Sheep farmers can look forward to the current buoyancy in markets continuing for at least quarter one of 2021 and possibly throughout the first half of the year.
This was one of the key messages delivered by Seamus McMenamin, Bord Bia sheepmeat and livestock sector manager, at the organisation's Meat Market Seminar on Friday morning.
Seamus outlined how EU sheepmeat production declined by 3% in 2020, with an additional 1% drop in production forecast for 2021.
Of great significance, there was also a 4% drop in sheepmeat imports into the EU, primarily due to New Zealand only utilising 46% of its tariff-free quota and UK exports to the EU reducing by 12% on 2019 volumes.
Sheepmeat imports into the EU are predicted to reduce by a further 3% in 2021.
This level of imports from New Zealand is the lowest level since the quota was negotiated and is being driven by the country targeting the Chinese market, with an increasing volume of sheepmeat exports and tighter domestic supplies.
Seamus cautioned that there was a drop-off in New Zealand exports to China in the latter half of 2020 due to increased pork availability, but this rebounded in November and is hopefully a strong sign of renewed appetite for sheepmeat in China.
Lower UK exports
The volume of sheepmeat exported from the UK to the EU is expected to reduce significantly during the first quarter of 2021.
While the UK sheep sector will benefit from avoiding tariffs on sheepmeat exports, its exit from the EU means it will face increased costs of doing business.
Along with this, logistical challenges in moving product due to transport disruption and increased paperwork is expected to curtail volumes of sheepmeat moving into EU markets during quarter one of 2021.
Leaving aside these challenges, the UK is also expected to focus more on servicing its domestic supply to account for lower levels of imports.
A 4% decline in the UK breeding flock in 2021 is expected to bring about a further decline in the number of hoggets carried forward to 2021, which Seamus says will further hit short-term supplies. UK production is forecast to decline by 3.4% overall in 2021.
Tighter Irish supplies
Seamus also predicts tighter supplies on the Irish market for at least the first quarter of 2021 and leading well into quarter two.
He predicts the carryover of hoggets available for slaughter in quarter one of 2021 to reduce by some 90,000 head to in the region of 550,000 head.
This is being influenced by higher lamb throughput in 2020 and greater retention of ewe lambs at farm level.
Imports of sheep from Northern Ireland are also predicted to tighten in quarter one of 2021.
Seamus recapped on positive performance for the sector in 2020, with sheepmeat export volumes increasing by 4% to reach 75,000t, while the value of these exports increased by a sizeable level of 12% to reach €360m.
This increase stemmed from higher volumes moving into EU markets, with exports to the UK declining by 17% and exports to non-EU destinations reduced by 9%.
While export volumes reduced, the value of product moving increased significantly, meaning the value of exports to the UK increased by 5% while the value of exports to non-EU destinations increased by 26%.
2021 price prospects
In conclusion, Seamus expects the trade will hold robust throughout quarter one of 2021.
Easter and Ramadan are also falling within two weeks of each other in early April and it is likely that this will keep a strong floor under the trade leading into quarter two.
He said the focus will remain on the EU market and capitalising on the opportunity to displace UK supply.
Longer term, Seamus cautioned of a possible recovery in New Zealand imports into the EU, with performance in EU markets dictated by the supply-demand balance.
China will continue to influence global sheepmeat demand and Seamus says finally securing access to the Chinese and US markets would provide a wider scope for Irish processors to expand their customer base and achieve a greater balance in demand for different carcase components.