Sheep markets across Europe continue to benefit from reduced volumes of New Zealand sheepmeat entering the market. The latest European Commission estimates show that New Zealand only filled in the region of 36% of its historical tariff-free quota of approximately 228,000t in 2021, the lowest volume on record.

The reason for describing the quota as historic is due to the fact that this was split in 2021 as a result of Brexit, with 114,000t attributed to the UK on leaving the EU.

The EU data shows that, in 2021, New Zealand exported 52,077t to the EU and just 29,103t to the UK.

This situation is unlikely to change significantly in 2022 as current market dynamics stand.

The increased fuel costs will favour the economics of targeting markets closer to home

Supply forecasts in New Zealand are down 1% to 2% for the 2021-22 lamb crop and China is expected to continue to dominate New Zealand’s export portfolio, accounting for over 50% of total export volumes of in excess of 400,000t.

The increased fuel costs will also favour the economics of targeting markets closer to home while supply chain challenges in securing freight containers, initially caused by the coronavirus pandemic, is expected to last for most of 2022.

Sheepmeat prices have also recovered in New Zealand and while European prices are high, other destinations have closed the gap that once existed.

Data published by Beef and Lamb New Zealand shows that the US is the highest value market with a tonne of sheepmeat recording an average export value of NZ$14,000 in 2021 (€8,930/t).

This compares to about $12,500/t (€7,974) in the EU and $9,000/t to $10,000/t (€5,743/t to €6,383/t) in Middle Eastern, Asian and African markets.

European prices

Looking closer to home production in EU countries in 2022 is predicted to fall by 2% (EU flock reduced by 3.7% in 2021), while UK production is expected to recover by 1% to 2% following significantly lower throughput in 2021.

As reflected in Figure 1, France continues to record the highest farmgate price with Bord Bia price analysis showing lamb prices for the week ending 26 March at €7.57/kg.

The Irish price of €7.05/kg for the same week is running about 20c/kg behind the corresponding week in 2021

Reports indicate prices have strengthened further on the back of buying for religious festivals of Ramadan and Easter.

The Irish price of €7.05/kg for the same week is running about 20c/kg behind the corresponding week in 2021 but this differential has also narrowed since then.

British prices are running 49c/kg behind 2021 levels, as are Northern Ireland prices with farmgate returns influenced by a higher carryover of hoggets and throughput running up to 10% higher.

There are also strong signals this week that prices are recording upward movement with liveweight prices firming by 5p/kg to 10p/kg.

Spanish prices are running almost 60c/kg higher and this has been fuelled by strong demand in EU markets.

Global supplies

The global sheepmeat supply balance is not expected to change significantly in 2022. Australia is the only country from a small number of sheep-exporting nations to forecast a significant increase in production.

Meat and Livestock Australia is forecasting the national breeding flock to grow by 4.9% in 2022 to 74.4m head.

This prediction is based on more favourable forage supplies and combined with average carcase weights expected to rise to almost 25kg will underpin a 7% increase in production.

The increased production is not expected to create a surplus in sheepmeat on global markets, with import demand in China growing by almost 50,000t in 2021 (to almost 450,000t), while production in the US market continues to fall sharply.