Sale prices for 2012 season lamb should be on a par with 2011 due to reduced supply at home and abroad.
UK sheep meat production is likely to stabilise in 2012, but imports from New Zealand are forecast to remain lower than usual.
“After many years of deflated prices and low producer confidence, the sheep sector continues to experience a resurgence,” says Andersons consultant Oliver Lee. “Both prime lamb and older sheep traded throughout the year above 2010 values, which in turn were significantly better than previous years.”
Higher producer returns have, however, fed through to retail prices. Demand (consumption by volume) fell by up to 25% during periods of 2011, although this may also be due to price-conscious retailers reducing shelf space. “If the product is not offered, consumption will naturally fall.”
Most farmers’ margins remain slim as production costs increase. “This is particularly the case in hill production systems where positive margins before area payments are rare,” he says. “The requirement to implement electronic identification (EID) with high accuracy is also likely to be a huge problem in the uplands.”
The sector is vulnerable to the impact of any negative changes in relative currency values on the carcase export trade to Europe. Another concern is the increasing skills shortage which is leading many businesses to question the ease of maintaining (or expanding) sheep enterprises. Improved prime lamb and cull ewe returns have also inflated the value of breeding stock significantly, in turn raising the capital demand of sheep enterprises.
Nevertheless, producers who are highly focused on production costs and achieve optimum market returns are achieving business growth, says Mr Lee. “Continued robust sheep prices will enable the very best producers to achieve sustainable returns, while allowing those exiting or scaling down to gain decent returns for breeding stock.”
• Lamb prices expected to hold
• Some concern over falling consumer demand
• Producer margins remain slim
* Commentary for this article is based on Andersons’ Outlook 2012. Copies can be obtained free of charge by calling 01664 503200 or it can be downloaded from the Andersons website – see ‘Publications’.
* The Andersons Centre will be running its popular series of spring seminars on the prospects for UK agriculture in more depth at locations around the UK in spring 2012. These briefings are aimed at farm business managers as well as professionals working with companies in the agricultural sector. Detailed overviews of each of the main sectors of UK agriculture will be covered as well as comprehensive discussion of the latest agricultural policy developments. For details go to the Andersons Centre.