Lamb Trade Remains Firm Despite Volumes Starting to Increase

Despite the seasonal increase in the number of lambs reaching the market, farm gate prices for prime lambs are remaining firm according to Quality Meat Scotland (QMS).

While there has been some easing in prices as more lambs come onto the market, prime lambs are currently trading around 10% higher than last year.

“This relative firmness in price is being reflected across Europe in the countries producing heavy lambs,” said Stuart Ashworth, Head of Economics Services with QMS.

“The French producer price is 13% higher than a year ago, the Spanish price is 14% higher and the Irish price one percent higher. 

“In contrast, the price for light lambs, defined as carcases of less than 12.5 kg, is struggling to match last year’s levels in the two main lamb-producing regions. It is nine per cent lower in Greece and six per cent lower in Spain although light lambs are selling well in Italy and Croatia.”

The firmness in the UK heavy lamb price is, observed Mr Ashworth, occurring despite modest increases in the volume of new season lambs reaching UK abattoirs compared to this time last year.  In England the weekly kill during June reported by Defra was 3% higher than 2016. 

“The current price behaviour we are seeing suggests a degree of positivity from the demand side of the equation, perhaps coupled with reduced supplies from outside the UK,” said Mr Ashworth.

In Ireland the volume of new season lamb is also currently running higher than last year but they too have seen producer prices holding similar to 2016.  Price movements in France, however, reflect a lower domestic supply.  French lamb slaughterings during May, for example, were two percent lower than last year and, with a ewe population reported in December 2016 to have fallen by 1.5%, reduced numbers remain likely. 

“Deliveries from New Zealand to the UK and Europe are also running lower than year-earlier levels,” said Mr Ashworth.

“Over the past six months New Zealand reports around 20% less sheepmeat dispatched to Great Britain. On the basis of a 20kg lamb carcase, this shortfall in volume could amount to the equivalent of around five per cent of the UK weekly production at this time of year.”

With New Zealand deliveries into the mainland European market also falling short of last year, there is potential export opportunity for UK abattoirs, he added.

UK export statistics for 2017 up until the end of April show growth in export volumes to Europe compared with 2016, helped by exchange rates that make UK lamb competitive in European markets.

“The net effect of these trade patterns and opportunities is to boost competition in the market place and support price,” stated Mr Ashworth. 

However, he said, one consequence of the current market situation is that the volume of lamb on the home market has declined but the level of self-sufficiency has increased. The decline in the total volume of lamb on the home market inevitably means that overall consumption has also declined and the retail price of some cuts has gone up.

“The volume of domestic lambs available on the market typically builds towards autumn with the UK weekly kill usually peaking in September or October when it is often 25% higher than the weekly kill in June,” added Mr Ashworth.

“This is the point where there is typically the greatest seasonal downward pressure on farmgate prices.  However, the weakness of Sterling and low production in mainland Europe and New Zealand point to export opportunities which could, to some extent, mitigate the seasonal price fall this year.”