Scotland’s lamb prices 50% above five-year average

Although prices for old season lambs have dipped back from the record prices reported in autumn and winter, they are still 43% higher than last year according to the latest market commentary from Quality Meat Scotland (QMS).

Iain Macdonald, QMS Senior Economics Analyst, explains:

“In the third week of April, prices for old season lambs have dipped back from highs above £3.10/kg at Scottish marts between Easter and Ramadan, but still averaged around £3.05/kg. This would put them 43% higher than last year, closer to 50% above their five-year average, and even 17% above their early season peak from May 2020.

“One factor supporting the lamb market in 2021 has been the early marketing pattern this season, which has seen fewer lambs sold at Scottish marts on a weekly basis than during the August to December period, when in a more normal season it would be the opposite.”

Meanwhile, at GB abattoirs, despite a smaller lamb crop in 2020 across GB, prime sheep slaughter rose 3% year-on-year between June and December.   With fewer hoggs carried over, slaughter numbers then fell 10% year-on-year in January to March 2021.   

December census data highlights the reduction in availability of hoggs, with 2.4% fewer slaughter lambs on Scottish farms and 5.5% less in England at the end of 2020.  One identified factor limiting supply has been an increased retention rate, driven by strong store and finished lamb prices, resulting in a 14% surge in lambs put to the tup in Scotland.  A sharp reduction in ewe slaughter of 15% at GB abattoirs in 2020 also points to increased retention rates.

December census results can also point towards potential supplies in the 2021/22 season. In Scotland, while the way the questions are asked can vary from year-to-year, the figures are suggestive of a small increase in the breeding flock, with 0.8% more breeding ewes on farm at the end of 2020.  Meanwhile in England, the total breeding flock rose by 0.4%, suggesting a small lift in overall ewe numbers.

“However, once you factor in the cold wet start to the year, and then the cold dry April, it seems unlikely that last year’s record lambing percentage will be repeated in Scotland, while England and Wales also had very good lambings in 2020.  Therefore, we may struggle to match last year’s lamb crop.  The cold dry spring across GB also suggests that lambs will grow more slowly than last summer, taking longer to arrive on the market.  However, if the grass does begin to grow, this could quickly change come June and July,” said Mr Macdonald.

In international trade, despite firm lamb markets in the UK and EU, and its companies exporting more lamb onto the world market, New Zealand has exported considerably less product to Europe in 2021.  Its exporters have continued to rebalance towards China, where wholesale lamb prices are currently equivalent to £8.60/kg. 

“On the export side, exiting the EU single market has made it much more challenging and costly to export to EU countries.  Trade data from HMRC up to the end of February shows that while UK sheepmeat sales to the EU increased by 9% between January and February, they were still nearly a third behind year earlier levels, following a reduction of 47% in the opening month,” said Mr Macdonald.

The new trading environment has also had a major impact on the composition of exports, with carcases and half carcases of lambs surging to a 79% share of volumes sold to the EU in early 2021, up from 47% in early 2020.  By contrast, bone-in cuts fell from 30% of exports to 13%, and boneless cuts from 6% to 2%. 

“Exporters and hauliers are nervous about potential delays and rejections at the border for mixed loads of products, especially those from different processing sites requiring separate paperwork.  Looking forward, it is difficult to see this situation improving without a change in trade protocols.

“In addition, exporting companies have reported that it is difficult to compete in key EU markets. Highlighting this, the wholesale price of imported R grade carcases at Rungis market in Paris on April 21st was only 6% above the latest GB deadweight price, converting to £7.16/kg.  Before the recent upturn in France around Easter and Ramadan, there had been even less of a difference,” explained Mr Macdonald.

The domestic retail market has been very strong in the opening third of 2021, and coupled with reduced availability, appears to have offset any challenges caused by reduced export activity. 

“Kantar reported that GB households had managed to still spend 6% more money on lamb than a year earlier in the four weeks to March 21, a period which had included the peak panic-buying phase at the beginning of the pandemic.  Although, retail prices do appear to have been significantly higher, so the overall volume sold may not have risen.

“Looking forward, as the catering sector begins to re-open in the coming weeks, increased out-of-home eating could have an impact on meat demand, particularly if provenance is less of a concern to some buyers than in retail,” concluded Mr Macdonald.