The sheep trade has picked up where it left off in 2020 and recorded one of the strongest starts to a year’s trading on record.
Farmgate prices are running from 80c/kg to 90c/kg higher than those recorded 12 months ago or typically €17 to €20 higher on a finished lamb.
Similar prices have been achieved in recent years at different periods throughout the spring.
The main difference now is that prices have increased to this level at a much earlier stage of the year. The sheep sector has benefited from relatively tight supplies across Europe and increased retail demand spurred on by COVID-19.
Among the key drivers of lower supplies in key export markets was New Zealand sheepmeat exports to the EU falling by a further 12% on 2020 levels to their lowest level on record, while exports from the UK to Europe were also reduced.
Sheep prices in 2020 were recorded at an average of €5.24/kg, up 48c/kg on 2019 levels. However, market performance in 2019 was blighted by Brexit and reduced 29c/kg on the previous year.
Therefore, a more accurate reflection of market performance is a comparison to the five-year average, which shows prices running 34c/kg or 6% higher.
The strong appetite and higher prices on offer has provided processors with an ideal trading environment while, from a producer perspective, the last year was relatively positive for the 2020 lamb crop in terms of litter size, reduced mortality at lambing and production performance, all of which boosted volumes available for export.
It should be noted that the domestic market also performed strongly in 2020, with a resurgence in the butcher trade an added positive.
The final figures published by the Department of Agriculture for 2020 show lamb/hogget throughput increasing by 96,158, while the ewe and ram kill reduced by 21,639 head. The net result was throughput finishing the year 74,519 head higher to reach 2,884,480 sheep.
This follows a dip in throughput in 2019, as reflected in Figure 1.
This reduction in the 2019 kill provided the platform for higher throughput in the first quarter of 2020, with hogget throughput increasing by 40,786 head to reach 793,066. While the kill increased significantly on 2019 levels, it still fell short of the higher throughput levels recorded in 2018 and 2017, as detailed in Table 1.
The table breaks down the kill by animal category and details some interesting production trends. Lamb throughput was recorded at its highest level in over a decade, while the ewe and ram kill reversed the worrying spike in throughput recorded in 2017 and 2018. The 21,639 head drop in the kill from the year previous to 386,605 was the lowest level of throughput for six years.
While the lamb kill finished 2020 at 55,372 head higher, it was running in the region of 100,000 higher than 2019 levels before running out of steam from October onwards. While throughput is at present running at a relatively strong level, it is failing to satisfy increased appetite. It is likely that throughput will, at best, equal levels recorded in early 2020, with the more likely scenario of throughput levels running at a lower level.
The one factor which could have a marked influence on this is if prices continue to increase and encourage farmers to draft a percentage of the higher numbers of ewe lambs carried forward to 2021.
Volumes of sheepmeat entering the EU from New Zealand will also continue to come under pressure
Reports on the probability of this occurring are varied, with some producers also afraid of potentially missing out on a repeat of the vibrant breeding sales witnessed in 2020.
Brexit disruption is at present curtailing exports from Britain to EU markets. This will rectify itself in time, which may temper demand, but it should not derail the present strong trading environment.
Volumes of sheepmeat entering the EU from New Zealand will also continue to come under pressure, with industry sources predicting the 2020/2021 lamb crop to decrease by over 4%, along with a 10% decline in mutton throughput.
NI remains a key supply source
The number of sheep imported from Northern Ireland (NI) for direct slaughter in 2020, at 378,632 head, reduced by 11,418. This is the lowest level for over five years, as reflected in Figure 2.
This reduction was cancelled out by a greater increase in the number of store/breeding sheep imported on to farms. This figure stood at 56,386 head at the end of October.
The increase of 64,430 head on 2019 levels could increase even further once the final figures for 2020 live sheep exports are revealed
NI factories also recorded their highest level of throughput since 2015, with the annual kill recorded at 466,651. This represents an increase of 51,332 head on 2019 volumes.
Northern lamb prices averaged £4.51/kg in 2020 (5.01/kg), up 52p/kg on 2019 levels.
When slaughterings and sheep exported from NI to Ireland are combined with live exports of 63,325 head to Britain, total throughput is running in the region of 964,994.
The increase of 64,430 head on 2019 levels could increase even further once the final figures for 2020 live sheep exports are revealed.
The strength of sheep prices in recent months in particular is a highly welcome aspect of the trade.
As detailed above, comparing it with 2019 trade levels can exaggerate the price increase, with the truth being that the primary producer needs a return in excess of €6.50/kg for early-season lamb and €5/kg for main-season lamb to cover costs and generate a small margin.
With CAP reform moving to the formation stage in 2021, it is vital that a policy is put in place for sheep that can capture and build on the current confidence.
Central to this will be the replacement, or continuation, of the Sheep Welfare Scheme with a programme that provides a worthwhile payment while continuing to deliver tangible benefits in return.
The EU Farm to Fork strategy will have a profound effect on shaping agriculture in future years
Access to grant aid funding is also vital for a sector which has struggled in recent years to generate the margins necessary to improve farm infrastructure and take advantage of new technologies and developments in animal handling facilities.
The EU Farm to Fork strategy will have a profound effect on shaping agriculture in future years. It is dead set on using organic production as a standard for achieving this policy, which is concerning, given there is not a market for organic production.
With some tweaking, the sheep sector can align itself easily with such a strategy without making the full jump to an organics market that, at present, is not delivering for the primary producer.