Farm Ireland
Independent.ie

Wednesday 19 December 2018

Sheep sector proves its resilience

Sheep prices remain ahead of the five-year average despite the impact of the severe winter and summer drought, writes Declan Fennell

Declan Fennell

Irish sheep meat exports for the first half of 2018 have performed well with a 4pc increase in value. For the period January to June, a total of €149 million or some 24,204 tonnes were exported.

In quarter one, Irish sheep meat export volumes were almost on par to 2017 levels at 16,397t. The early Easter this year falling on April 1 would have contributed to the drive in exports in the first quarter.

However the extreme weather conditions of spring 2018 had an impact on lamb thrive and peak supplies of new spring season lamb did not materialise till mid/late summer.

This saw Irish sheep meat exports slip in quarter two (mainly in May/June period), culminating in an 8pc reduction in exports for the first six months of the year.

With increased throughputs of new season lamb during the month of August - and the expectation that weekly throughput figures will maintain the current levels of supply for the remainder of the year (circa 65,000 head) - export volumes for the third and fourth quarter will return to growth.

Notwithstanding the higher input costs which were incurred due to the spring and summer extremes, farm gate price returns have performed well.

At €5.33/kg, average sheep prices (January - mid-September) were some 30c/kg above the five-year average of €5.03kg and some 42c/kg above 2017 levels which stood at €4.91/kg.

The table provides some interesting insights on sheep supplies and farm gate returns for January to April.

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The data excludes ewes and rams, so throughputs are exclusively hoggets.

In 2015 and '16 average hogget price returns stood at €5.56/kg and €5.48/kg respectively.

This was against a backdrop of tight supplies which were below the 640,000 head threshold. However, a strong carry-over of hoggets into 2017, equivalent to an additional 80,000 head on the previous year resulted in a downward effect on farm gate returns.

In the period January - April 2017 average prices dipped by 11pc equivalent 58c/kg when compared 2016 levels. Sheep throughputs for January-April 2018 period were almost identical to 2017 figures (720,000 head versus 726,000 head in 2017).

This pattern of a strong carryover of hoggets would normally have a negative effect of prices.

However average prices for the first quarter rallied and strengthened to a point that they reached a five-year high of €5.58/kg, up 68c/kg on the previous year.

So why did Irish farmgate prices hold strong despite strong throughputs and a weak sterling which made UK exports more competitive in our main export markets?

The heavy snow falls which Ireland experienced in late February disrupted the movement of sheep destined for marts/export plants.

Furthermore the cold weather situation which repeated itself on March 17-18 led to a tightening in supplies.

This coincided with a period when orders were being placed in the run up to Easter week.

The UK had a difficult spring too, the net effect being that their lamb crop was back 5pc equivalent to 700,000 head.

With more domestically produced lamb remaining in the home market as a result of UK retailers placing a stronger emphasis on sourcing British, overall UK exports were back 30pc. Furthermore NZ imports were back by 9pc.

New Zealand continues to focus on other export markets such as China. The 2017/2018 exports to China grew by 30pc to 161,000 tonnes, while trade to the EU was up just 2pc to 107,000 tonnes.

Declan Fennell is sector manager Sheep & Special Marketing Initiatives at Bord Bia

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