Producers close to crisis point over lamb prices

Battle lines are already being drawn at auction marts around the country as sheep farmers and supermarkets plan their strategy for a prime lamb selling season that could have major implications for the future of sheep production in the UK.

Auctioneers are in total agreement when they say their prime lamb vendors are no longer making “empty threats” about getting out of sheep production.

Although prices at many of this week’s markets were still well up on a year ago – some about 30p/kg more than early June 2007 – auctioneers and farmers say rising production costs are biting hard into margins, with creep-fed lambs the most expensive commodity these flocks have produced for years.

But as lamb trade makes its transition into the first stages of the main selling season, supermarket buyers are already saying producers will have to be realistic about what they expect for their lambs or there will be consumer resistance and demand will slump.

Unhappy

Plenty of prime lambs were leaving the ring at 170-180p/kg at many markets this week and, although some local butchers were giving up to 200p, volume buyers made it clear they weren’t happy. Prices did ease at most centres and, with lamb numbers increasing, the supermarkets are poised to take advantage.

While no one is prepared to be quoted about what an “acceptable” prime lamb price will be as trade moves into the main summer season, 150p/kg is looking like the cut-off point. Returns below that could trigger the biggest upheaval the industry has seen for decades.

“Unless main season’s lambs leave a fair margin, we’re going to see a lot of sheep men get out of the job – and they are men that you’d never think would leave sheep farming,” said Lanark Auction Mart auctioneer Brian Ross.

His opinion was echoed by McCartneys auctioneer Clive Roads, who sold 2500 prime lambs at Ludlow this week to average 180p/kg. “There is plenty of competition for well-meated lambs at the moment, but if prices take a dive in mid-season, many farmers have vowed to get out,” he said. “Our cull ewe trade through all our markets continues to be strong, but it is worrying so many young ewes continue to be taken out of the system.”

Realignment

The realignment of the sheep sector, driven by rising costs and low returns, is already under way much earlier than expected. Comparisons with the exodus from milk are already being made.

The new Rugby auction mart at Stoneleigh has been trading since early May. Spokesman Vincent Davies said the 977 prime lambs forward this week averaged 177p – about 11p down on the week.

“Supermarkets are already trying to talk the price down, but this year’s unprecedented rise in production costs means farmers have got to be paid a price that leaves them a profit,” said Mr Davies.

This week saw the first sale of lightweight lambs at Kirkby Stephen, Cumbria, where the best – weighing 32-34kg – reached 150-160p/kg. Lighter sorts at 26-27kg were harder to cash.

“Gone stale”

But Kirkby Stephen’s main sale of prime lambs reflected the difficulties many north-country producers are facing trying to sell lambs that have “gone stale”.

“Lambs were selling from 170-200p/kg, but there were many plain lambs that had eventually reached 40kg but should have been there three weeks ago,” said auctioneer Stuart Bell. “They’d lost that fresh look and were down to about 150p.

“Supermarkets tell us 170-180p/kg isn’t sustainable. Every producer has a cut-off point and knows what his lambs must make to leave some profit. This is make or break year for many sheep producers.”