Farmers are becoming increasingly angry with factories after the substantial base price cuts they have been trying to implement over the past few days.

Earlier this week, farmers were securing €5.00/kg to €5.10/kg including bonus payments for lambs. However, agents are trying to dampen expectations and talk down the trade further and their aim is to secure lambs at a maximum of €4.80/kg to €4.90/kg including bonuses.

So what’s the reasoning behind the price drop? Factories say demand on continental Europe is poor in general. They also claim that the number of lambs exported from the UK has increased substantially. All these factors, combined with poor skin prices, are having a negative effect.

The number of sheep slaughtered last week was not exceptionally high, standing at 57,679 head, and was down 4,480 head on the same period last year. Good weather played a factor, but numbers are likely to be higher this week as a lot of field work is complete now and the threat of lower prices will bring more lambs out.

One of the main consequences of falling prices is a flush-out effect, where excess lambs enter the system as farmers try to market their lambs at higher prices. It is best if farmers focus on selling their lambs as they become fit for slaughter, as otherwise kill-out percentage will suffer as a result.

Producer groups are negotiating higher weight limits, with weights starting to move from 21.5kg to 22kg and this is helping to offset reduced market prices for heavier lambs.

IFA national sheep chair John Lynskey said the move by the factories this week to severely pull lamb price quotes is very negative and will have a damaging impact on confidence in the sheep sector.

He said farmers are strongly resisting the price pressure and, on Tuesday, were negotiating prices of €5.00/kg to €5.05/kg. He said some group prices set earlier this week were delivering €5.10/kg to €5.20/kg.

He said in the UK, factory prices are reported at £4.22/kg by the AHDB, which is the equivalent to €5.30/kg (incl vat).

Northern trade

Pressure on southern prices is also inserting pressure on the northern trade.

Agents purchasing for southern plants have not had the same buying power, leading to less competition in the live trade.

Over 7,000 lambs were still imported south, showing the importance of northern lambs to throughput.

Quotes have fallen by 10p/kg to 15p/kg in the last week and now stand at £3.85/kg or the equivalent of €4.82/kg including VAT.