Lamb prices must rise by 30p/kg live weight for the average producer to break even, and by 71p/kg to reach a sustainable commercial return.

That was the bleak message from Hybu Cig Cymru (Meat Promotion Wales) on the opening day of the Royal Welsh Show as 42 sheep breeds competed for show ring honours.

Rees Roberts, HCC’s chairman, said the organisation’s latest research indicated that a combination of low market price and rising production costs threatened the long-term future of the Welsh sheep industry.

Mr Roberts claimed that the position had been exacerbated by an unjustifiable increase in lamb imports at a time when home-killed supplies were plentiful. 

Lamb consumption in Wales remained robust – sales had risen by 12% in the past year compared with 7.5% in the UK as a whole – but an HCC survey showed that little of the 13% increase in expenditure ended up in farmers’ pockets.

“In 2006 our farmers were receiving 47% if the retail price/kg, this year the figure seems likely to fall below 45%,” claimed Mr Roberts.

Producers were selling more value added quality lamb but farmgate prices were edging downwards, so they were being forced to keep running to stand still.

Prys Morgan, HCC’s industry development manager, said the survey showed that the average cost of producing lamb in Wales stood at £1.43/kg liveweight, while the average return was £1.13/kg.

“This survey indicated that the hypothetical average farm needs an extra £11.40/lamb to break even, or £26.98 more for a 38kg lamb to operate successfully without subsidy,” Mr Morgan suggested.

The figures showed a huge variation in production costs. On the third of farms with the highest inputs fixed costs averaged 99p/kg and variable costs 72p/kg of live lamb sold.

The all-farm averages were 70p/kg and 59p/kg, but on the third of units with lowest costs both fixed and variable charges averaged 48p/kg.

It was essential that lamb producers continued to strive to utilise the latest technology to control production costs, but even the most efficient flocks needed higher prices.

To ensure a vibrant and sustainable Welsh sheep industry the supply chain from farm gate to plate must recognise its responsibilities, added Mr Morgan.