Farm Ireland
Independent.ie

Sunday 4 December 2016

Prices to hold as supply falls

Published 09/02/2010 | 05:00

Sheep farmer returns are set to hold this year on the back of a sharp drop in lamb supplies.

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Although demand for sheep meat is expected to fall, this is likely to be offset by a significant drop in numbers.

Bord Bia estimates that total sheep output could be down 4pc, or close to 100,000hd this year, but some factory sources say this figure could top 150,000hd.

Throughput in export plants fell by 5-6pc, to 2.8m head, last year, as the exit of farmers from the sector resulted in a serious contraction of the national flock.

The economic recession has considerably affected demand for sheep meat over the past 12-18 months. Lamb is an expensive meat and, in a recession, is often replaced by beef, pork and other cheaper alternatives.

However, the overall effect of reduced supplies this year is expected to keep a floor under lamb prices.

One factory source, who refused to be named, went so far as to say he was hopeful of a 10pc price lift for this year.

The biggest factor affecting the trade will undoubtedly be the national and European economic environment. If it takes an upturn, lamb prices would be expected to follow suit.

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There will also be other factors at play during the coming year. Ireland exports half of its national sheep production total to France, where it has to compete with British supplies.

Sterling fluctuation will do Irish lamb no favours. Should the euro/sterling exchange rate come close to parity, it could cost farmers up €15/carcass.

However, there are several positive trends in evidence.

Despite the recession, last year's prices finished around 1pc higher than 2008 levels -- a considerable achievement considering the financial turmoil.

Stronger

According to the Bord Bia Meat and Livestock Review and Outlook, lamb prices averaged 375c/kg deadweight, exclusive of VAT during 2009. This was due to stronger prices during November and December when returns were 10pc higher than 2008.

In France, the trend of declining lamb consumption was reversed for the first time in several years. This is attributed in part to a major marketing campaign by Bord Bia and its French and English counterparts.

The Agneau Presto Lamb initiative is a generic lamb promotion which does not differentiate between the countries of origin but seeks to grow lamb consumption in the key French market. This year is to be the final one of the campaign.

In addition, supplies of Spanish lamb are expected to be significantly down on previous years as their national flock dramatically contracts.

According to Bord Bia, tighter lamb supplies across the EU are anticipated for this year, with Britain also predicting reduced production levels. However, the total reduction should be offset by a slight increase in French production.

Meats from non-EU suppliers are expected to be a little higher than last year as New Zealand once again fills its quota, although Australia continues to focus strongly on the US market.

Bord Bia sheep trade specialist Margaret McCarthy said this year's predicted 4-5pc reduction in Irish sheep supplies would bring export volumes below 40,000t, assuming sales on the domestic market stabilise.

"The lower supplies of lamb expected from key players across Europe this year should provide a reasonable market environment for Irish lamb, providing sterling doesn't weaken any further against the euro," she said.

"The relative stability in lamb prices last year, despite the difficult economic environment, gives some cause for optimism that price levels could improve," she added.

"Overall, it could be a good year for sheep producers and lamb prices."

Irish Independent