Ewe premium to save sheep farmers' profitability in 2017
After a 3% gain this year, Teagasc economists forecast that Irish sheep farmers’ gross margin will continue to grow at a rate of 4% next year. This is despite a negative outlook for Irish and EU lamb prices, backed by a complex economic scenario.
On the one hand, global lamb supplies are expected to tighten, with Australia and New Zealand cutting their production. This is likely to push international prices up. But, in Europe, Irish lamb will be undercut by British producers made more competitive by the weak sterling exchange rate, and by beef becoming cheaper.
The weaker pound sterling will put downward pressure on the price Irish exports to the French market can expect to receive in 2017
“The UK is the largest lamb producer in the EU and is Ireland’s principal competitor on the French market,” Teagasc’s Kevin Hanrahan and Anne Kinsella wrote. France is the main market for Irish lamb, absorbing 38% of our exports. “The weaker pound sterling will put downward pressure on the price Irish exports to the French market can expect to receive in 2017. Our forecast is that lamb prices in 2017 will decline by 5% on the 2016 level,” the authors added.
Input costs are expected to decline, driven by the low fertiliser prices observed recently, but not enough to make up for the lamb price drop.
This should eat into sheep farmers’ profitability, but when the new sheep welfare scheme is factored in at the rate of €10/ewe, Teagasc’s estimate is that their gross margin will increase by 4% to €568/ha.
Teagasc's forecasts are based on mid-season lowland lamb production.