Sheep quota prices slip, but could firm
By Simon Wragg
SHEEP quota lease prices have fallen by up to 20% in the three months since dealing opened, but could recover as the market enters the busiest period.
Arrival of quota forms from MAFF last week will encourage many producers to review their position, say brokers. A busy six weeks to meet the 4 February deadline for submissions is expected.
A rising lamb price and minor recovery in cull ewe values dampened initial interest earlier this year since this would reduce the value of sheep annual premium. And sheep prices continue to strengthen.
“A lot depends on what producers are expecting the premium to be. Early MLC predictions of £16 a head may be a bit optimistic if lambs values continue to firm,” says George Jenkinson of Townsend.
Values in some Continental lamb markets have risen significantly this year. Prices in Portugal, France, Greece, the Republic of Ireland and Spain have risen by 7%-46%, according to EU reference figures.
Against these increases, quota is currently trading to about £4-5 a head for leasing and £11-12 for purchase of lowland units.
Less favoured area quota has followed suit to £12 and £30 a head, respectively.
“I wouldnt be surprised if the market didnt come down a little,” says Mr Jenkinson.
Producers shedding excess culls, retained as a result of plummeting prices last winter, and retirements are likely to increase the amount of quota available, he suggests.
Cull numbers entering markets are increasing. Latest MAFF figures suggest an extra 295,000 head have been slaughtered in the 46 weeks to mid-November compared with last year.
As prices rise – up by £2 a head in many larger marts last week – more entries are expected.
However, holding back from the quota market could be risky, warns McCartneys Chris Jones.
“Last year saw supplies in the last few weeks rise from £4 a unit for leasing to settle at £7-8 by the close of trading.”
He advises any producer looking for quota to view leasing at £5 a unit to recover £15-16 in subsidy as a good investment rather than leaving income to be dictated at the whim of the market.
And theres likely to be less pressure from over-zealous vendors. A brief review of quota supply forms suggest few are expecting to see a hike in values. “Asking prices are fair,” he adds.
One change in trading is the volumes requested by individual producers, report brokers. This is increasing, mirroring the rise in average flock size.