19th August 2016

Firm Lamb Market Continues but Carcase Weights Lighter

Despite some easing of price in the current week, prime lamb producers are continuing to benefit from a firm market.   Producers are currently seeing prices per kg that are around 25% higher than last year and at their highest level at this time of year since 2013, said Stuart Ashworth, Quality Meat Scotland’s Head of Economic Services.   However, some of the gain in price per kilogramme is, he said, being offset by drawing lambs for sale at slightly lighter weights.    “Scottish abattoir information suggests that carcase weights in July were 0.7kg lighter than last year, while across the UK as a whole lamb carcases were 0.4kg lighter.     “This weight change offsets some, but not all, of the per kg price increase when measured as revenue per lamb.”   Looking at the retail side of things, market analysis by Kantar Worldpanel suggests the volume of fresh lamb bought by consumers has fallen in the past quarter.  However, the value of these sales has fallen less quickly.     “This is because retail prices are in general sitting 8-10% higher than this time last year.  Since the retail price movement has been less than the farmgate price movement, producers are receiving more of the retail value of a lamb than they have for some time,” noted Mr Ashworth.   The fall in retail consumption may be more a reflection of lower abattoir production of lamb than a switch away for lamb because retail prices have increased.  Indeed, he added, during July Scottish abattoirs produced more than 20% less lamb meat than last year, although across the UK the decline was smaller.   Two key factors are helping to support prime lamb prices this year - a lower availability of domestic lamb meat and a weak Sterling exchange rate.  The latter has made Scottish and UK lamb extremely competitive in the European market despite the rise in sterling price; although export sales have been lower than 12 months ago.     “Also influencing the wider European market is the slower arrival of prime lambs onto the Irish market and reduced production in New Zealand as their season draws to a close.  Irish lamb slaughterings since May are running 4% lower than last year and in recent weeks have been running more than 7% lower than last year,” observed Mr Ashworth.   Lamb meat production in New Zealand during June was 10% lower than last year.  Furthermore with the latest report on New Zealand breeding sheep numbers suggesting a decline of 3% in the breeding flock, along with a high incidence of facial eczema there is a real prospect of a fall of more than 3% in New Zealand lamb meat production through 2016 and into 2017.   “The current market challenge is one of potential short-term lamb volumes.  While clearly running lower than last year in both the UK and Ireland we do not know yet whether this reflects a smaller lamb crop or simply slow growth rates,” added Mr Ashworth.   “The latter would result in a larger volume of lambs in the market during the peak selling period of September and October.  Indeed the gap between weekly lamb slaughter numbers on a year-on-year comparison has closed in recent weeks.     “A strong growth in lamb numbers over the next few weeks in both the UK and Ireland will have a downward impact on market prices, although the current QMS Scotch Lamb PGI campaign, which started this month, coupled with continued weakness of sterling and lower New Zealand supplies, will help to support the price.”  

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