After the decline in prime lamb prices during July, August and September, prices lifted at the turn of the month, according to Stuart Ashworth, Quality Meat Scotland’s Head of Economics Services.
Over the past fortnight, Scottish prime lamb prices have found some stability at around 150p/kg lwt and, boosted by a religious festival this month, there may be some continued support for the lamb market over the next week or ten days. However, while better than the 143p/kg of just three weeks ago, this is still some 10% lower than this time last year.
“The biggest pressure this year is increased supply,” said Mr Ashworth. “Between May and August, for example, UK abattoirs slaughtered 6.5% more lambs than last year and carcase weights have also increased.”
Recently released census data suggests that this pressure will continue throughout the season, with the Scottish census showing a lamb crop which is more than 5% larger than last year, the English census showing an increase of over 6% and the Northern Irish census showing an increase of 3%.
“The challenge for producers is to manage the orderly delivery of this increased supply onto the market within customer specification,” commented Mr Ashworth.
“Earlier this year there has been a higher than normal proportion of lambs exceeding the standard quality quotation upper weight limit of 45.5kg liveweight.”
Mr Ashworth pointed out that this supply pattern has also been repeated in the Republic of Ireland where the lamb kill between May and August was 6.9% higher. However, their June census would suggest that, on the back of a smaller breeding flock, their lamb crop has hardly changed from last year and so the increased early season kill would imply less pressure from Irish supplies as the year progresses.
Meanwhile, the continued decline in ewe numbers in France and Spain will create continued opportunities for exports, notwithstanding exchange rate complications and weak consumer confidence.
Elsewhere, estimates of a 1.4% decline in New Zealand breeding ewe numbers in June 2014 led Beef and Lamb New Zealand to forecast a decline in export volumes of over 3% during their 2014/2015 lamb marketing year, which has just started, as more retentions for flock rebuilding are expected.
A second pressure on prime lamb prices is the current strength of sterling against the Euro, making the trading of lamb to European customers more challenging for Scottish and UK lamb exporters.
“Adding to this export pressure is weak consumer demand in Europe,” said Mr Ashworth.
“France has seen the consumption of lamb decline by almost 7% during July, although their domestic production fell by 3%. Over the longer period of January to July, however, consumption has increased slightly.”
A less transparent pressure on lamb prices has been the collapse in global sheepskin prices. This collapse, which has seen prices fall by 50% or more in some cases since the start of the year, is driven by Chinese environmental policy.
“In an effort to improve water quality, China has tightened up its pollution control policy which, in turn, has seen many hide tanning and sheepskin processing facilities closed down either permanently or temporarily since May this year, commented Mr Ashworth.
“With China being the single biggest global customer for sheepskins, it is not surprising that skin prices have fallen, and it will take some time before they recover.”