19 July 2002

UKFLOCKSATCROSSROADS

By Peter Crichton

ALTHOUGH the domestic outlook for finished sheep remains reasonably firm, the UK sheep industry continues to be dominated by the export market.

Following the first cases of foot-and-mouth last year, live exports ceased and currently most export business is done in carcass form. Later in the season, however, when lighter store lambs hit the market, live exports could bottom into producer returns at a time when they are most needed.

Before F&M, British sheep exports accounted for 27% of production. This included light lambs of less than 14kg deadweight – which do not have a ready market in the UK – most of which were exported live to countries such as Spain, Portugal and Italy.

France remains the largest market for British sheep and accounts for approximately 70% of total exports, which are equivalent to an estimated 100,000t/ year.

Most export buyers are looking for lean, E, U and R grade lambs ideally in the 2 to 3L range with a target average deadweight of between 17kg and 20kg.

Recent MLC figures have shown about 74% of UK lambs are now falling into the U and R conformation class and 70% are in the 2 to 3L fat class.

There are still, however, almost 30% at 3H and over with a higher proportion of over-fat lambs being produced in Scotland and Wales than in England.

The strength of the k also remains a key factor influencing prices and it has risen in value over the past eight weeks from just under 62p to 64.5p.

At the same time, the UK breeding flock has continued to decline from a 20m high in 1998, to an estimated 17.5m now.

High levels of slaughtering during the F&M crisis and lack of producer confidence are cited as the main reasons for this. In the 2001/2002 quota period, a higher than average proportion of non-productive breeding ewes and ewe lambs were retained, which means fewer finished and store lambs will be coming on to the market this year.

Demand for other meats is also slightly firmer, with pork prices, in particular, higher than they were a year ago although poultry meat remains a competitive alternative on the retail counter.

Deadweight prices are holding reasonably firm at present with most quotes between 240p/kg and 255p/kg producing returns of between £45/head and £50/head for lambs in this category. Prices have risen from 145p last October to a peak just over 300p in early May. If seasonal trends are repeated this year, although prices may drop because of the greater strength of the k and reduced numbers, it is hoped late summer and autumn returns will be 20-30p/kg above the same period last year.

The sheep market remains highly valuable and is worth about £1.6bn in retail, catering and export sales.

David Croston, head of sheep strategy at MLC, has pointed out that lamb has to compete in a fast moving consumer market and is concerned that the demographic profile of lamb eaters is characterised by a significant proportion of over 45 year olds.

The MLC is continuing to research convenience and other meal solutions, which will improve demand for sheep meat in the face of challenges from the fast food sector.

This will allow the industry to be less reliant on the export market if any future F&M or other disease related restrictions are introduced.

French proposals, if ratified, to require the removal of spinal cords from all lamb carcasses over six-months-old could also have a serious effect on export value of UK lamb.

The industry needs to continue to look for additional outlets both at home and abroad to remain viable. &#42

The sheep industry must look for new outlets at home and abroad to remain viable, says Peter Crichton.

&#8226 Dominated by exports.

&#8226 Competition from other meats.

&#8226 Spinal cord removal threat