Following three weeks of sharp decline, prime lamb auction prices have stabilised over the past week.
According to Stuart Ashworth, Head of Economics Services, Quality Meat Scotland, the average auction price in Scotland this week was around 178 p/kg lwt, a similar level to the price at sales at the end of last week. Thursday sales this week saw some improvement on the overall weekly average steadying prices.
The sharp fall of the past three weeks has been repeated in England and Wales.
“Given the accepted view that this year’s lamb crop is smaller than last year, the question is ‘why have prices slipped?’ The answer lies in short-term volumes,” said Mr Ashworth.
“Scottish auction sales during June were 40% lower than last year, while across GB as a whole, auction sales were 15% lower. However, over the first three weeks of July the volumes reaching Scottish auctions were 7% higher than last year, while GB as a whole was 17% higher. In the past week, volumes reaching the market returned to the June pattern and have been 25-30% lower than last year.
“While some of this week’s decline may reflect short-term reaction to the market price movement, it will also reflect the expectation of a smaller 2013 lamb crop,” said Mr Ashworth. “However, while short-term volumes may have increased at the start of July, they were still below the levels of two years ago.”
A rapid increase in lamb availability normally occurs in late June rather than early July and the price slides accordingly. In early June the price eased slightly but subsequently increased because of the very tight supply of new season lamb during June.
“The short-term supply pattern of July may reflect growth rates among the earlier lambing flocks during March and April,” said Mr Ashworth. “The short-term volume may also reflect the age old problem of managing the multitude of farm tasks at this time of year, particularly the slightly later silage season.”
A further complication has been the good weather which is likely to have turned consumers towards barbecue products meaning demand for lamb steadied just as an increased supply became available.
“However, the question for most producers now is ‘what is the outlook for the next six months?’”, said Mr Ashworth.
“A quick look at recent history shows that late July was a low point in 2008, 2009 and 2010, and so the stabilising of the price this week repeats this pattern. The same period of history would suggest that the price will remain steady through to October or November.
“Equally, history tells us that the number of lambs reaching the market, although the highest of the year would be reasonably steady over this period,” added Mr Ashworth.
The appalling weather last year dictated supplies and quality. With this year’s summer, quality is likely to be better and the marketing profile more normal.
“This then, given a smaller lamb crop and possibly a need for more retentions for breeding, would leave the market, by historic standards, tightly supplied although in the short-term volumes may stabilise similar to last year’s levels,” observed Mr Ashworth.
The tightly supplied market is unlikely to be offset by bigger supplies from other parts of the World.
“Although Ireland reported a larger breeding flock in December, they too report the effects of weather and disease have limited the size of their lamb crop,” said Mr Ashworth. “With marketings running ahead of last year they are unlikely to have an abundance of lamb later in the season.
“In New Zealand ewe numbers have stabilised but weather conditions at mating may result in a lower lamb crop,” added Mr Ashworth. “Again, they are unlikely to be a ready source of abundant supplies of sheepmeat particularly as they steadily develop opportunities in China.”
Meanwhile, slightly improving economic data from the UK and the European Union, and the improvement in UK lamb consumption over the past six months, suggest an improving consumer environment.
“Exports remain critical but with sterling standing at around 86p to the Euro compared to 78p at this time last year and 81 or 82p during the autumn our product remains competitive in the European market,” said Mr Ashworth.
“The prospects for the prime lamb producer remain positive.”