30 to 42 months old animals. US Beef that is less than 30 months old, the 3rd price grade, is called Select.
Neither European nor US farmers are using ‘lower standards’, they are simply producing for different markets with different geographical conditions. In the US, red meat is more highly prized and larger grazing ranches make keeping cattle for longer in the field economically viable, unlike in Europe where many continental cattle would need to be housed during winter if they hadn’t already been sent to market. Although agriculture occupies more than half of the total EU land area, nearly 60% of this area is arable – that is used to grow crops not for grazing animals. But incredibly the EU still limits meat imports.
Sometimes, trade in primary products also helps other industries. The EU is now a net exporter of food, and – according to the OECD –almost three quarters of EU agri-food exports are processed foods for final consumption (59%) or industry (14%), while over half of the EU’s agri-food imports are primary products either destined for processing (29%) or for final consumption (24%). Thus, limiting imports to protect farmers may even prevent other higher value industries from developing.
Conclusion
Victoria Prentis, Parliamentary Under Secretary of State at the Department for Environment, Food and Rural Affairs summed up the debate claiming that the Agricultural Bill gives a framework for the future for farming and that it will support investment in technology and research to improve productivity. She might well discover, as farmers in the rest of the world have, that feedlots and hormone implants improve productivity. They are a more efficient way for countries with less land and large populations to produce beef. Importing grass fed beef from countries with more grazing land than people may be a better for consumers by lowering meat prices, help reduce UK obesity as well as UK food poverty.
Catherine McBride is an economist with 19 years’ experience in the financial derivative markets. She established and ran the Brexit Coalition and previously worked for the Financial Services Negotiation Forum, the Legatum Institute and the Institute of Economic Affairs. She writes here in a personal capacity.
[1] https://hansard.parliament.uk/Commons/2020-05-13/debates/D4889925-5B63-498E-BC68-BFCF91691C66/AgricultureBill#contribution-78FA26CB-3B8B-44F6-ABC6-BDF3A49CA631 [2] Meat and Livestock Australia, Beef, Lamb and Brexit, 30 June 2016 [3] lumiracoxib, rimonabant, tolrestat, ximelagatran and ximelidine, for example were approved to be marketed in Europe but had not yet been approved for marketing in the US, when side effects became clear and their developers pulled them from the market. [4] https://www.fda.gov/animal-veterinary/product-safety-information/steroid-hormone-implants-used-growth-food-producing-animals [5] https://read.oecd-ilibrary.org/agriculture-and-food/agricultural-policy-monitoring-and-evaluation-2017/european-union_agr_pol-2017-13-en#page1 page 13 [6] https://hansard.parliament.uk/Commons/2020-05-13/debates/ Vol. 676. [7] Argentina, Australia, New Zealand, the US and Uruguay, [8] Human oestrogen production amounts from Hoffman and Eversol (1986) [9]https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/848641/AUK_2018_09jul19a.pdf page 55 [10] https://ahdb.org.uk/eu-and-uk-import-tariff-rates-for-selected-beef-products [11] https://read.oecd-ilibrary.org/agriculture-and-food/agricultural-policy-monitoring-and-evaluation-2017/european-union_agr_pol-2017-13-en#page3
