24 May 2002

A MOREPOSITIVEOUTLOOK

WITH arable farmers struggling to adjust to plummeting cereal values and prices of £60/t forecast, sheep producers are facing a more positive outlook.

The UK sheep meat industry is worth more than £1.5bn on the retail and catering market. Although live exports have been almost killed off since foot-and-mouth, carcass trade to Europe and beyond still represents about 30% of total output.

The export trade has, however, been adversely affected by the low value of the k which is still only worth 62p. A rise to 68p could put almost 10% onto export values overnight.

However, prices for new season lambs are 20-40p/kg deadweight better than the equivalent period a year ago. Current new season lamb quotes are about £2.80-£3/kg dwt with trade in live markets also bringing more competition into the system.

The resumption of live exports on a larger scale later in the season would lift prices and with the national flock predicted to be 10% smaller than pre-F&M levels, supplies will be tighter.

Another bonus comes from reform of the EU sheep regime which has moved to a flat rate system, rather than payments based on average EU sheep values including coefficients, stabilisers, first and second advances and balancing payments.

This will result in a basic premium of £13/ewe with a further 62p/ewe being paid into the National Envelope.

It remains to be seen whether DEFRA will use the National Envelope for a quota buy-up scheme or will scale back ewe premiums to about £12.40/ewe and use the balance to top up the National Envelope fund.

Farmers in Less Favoured Areas should receive payments close to £17/ewe including the LFA supplement.

Private storage aid is also being retained which may help put a bottom in the meat market should prices collapse.

For producers with breeding sheep to sell, a major question mark remains over the extent to which DEFRA will seek to impose new biosecurity and other rules on seasonal sales. Many of these auctions are held on grassland sites with few disinfection facilities and it may not be economic for some to continue.

Early indications are shearlings/gimmers will be in demand and private treaty sales are indicating strong enquiry for all categories of breeding sheep.

Well bred Mule replacements are expected to be at a premium and once the selling season is underway, breeders could see returns of more than £70/head for the right types with ewe lambs also moving up in value later in the season.

Finished lamb prices are expected to remain relatively firm throughout the trading season and cull ewe values have also improved. Well finished culls have been fetching at least £35/head and with the relaxation of licensing restrictions, more demand is expected to return for grazing ewes later this year.

Providing that seasonal breeding sheep sales return to a more normal pattern, pedigree tup breeders should also enjoy a better year. Many producers held back from tup replacement during the F&M crisis and could be looking to top up flocks with younger, high quality replacements.

Sheep feed prices and grazing rents should also decline in line with the drop in arable returns, helping producers look forward to a better trading season. &#42

Although live exports have been almost killed off since foot-and-mouth, carcass trade to Europe still represents 30% of output, says Peter Crichton.

&#8226 Firm finished prices.

&#8226 Better cull trade.

&#8226 Tups in demand.