Prime lamb prices remain subdued
Although very similar to 2017, prime lamb prices continue to trail last year’s levels by 8%, according to the latest market analysis by Quality Meat Scotland (QMS).
The number of lambs slaughtered in the UK between May and the end of August was up nearly 5%, reflecting the effect of weather on lamb production in 2018 compared to 2019. Auction market throughputs through September continue to run ahead of last year.
This extra volume of prime lamb along with higher carcase weights will have constrained market prices.
However, according to Stuart Ashworth, director of Economics Services with QMS, the expectation is that the 2019 lamb crop will be lower than last year on the back of a 3.9% reduction in the UK breeding flock reported in December 2019.
“Publication of the English June 2019 census results support this expectation by reporting a decline of 1.5% in the English lamb crop,” said Ashworth.
“Given the higher levels of lamb slaughterings so far this year, this would suggest a tightening of prime lamb supplies to come over the coming months.”
Trade data from HMRC shows a substantial reduction in deliveries of sheepmeat into the UK from New Zealand in the first seven months of 2019 and also significant increases in UK exports.
“This change in trade pattern reduced the quantity of sheepmeat on the home market by almost 9,000 tonnes in the three months to the end of July, more than offsetting the increase in the volume of sheepmeat leaving UK abattoirs and resulting in the home market being more tightly supplied,” said Ashworth.
“Nevertheless, to achieve this growth, exports did need more competitive pricing and hence pressure on the farmgate price to balance the trade opportunity with the supply available.”
According to Ashworth, updates of New Zealand sheepmeat prospects from Beef and Lamb New Zealand suggest that New Zealand will continue to have limited interest in the UK and European market.
“The initial expectations of their new lamb season, which began this week, is that their breeding flock has declined slightly as will their lamb crop,” said Mr Ashworth. “They do, however, expect slightly higher lamb slaughter as the need for breeding replacements adjusts slightly.
“However, they have seen export sales to China grow 18% in the past year to 37% of all their lamb deliveries, while deliveries to the EU have fallen 20%. New Zealand’s third largest export market, the USA, has also seen growth in sales and of the highest value cuts, lamb racks,” added Mr Ashworth.
These positive developments in China and the USA alongside the confused state of Brexit and implications for tariff rate quota flexibility, will limit New Zealand’s interest in supplying the UK and Europe in the short term.
“Thus, the building blocks of the UK market point towards some support for prime lamb prices, however there remains the significant destabilising risk of Brexit and it’s threat to tariff free access to the important European market,” concluded Mr Ashworth.