By FWi staff

SHEEP producers face a precarious first few months to 1999, with domestic oversupply of lambs expected to meet uncertain overseas demand.

A backlog of finished lambs is forecast to come on to the British market, and is likely to delay any recovery in prices.

Poor weather and low returns have restricted sales of finished lambs prior to Christmas, and any sudden influx of sales will limit price increases.

Big numbers of sheep are likely to be sold during the first three months of 1999, said Lesley Green, analyst at the Meat and Livestock Commission.

Prices could recover to 1998 levels if demand recovers for meat and sheep-skins, although returns are unlikely to climb back to those seen in 1997, she added.

However, sheep producers may benefit from any decline in the value of Sterling following the launch of the Euro on 1 January.

That would make exports more competitive and help overcome the fall in overseas demand caused by the plight of the Russian economy.

Russia, a traditional big buyer of British skins, is unlikely to re-enter the market soon but a weakening of the Pound could open up alternative export markets.

European Union food aid to Russia in the first three months of 1999 could also help boost the market.

The aid should remove some of the glut from the domestic market but any trickle-down benefits to farmers are likely to be small.