While sheep market performance has taken a hit in recent weeks, the trade in the year to-date has been relatively positive with average prices for lambs / hoggets recorded by Bord Bia at €7.20/kg.
Base quotes are running 60c/kg to 80c/kg above the corresponding week in 2021.
This equates to €12 to €16 on an average 20kg carcase. The increase in price is badly needed given the scale of the spike in input costs and as such, farmers will be hoping for a period of stability to grab hold of the trade.
A number of factors have contributed to buoyant market performance in recent times.
There has been a significant growth in the Muslim population in Europe over the last ten years, while reports indicate that the overall consumption of sheepmeat was also boosted by the COVID pandemic, with the effects of this still lingering.
Higher EU production
The strong appetite for sheepmeat has also occurred against a backdrop of higher production across Europe in 2022.
This is very evident in Ireland where the hogget kill is running over 197,000 head higher, although part of this increase is eroded from the lamb kill running over 36,000 head lower.
The EU Commission reports that for the first four months of the year, sheepmeat production was running 4.4% higher.
As detailed in Table 1, there is significant variation with growth in many of the main sheep producing nations while production continues to fall in important export markets such as Germany, Belgium and the Netherlands.
Lower production in some countries such as Greece, has been driven by milking sheep flocks cutting numbers in response to escalating input costs, which will have longer term consequences on volumes produced.
Global trade dynamics
The volume of sheepmeat entering the EU from New Zealand for the first four months of 2022 increased by 12% to 21,058t.
This still remains low in the context of historic import volumes and is partly driven by lower availability of sheepmeat for export and also by New Zealand apportioning over 50% of its export volumes to China in recent years.
Exports volumes from New Zealand in the period from January to April fell by in the region of 25,000t and was recorded at approximately 156,000t.
The shortfall in export volumes has had the greatest effect in China where import volumes worryingly reduced by over 40,000t to about 140,000t.
The fall in imports was also influenced by a resurgence in coronavirus cases and the return of lockdown conditions. It is hoped that the drop in Chinese import volumes recovers quickly as, if trading challenges persist it could redirect higher volumes of New Zealand sheepmeat to the EU.
However, reports indicate that New Zealand processors are slow to head down this avenue at present due to higher costs of transport and persistent challenges in securing freight containers and space on cargo ships.
Recovery in the Australian sheep flock maintains and this is fuelling higher exports. The European Commission reports that from January to April 2022 Australian sheepmeat exports were recorded in the region of 160,000t, representing a year-on-year lift of over 12,000t.
On the bright side, US imports of sheepmeat are reaching new heights with volumes absorbed by the market rising by over 15,000t to reach 60,000t.
As such it is important that Irish authorities continue to work hard on finalising trade negotiations to get volumes of sheepmeat moving to both the US and Chinese markets.
As mentioned at the start of the article a growing Muslim population is underpinning increased demand for sheepmeat.
This is especially evident around Islamic religious festivals, which are now taking place in the first half of the year when supplies are at their tightest level.
Festival dates move forward each year by 11 days due to differences between the Gregorian and Islamic calendars. The religious festival of Ramadan is the first up in the calendar in 2023 and starts on Wednesday 22 March and finishes on Thursday 20 April.
Demand is typically concentrated to the start and end of the festival, with fasting limiting demand in between.
Demand in mid-April will be strengthened however by Easter with Easter Sunday falling in 2023 on 9 April. The two festivals have taken place in close proximity in recent years and boosted demand and farmgate returns in 2022.
The most important festival in terms of increasing throughput is the Islamic religious festival of Eid al-Adha which takes place from Wednesday 28 June to Saturday 1 July.
These dates can be subject to slight change and if so should only move by a day or two.
This year’s Eid al-Adha festival underpinned the largest weekly sheep kill for over 10 years (over 78,000 head) with the festival responsible for the largest sheep kill in each of those years, with the exception of 2019 due to the Beef Plan factory blockade.
The fact that supplies across Europe are tightest in the first half of the year, combined with the three religious festivals falling within this period and no great recovery expected in New Zealand sheepmeat imports, should deliver a platform for positive market performance again in the first half of 2023.
There is one potential cloud on the horizon and this is the spending power of consumers, taking account of rising inflation.
The religious festivals undoubtedly offer increased demand but should not be the sole factor in planning breeding dates.
The farm’s breeding date should continue to be influenced by how many resources it has in terms of its ability to match grass supplies to nutritional requirements, labour availability and housing facilities, as well as carefully considering the market forces.
For some it may be amenable to change the lambing date slightly to have a higher number of sheep ready for these festivals, while for others, targeting these dates will put undue pressure on the system and add significant expense.
Decisions should be assessed while taking in to account that fertiliser, concentrate and fuel costs are all likely to remain at an elevated level.