Tight lamb supply makes for firm price outlook

Despite a dip in mid-January, finished lamb prices remain above early 2021 levels on auction market throughputs, which are about 10% up on the year.

Markets in the week to Tuesday 1 February saw the GB SQQ average rise by just over 2p/kg liveweight to 269.38p/kg on a throughput that was 8% higher than the previous week.

Deadweight prices in the week to 29 January dipped by almost 8p/kg to an SQQ average of 577.5p/kg on slightly higher throughput.

Jonny Williams, joint operations director of livestock marketing group Farmstock, said: “Trade is finely balanced and it appears to be a steady outlook for the rest of this month.”

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Deadweight buyers’ base prices are around the 570p/kg mark this week, with slightly stronger demand from exporters providing more competition. However, Mr Williams cautioned that overheavy and out-of-spec lambs needed to be placed with the right buyer in order not to attract heavy penalties – good information from farms to marketing groups is needed to achieve this.

At Shropshire-based Euro Quality Lambs, managing director Rizvan Khalid said supply was tight, because of a lack of New Zealand product. “The supermarkets are quite busy and prices are robust,” said Mr Khalid, whose business currently exports about 70% of its lamb kill, slightly lower than its pre-Brexit level of about 80%.

Export trade has been challenging because of the tight supply of lambs, he said. “The volume is down and the costs are up, but we are able to make a profit, it’s just not the same as before.” Markets for heavy lambs included the catering and restaurant sectors, he said.

He cautioned that while it was not an imminent threat, political issues could divert lamb into the UK market in future. For example, Australian beef imports to China were heavily restricted in 2021 because of political tensions between the two countries.

Strong cull trade

Cull ewes have maintained an average value above £90 a head through December and January – about £10 a head up on year-ago levels. This is despite a rise in numbers of about 10%.

About 7.5 million of 16.4 million head of lambs recorded in the June 2021 census were slaughtered in the second half of last year, about 600,000 fewer than the AHDB would usually expect based on that size of lamb crop and seasonal kill patterns.

Analysts expect actual kill was higher than published by Defra, based on other data sources, market dynamics and industry reports.

As a result, the AHDB forecasts the carryover from 2021 into 2022 to be about 3.9 million head. In addition to this, about 1.8 million new-season lambs will come forward in the first six months of the year.

It also said the official statistics on the ewe kill have been exceptionally low for the past 18 months. It is forecasting the number of ewes available to kill at 750,000 head, a marked increase on the figure recorded for the first half of 2021, but in line with long-term averages.

UK production from July to December 2022

Based on industry reports, high farmgate prices and optimism within the sector, the AHDB expects the breeding flock to have grown by about 2% for this year, a strong increase compared with the historic trend.

However, it suggests lamb availability between 2021 and 2022 will be similar and the ewe kill to remain stable, reflecting long-term average numbers.

The largest risk factor for production in 2023 and 2024 is the effect government environmental schemes and policy will have on stocking density, said the AHDB.