2013 outlook: Sheep

What does 2013 hold for UK farming? Farmers Weekly and farm business consultant Andersons have teamed up to provide an outlook. Today we look at sheep.

A larger, more productive flock should see domestic production increase in 2013, in line with a growing demand for exports.

Survey data as at June 2012 showed a 2% increase in the UK breeding sheep flock on the back of buoyant sheep prices, says Andersons consultant Oliver Lee.

“Autumn 2012 breeding sales continue to reflect optimism. Breeding sheep prices are generally just £5-10/head down on last year’s extreme highs.”

However, concern about falling UK consumption continues. High sheepmeat prices, changing eating habits and slim retail margins mean supermarkets are reluctant to devote much shelf space to the product, says Mr Lee.

“To date the fall in consumption has largely been at the expense of New Zealand lamb. However, a weaker euro may put some pressure on prices in the year ahead.”

Key points and management advice

  • Export growth potential in 2013 but currency an important influence

  • Keep things simple to contain fixed costs

  • Monitor ewe depreciation and pay attention to condition at marketing

  • Maximise production from forage

A backlog of lambs coming to the market has weakened prices. Higher numbers are likely to be carried through into 2013, which could dampen prices for the rest of the season. Overall, prices for 2012 are likely to be similar to 2011.

The peak in the profitability cycle could prove to be 2011-12 as costs of production, especially feed, continue to rise. “However, the sheep industry is a relatively light user of purchased concentrates. And we expect deadweight prices for the coming year to be similar to the past couple of seasons, at 370-470p/kg.”

High headline prices should not be an excuse to raise fixed costs, he adds. “Keep things simple – sheep is one sector that should not need too much capital.”

Maximising production from forage is one area worth investing in, he adds. “This will extend grazing, offsetting higher feed costs and improve fertility – a decent flock deserves good pasture.”

A keen understanding of ewe depreciation costs will help underpin profits, he adds. “Aim for an annual depreciation charge of £21-22/ewe, and send culls away while they have value, if necessary putting condition on from forage.”

Commentary based on Andersons’ Outlook 2013

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