TROUBLEINSTOREFOR FINISHED LAMBSFIND E
TROUBLEINSTOREFOR FINISHED LAMBSFIND E
Price prospects for finished lambs appear to be less exciting than this autumns store trade may suggest. Emma Penny reports
FEW sheep producers can have failed to notice this autumns high store prices either because they set out to buy lambs or were selling them. But will the high prices be justified? Are finished lamb prices likely to hold up?
According to MLC economist Duncan Sinclair, current high prices for finished lambs are a reflection of the summer, and are encouraging a buoyant store trade.
"Prices are high at the moment because there have been fewer finished lambs sold this season. During the first two weeks of August, numbers sold were down almost 20% on last years levels."
Mr Sinclair reckons this is down to several factors; a proportion of flocks have changed to later lambing, wet weather in June slowed lamb growth and hot, humid conditions in August were not conducive to finishing.
"That has meant fewer lambs have finished. It also means there is the likelihood of heavier marketings to come over the next few months."
He warns that an expected recovery in flock productivity due to good lambing weather will offset the fall in ewe numbers.
Mr Sinclair also points out that changes in the retention period mean more ewes will be used for breeding.
"It is now less attractive to keep non-productive ewes such as dry hoggets. The retention period ended on 16 May this year as opposed to the traditional beginning of March. That meant producers wishing to claim ewe premium has to retain ewes, missing the Easter market peak. Those producers are more likely to have put ewes to the tup, increasing productivity," he explains.
Last year, the BSE crisis meant that demand and prices rose, so finished lambs were marketed more evenly throughout the season. "Lambs were sold earlier as producers took advantage of good prices."
Drought also played a part last year, with keep being in short supply. Thats anything but the case this year, with plentiful forage increasing store lamb demand and price.
"There is a lot of grass around and fewer cattle to graze it since the BSE crisis. Also, more rain during the summer has meant that producers have excellent root crops."
As a result, average store lamb price is up £2-3 a head on last year, says Mr Sinclair.
But the price may fall later in the autumn as more finished lambs come to the market."The extent to which the finished lamb market falls mayl depend on how lambs come onto the market. If they are sold in an orderly fashion, prices may not fall far, but if a high proportion come onto the market at once, we are likely to see prices weaken," he warns
"If producers hold off buying stores until October, finished lamb prices may have weakened and the store average might follow suit. However, the availability of good root crops could encourage purchasing of longer term store lambs, which might see prices holding up better than the finished market."
For producers who have already bought store lambs at high prices, he warns that an adequate margin may prove elusive. "Besides the greater proportion of finished lambs to come onto the market, higher productivity in the rest of the EU and the strong £ will put prices under pressure."
In Ireland, the June census showed that there were 250,000 more lambs on farm than usual, and slaughterings are also behind predicted levels. There are more lambs on farm throughout the EU, he says.
The export market is also likely to be more difficult this year. If the £ retains its current value, or strengthens further, exports are likely to fall. "The light lamb trade is highly sensitive to currency valuation, and has been adversely affected by the exchange rate."
The MLC is planning an autumn push in an effort to increase home consumption. Its lamb promotion is to run on television and in conjunction with retailers until the end of October; last year prices strengthened during the campaign, he says.
But low finished lamb prices, and the availability of plenty of keep mean producers could be tempted to hold on for lambs for too long, warns Mr Sinclair.
"Farmers may be tempted to play a waiting game when they feel the finished lamb price is too low. The temptation is to maximise weight at sale time. But the danger is that lambs become too heavy and over-fat – and its a particular risk when there is plenty of keep."
He cautions that although heavy lambs may appear to be more profitable as a whole, when priced per kg they are likely to make less than the average.
"There is only a limited demand for heavier lambs. And those which are over processors weight limits may be severely penalised. Some processors dont pay for the additional weight above their specified maximum."
He advises producers to ensure their lambs fit within processor and supermarket requirements. "Target weight and finish level to ensure you have the widest number of buyers possible."n
FINISHEDLAMBPRICES
• Many still to be slaughtered.
• Price depends on orderly marketing.
• Meet buyers specs.
Producers buying store lambs at high prices must ensure they are finished to market specifications and are not allowed to become too heavy and over-fat – a risk with abundant keep – says MLCs Duncan Sinclair.
New regulations
New EU regulations forcing the removal of ovine offals after Jan 1, 1998 and a cessation of renderers subsidies may adversely affect finished lamb prices.
So warns MLC economist Duncan Sinclair, who warns that complying with the regulations will add cost to the abattoir. "This may have some effect on the price paid to producers but its difficult to predict at the moment."
Pressures are increased as renderers currently receive a government subsidy but this will be phased out next year, he says. "This will lead to higher charges for removal of specified offals.
"Renderers are now dealing with waste disposal rather than producing products such as tallow and meat and bone meal. They therefore have nothing to add value to, and the cost of disposing of offals will have to be borne by industry."
Abattoirs are likely to be charged more for collection. They may absorb some of this cost, but Mr Sinclair warns that it will probably be passed onto producers.
"The cost pressure will increase as the year goes on. It is difficult to say how this will affect prices as we dont know how it will be borne by industry. It may be that a pricing mechanism will be used, which will mean the cost is taken off finished lamb prices."