Lamb market sees seasonal rebound in November

Prime sheep prices have rebounded from a season to date low in October, according to the latest market commentary from Quality Meat Scotland (QMS).

QMS Market Intelligence Manager, Iain Macdonald, says prices rose from 220p/kg in late-October, to average 241p/kg at Scottish marts in the week ending November 9th.  With more lambs reaching the market in the fortnight since, prices have settled around this level, averaging 241p/kg and 240p/kg respectively in the weeks to November 16th and 23rd. 

Across Great Britain as a whole, the second and third weeks of November have seen the largest weekly volumes of finished lambs since the week before Eid al-Adha in July. Over the fortnight, numbers were 13% higher than the weekly average over the previous quarter and matched year earlier levels after trailing in twelve of the previous thirteen weeks.

“Placing current market conditions into some context, the average price of 241p/kg so far in November at Scottish marts is the highest since mid-August.  

“However, it has left prices lagging more than 10% behind the seasonal records of late 2021, when there had been a lift from around 235p/kg in mid-October to around 270p/kg in November.

“Market prices have continued to hold nearly 20% above the five-year average, with prices trading around 170p/kg in 2017 and 2018, rising to 190p/kg in 2019 and 210p/kg in 2020,” explains Iain.

With ongoing household budget pressures as rising living costs outpace wage growth, shoppers have been looking to trade down to cheaper cuts and switch to cheaper proteins, leading to a challenging retail environment for lamb.

According to Kantar, in the 12 weeks to October 30th, fresh lamb averaged more than £12/kg across the GB retail sector, compared to under £9/kg for fresh beef.  

During this period, household spending on fresh lamb trailed year earlier levels by 15%, with higher prices leading to a 23% reduction in sales volumes. For fresh beef, spending rose by 2% but higher prices meant volume reduced by 7%.  

For fresh pork and poultry, sales volumes were similar to 2021 levels as, despite showing considerable price inflation, spending rose significantly – up 8% for pork and 13% for poultry. 

In many areas, a dry summer made it challenging for producers and slowed the arrival of lambs onto the market.  Between June and October 2022, Defra reported a 3% fall in lamb slaughterings across GB compared to last year, despite a 13% year-on-year decline in the same period of 2021. 

Iain continued, “In the 2021/22 season, sharply reduced slaughter through the autumn resulted in an increased carryover of hoggs and higher throughput in the run up to Easter. 

“After factoring in an increased June lamb crop in England this year and a 5.5% increase in store lamb sales at Scottish marts, it points to the potential for a further increase in hogg numbers across Great Britain in the early part of 2023.”

In addition to domestic production, imports and exports affect overall lamb market supply. Taking imports first, volumes rebounded to a three-year high in the first nine months of 2022. However, even if this trend was to continue in the final quarter, annual imports would likely remain 15-20% below the levels of 2017 and 2018, and around 25-35% below 2011-16 levels. 

Meanwhile, although export volumes dipped behind 2021 in Q3, they remained higher than import volumes, with the net effect of the trade balance being a reduction in UK market supply.

Iain commented, “One of the market fundamentals that has been having an impact on imports this year has been a rebalancing of Australia and New Zealand’s exports away from China, where covid-19 control measures have reduced foodservice sector demand and led to major delays at Chinese ports. As a result, one of the alternative destinations that Australia and New Zealand’s exporters have looked to is the UK market. 

“As well as a rebound in import volumes, the balance has shifted further towards frozen product, going from around two-thirds of deliveries from the two countries in the first nine months of 2021 to over 90% in 2022.”

Looking forward, Beef + Lamb New Zealand has projected a drop of around 1% in the country’s lamb crop and lamb exports in the production season which began in October 2022.  For Australia, Meat & Livestock Australia has forecast a 2.5% lift in slaughter, but an export increase of less than 1% in 2023. 

Iain added, “For UK exports, household budget pressures in the EU may be limiting the volume of demand for UK lamb.  However, import prices paid for GB lamb carcases at Rungis wholesale market in Paris have risen 6% since the start of November, as demand builds ahead of the festive period. 

“For 2023, the EU Commission has forecast a 4% increase in EU sheepmeat imports, signalling potential opportunities for UK exporters, given the weak pound and expectations of an increased carryover of hoggs, plus the relatively flat combined export expectations for Australia and New Zealand.”