25 September 1998

LOWPRICES, HIGHSTERLINGSTERLINGS

What are the prospects for

exports of British lamb this

year? MLC sheep strategy

manager David Croston

considers the potential

DESPITE the strength of sterling, lamb carcass exports to European markets in the first eight months of this year have been maintained just below last years levels.

However, SRM regulations introduced on January 1 this year restricted export of whole ewe carcasses. This had a particularly damaging effect on our export trade to France, which was reflected in low ewe prices for British farmers.

The MLC, along with industry organisations, has been pressing government to amend the SRM regulations to allow whole ewe carcasses to move under seal to EU approved cutting plants in France were French SRM regulations are then followed.

At the time of writing, a positive outcome is anticipated. Although exports have been maintained, this has been at the expense of low prices paid to producers, while the strength of sterling continues to be a concern.

So what are the export opportunities for British lamb in Europe this autumn? Opportunities of any significance are confined to three north European markets, France, Belgium and Germany and south Mediterranean markets where there is the opportunity to sell lightweight lambs. In each of the markets we compete with New Zealand imported lamb – chilled and frozen, indigenous supplies and small numbers of sheep from eastern Europe.

France

Demand in France is for a similar specification to the UK multiples, but distribution channels from farmer to consumer are completely different and more complex. There are a number of large independent cutting plants which supply major retailers, while the volume of lamb cut and retail packed in these plants is much lower than in the UK.

Most retailers prepare retail packs in-store and carcass/primal cuts remain the major business in volume terms. It is therefore difficult for British plants to deal directly with retailers, which reinforces the commodity element of the business.

The French industry has introduced full cattle traceability since the BSE crisis, and full lamb traceability has been introduced this year. All lambs are individually tagged on-farm and issued with a unique national identity before they leave the farm or become breeding adults.

French retailers use this information to inform consumers where the animal was born, reared, slaughtered and whether it is a lamb or ewe.

British lamb held 27% share of the market in 1996 and therefore the move towards traceability by the French industry provides a threat to the position of British lamb in this market. MLCs Sheep Strategy Council has requested that the MLC gains full understanding of the implications of this challenge and develops an appropriate tagging scheme – launched this autumn following an NFU initiative. As a result, lamb exporters will be able to source tagged lambs and provide their customers with details of farm of origin. This will help to secure French customers.

Consumer research has been undertaken in France and is being incorporated in an overall promotional plan for the French market.

Meanwhile, retaining and developing access to this important market is a high priority. This is being achieved through the MLC Paris Office, where Remi Fourrier keeps close contact with our customers, French industry organisations and French government officials.

Belgium

The Belgian market is a small but important outlet for our product, which has reached a fine equilibrium in terms of the suppliers and customers. Many business relationships are long standing.

Although the market is relatively small, it is strategically important. If the small volume exported to this market – 8100t last year – were to be displaced it is likely that it would be sold by British exporters to France at a discount. This would increase competition in that market and provide cheaper raw materials for the French cutting plants in the north which could the supply Belgium and Germany. The MLC strategy has been to promote British lamb to Belgian consumers to hold market share and this will continue.

Germany

Germany is now the second largest market for British lamb. This has arisen through the BSE crisis and the demand of German consumers for lamb in preference to beef. There are 3.5m foreign workers in Germany, mainly Muslims of Turkish origin and as Germans have consumed more German lamb, Turkish importers have increased supplies from Britain.

The German market is high-risk, with many Turkish importers developing business and then disappearing, leaving British exporters exposed to high losses. There have been few promotional possibilities, but through a trade agent and knowledge of this market, the MLCs export department has been able to alert exporters to likely risk and provide assistance on the ground when needed. This situation is unlikely to change.

Mediterranean markets

Volumes exported to these markets are low compared with the main French market but they are strategically important because of the small lightweight lamb they require.

It is estimated that this year there will be 0.7m lambs slaughtered below 12kg and 0.5m lambs slaughtered at 12-13.9kg this year.

There is a limited and weak demand on the British market for these carcasses. This years poor season highlighted the problems these lambs caused on the home market. Producers, in anticipation of better prices which failed to materialise, held them back with detrimental effects on fatness. This type of lamb does not command a high value on the domestic market.

Maintaining exports of these lambs is therefore a priority because they are a product of the less favoured areas and strategically important to the long term sustainability of these areas.

New market opportunities

Export opportunities to other member states are limited. The MLC export department led a mission to Scandinavia last year with some success, but the market opportunity is small. Austria is a small market with little prospect for growth and already being served by British companies. Outside the EU, Switzerland is the notable market, but like Austria it is well serviced by existing British exporters and limited by import quotas. &#42

British lambs market share of major markets in 1996

Consumption Self-sufficiency % share taken by

kg/capita 000 tonnes % British lamb

France 5.3 306 50 27.1

Belgium 2.1 22 18 37.2

Germany 1.2 95 95 9.6

Spain* 6.6 248 97 3.3

Italy * 1.7 99 55 6.9

Portugal 3.7 37 70 12.4

Greece * 13.6 142 87 1

UK 6.3 371 102 60.9

*1995 data

Source: MLC Economic Services Meat Balances