Farm Ireland
Independent.ie

Tuesday 24 January 2017

Outlook bright for sheep as supplies remain tight

Irish producers riding crest of a wave, but expert issues a warning over supplies and quality

Published 31/05/2011 | 05:00

Sheep farmers' fortunes continue to improve and the outlook remains positive, according to Bord Bia market analyst Margaret McCarthy.

  • Go To

The average sheep price for the year to date, at 508c/kg, is running 11pc ahead of last year's price, which was itself 14pc higher than the 2009 average.

"This increase in prices has been a long time coming and it is a result of tighter supplies here, in Britain, Europe and the southern hemisphere," Ms McCarthy says.

In the 10 years between 2000 and last year, the European sheep flock fell by 15pc, from 102.2m head to 87.1m head, despite an increase in the size of the EU during that time.

"The fall-off in sheep numbers was caused by a long-term lack of profitability," she says.

Ireland's sheep flock also contracted during this period, although the exodus from sheep was accelerated from 2005 onwards by the decoupling of farm payments from production.

Fallen

Sheep supplies from New Zealand have fallen significantly in recent years as farmers there switched from unprofitable sheep production to more promising dairy units. Between the 2008/2009 and 2010/2011 season, New Zealand exports fell from 305,000t to 260,000t of sheep meat.

Also Read


New Zealand exports into the European market have also lost some of their competitiveness. Their lamb now trades at a 20-30pc discount to Irish product, compared to a 30-40pc price difference in the past.

The result of this worldwide reduction in sheep supplies is that Irish farmers have been riding on a wave for the past two years. Sheep farmers are positive and optimistic about lamb production for the first time in a decade and prices for breeding stock at the back end of last year showed that farmers were willing to invest in flock expansion.

But is the price rise sustainable? Yes, according to Ms McCarthy, but farmers need to watch both sides of the supply and demand equation.

"If you look at the supply side, sheep supplies have contracted all across the world," she says. "Then if you look at global demand, there is a very slight increase, driven by increased demand in China, the Middle East and the United States. But if you look at Europe, consumption is forecast to remain relatively stable."

However, the sheep market expert warns that the domestic Irish market will be a challenge.

"Disposable incomes are lower and lamb is the most expensive meat on the supermarket shelves," Ms McCarthy says. "Up to April 17, the average price per kilo of lamb was €10.47/kg, compared to beef at €7.89/kg, pork at €6.82/kg and chicken at €5.13/kg."

She adds that lamb is not a meat that consumers are flexible about either. Whereas beef buyers will often switch from steak cuts to stewing beef or mince, lamb buyers tend to either buy or not buy.

"They don't tend to substitute rack of lamb for, say, stewing meat; they just drop it," she says.

When the main flush of lambs hits the market, it is crucial that producers keep the end consumer in mind, Ms McCarthy insists: "Under- and over-finishing lambs is an issue because consumers expect top-quality product for the price they are paying."

The main flush of lambs is expected to be somewhat later this year, starting around the third week of June.

Campaign

Last year, slaughter numbers topped 40,000 in the first week of June and exceeded 50,000 a week in July, but this year slaughter numbers are not expected to reach 40,000 until the third week of next month.

A new Bord Bia television campaign is being planned to coincide with the flush of lamb, while the annual Agneau Presto campaign to promote lamb to younger consumers will be renewed in our export markets.

On price, Ms McCarthy says that the annual drop in lamb price could be less dramatic than usual.

"It's always hard to call price and from now on prices will fall, but hopefully we will be more insulated from the usual tumble because of the lack of lamb availability here and on our export markets," she says.

The French market accounts for one-third of Irish production and so is a huge factor in determining the price paid to farmers. For this year, France is forecasting only a one per cent increase in its own domestic supplies and no increase in the volume of lamb it will import.

France consumes 25pc of New Zealand's exports but there has already been a 26pc drop in the volume of Kiwi lamb into France in this year's first quarter.

The net effect of less cheap New Zealand lamb on the European market could be more Irish lamb being bought in France at a higher price.

"Overall, this year is a good, positive year for the sheep sector and average prices will hopefully be at least as strong as last year," Ms McCarthy says.

"We have higher prices based on lower supplies but we should not forget that demand is the other side of the equation and we need to focus on quality."

Indo Farming