Outlook 2016: Sheep farmers advised to graze rather than conserve winter forage

Despite the current weakness of the lamb trade, ewe slaughterings remain at low levels and a large UK breeding flock looks likely to be carried through into 2016.

The October forecast for sheepmeat production in 2015 was for a 6% year-on-year increase, an overall rise of 15% since 2012, said Andersons director David Siddle.

“Costs of production typically range from £1.90-£2.20/kg liveweight. This compares with current seasonal average prices of £1.60-£1.80/kg, meaning most producers still rely on support payments to produce a profit,” he adds.

The adverse pound/euro exchange rate and continued difficult economic conditions in the UK’s main European markets are adding to market pressure, says Mr Siddle.

Lower global demand, most notably from China, means that the threat remains of more New Zealand exports heading to the EU and particularly the UK, due to the strong pound.

See also: Less than a third of Scottish livestock farms make a profit

A clear understanding of physical performance, variable and fixed costs and their relationship to lamb production costs is required, he advises.

“The key driver of profitability continues to be the level of fixed costs employed.”

Profitable producers typically look to optimise rather than maximise output from a significantly lower cost base.

“Too many producers are still fixed on maximising price per head, with little thought to the cost of achieving this.

“It’s not always easy to tease out this information, especially in a mixed farming system where many overheads are shared. Another approach is to ask how much cost could be saved by letting the sheep enterprise go, and see whether the gross margin would outweigh that figure.”

Most successful sheep enterprises will be a key part of the business on which management is focused, says Mr Siddle.

“Making more effective use of forage and moving away from long periods of winter housing and intensive indoor lambing will also be common themes.”