Outlook 2026: Sheep market strong but expansion unlikely

For the second year in a row, we have seen the UK breeding flock decrease, with Defra’s December 2024 survey reporting a 5% fall to 13.1 million ewes.

That is a drop of 600,000 compared with the previous year, which had been the lowest figure since 1996, and the downward trend looks likely to continue, says Andersons director David Siddle.

See also: Tesco targets sheep sector to capture farm data

Despite strong prices and margins, expansion appears unlikely in the near term as producers adjust to policy change, ongoing drought in many regions and renewed concerns around disease, particularly bluetongue.

Tight supplies have kept both lamb and cull ewe prices at historically high levels.

Export demand, particularly from Europe, where the breeding flock is also contracting, is providing strong support as domestic consumption weakens.

Cull ewe demand remains particularly robust from the halal and food-service sectors, with heavy cull ewes in many cases achieving values above prime lambs.

In 2025, old-season lamb values failed to match the exceptional peaks of 2024, constrained by reduced domestic demand as shoppers traded down to cheaper meats.

However, new-season lambs commanded good prices through much of last summer, as drought slowed grass growth and lambs were slow to finish.

As supplies increased later in the season, prices eased back but remained above those of 2024.

Free-trade agreements with New Zealand and Australia have improved these countries’ market access to the UK, but to date, tighter supplies due to drought and continued strong Chinese demand have prevented significantly higher volumes heading this way.

Outlook for 2026

Looking to 2026, the English June 2025 census data points to a continued decline in the flock.

Producers seem to be taking advantage of the exceptionally strong cull ewe trade and perhaps also choosing not to retain as many replacements, preferring to cash them in while the prime lamb market remains strong.

As a result, the number of ewes going to the tup in autumn 2025 appears set to reduce, limiting the size of the 2026 lamb crop.

Home consumption is forecast to remain under pressure, and exports, in particular to Europe, are likely to be a key determinant of price in the year ahead.

Sheep enterprises are generally less reliant on concentrate feeds than other grazing livestock sectors. Where concentrate feeds are required, costs should be £10-£15/t lower in the year ahead.

However, many farms will go into 2026 with depleted forage stocks and ewes in a less-than-ideal condition following the drought, hence more concentrates may in fact be fed.

Lambing percentages are also often affected following a drought year and this may have an additional effect on the size of the 2026 lamb crop.

The majority of the labour input to most sheep flocks tends to come from family members rather than employees.

This offers some protection from the difficulties other sectors are experiencing with recruitment and rising paid labour costs.

Living costs for everyone are increasing, however, and this will put pressure on the level of future drawings family members may require from their businesses.

In summary, we remain positive about sheep prices and margins for the year ahead.

With the demise of the Basic Payment Scheme, in England at least, these better returns could not have come at a better time.