Lamb Market Analysis Identifies Key Opportunities

Two key areas of opportunity in the lamb market appear to be consolidation and growth in the domestic market, following recent gains there, and maximising export opportunities other than France.

According to Stuart Ashworth, Head of Economics Services with Quality Meat Scotland (QMS), markets such as Denmark and Sweden offer real opportunities and QMS is working hard to develop these markets, including attending the Gastronord trade fair in Stockholm this week.

“Looking at the current market situation for lamb, a real challenge lies in export activity where trading has been difficult despite the attraction of current exchange rates.  Exporting lamb to Europe and France in particular has been challenging over the past six months,” said Mr Ashworth.

This is not just a British problem, he said, with French trade data showing French imports to have been lower than last year throughput October to January. 

“Both the UK and Ireland supplied less lamb to France in this period.  Some of this loss was taken up by increased supplies to France from New Zealand between October and December, but New Zealand shipped less lamb to France in January. 

“Furthermore, on the evidence of French data, sheepmeat consumption in France has been falling steadily for a number of years, with consumption in January down three per cent compared with a year earlier,” said Mr Ashworth.

However, he said, some of the more northern European countries are seeing more stable demand. “Indeed during February, Germany, Denmark, Belgium and the Netherlands all took slightly more sheepmeat from the UK than they did last year, though currently not sufficient to offset the fall in volumes to France and Italy.”

Looking at recent prices, it is clear that as the 2015 lamb crop year draws to a close and Easter has passed, prime hogg prices have come under pressure.

“It is not unusual for prime hogg prices to come under pressure at the conclusion of the lamb crop year and the fall in prices during the past week, although substantial, has not been as dramatic as last year. In the current week prime hogg prices are only 1-2% lower than last year,” observed Mr Ashworth. This compares with earlier in 2016 when the price was 4-5% lower than last year. 

Auction market and abattoir throughputs over the past four weeks show a decline, in comparison to last year, in both the volume of SQQ hoggs and total number of hoggs marketed. 

“The auction throughput has shown a higher proportion of SQQ hoggs in the total slaughter hogg marketings compared with last year, up until the past week. 

“Similarly, until the past couple of weeks, the proportion of hoggs slaughtered in price-reporting abattoirs which had met the preferred R3L or better grading had been running higher than last year.” 

On this evidence hogg quality has been good since the turn of the year, although in more recent weeks it has slipped a little. 

“Carcase weights have not been an issue either as they have been lower than last year since January and the volume of domestic prime sheepmeat on the market has been lower than last year. Indeed total domestic sheepmeat production, including cull stock, is slightly down on the year over the first quarter.”

For farmgate prices to fall alongside lower production is a clear indication of the wider challenges affecting demand. The impact of reduced demand from key export markets such as France, goes some way to explaining this, particularly in light of evidence of increased demand in GB.

Data from Kantar Worldpanel looking at the GB market shows the volume of lamb sold by GB retailers to be running ahead of last year for the past quarter, although with some variation between cuts and this has been achieved with little recourse to retail price discounting.