Lamb carcasses hanging up in abattoir© FLPA/John Eveson/Rex Shutterstock

A major retailer is understood to be close to launching a cost of production (COP) contract for lamb.

NFU livestock board chairman Charles Sercombe said the union had been talking to retailers for the past three years about how to deliver a COP contract.

“As a board we have been working desperately to get something in place. The negotiations are ongoing, but we are nearly there with one or two people.”

Mr Sercombe said delivering a workable lamb contract was more complicated that a dairy one, because retailers only took 40-50% of the carcass from the processor.

There was also debate about what the COP was given he had seen a range in costs of well over £1/kg.

Any contracts were likely to be for a small proportion of the lamb required by a supermarket and would probably be run on a pilot basis to see how it worked out, he said.

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Mr Sercombe said he realised that some farmers would not want to go near a COP contract as they would be unwilling to open up their books to processors and retailers.

However, he believed a contract would have the potential to take some volatility out for producers if a sustainable model could be delivered.

“I would certainly be prepared to lock-in some of my lambs on a COP basis,” he said.

Farmers For Action chairman David Handley said he too had been speaking to retailers about the possibility of a COP contract for lamb.

“It would have to be linked to the grades of lamb required by the customer and that any lambs that fell outside of that would obviously be bought on a market valuation,” he said.