The European sheep trade continues to excel on the back of tight supplies and robust market demand. Farmers in Ireland and the UK have been significant beneficiaries with prices at record levels.
The strength in the market was demonstrated by the Irish and UK farmgate price running ahead of the French price, something which occurred only once over the last decade for a brief spell in 2018.
The latest Bord Bia price dashboard shows the French farmgate sheep price increasing in recent weeks following a characteristic dip in the market in the period December through to February, as reflected in Figure 1.
Prices have increased by 30c/kg in the last four weeks and for the week ending 20 March stood at an average of €7.28/kg.
Irish highest in Europe
However, they continue to lag behind Irish and British prices, with the latest Bord Bia price dashboard positioning Ireland as recording the highest farmgate price among the main sheep-producing and exporting countries. The Irish price of €7.27/kg for the week ending 20 March excludes VAT of 5.6% (flat rate VAT refund increased from 5.4% to 5.6% on 1 January 2021) which when included leaves the farmgate price at €7.67/kg.
The increase of 36c/kg on the week previous also positions the Irish price above the British price of €7.45/kg, which in recent weeks was more than sufficient to hold the primary market position. The Irish price is now running €1.72/kg above the corresponding week in 2020. There has been some pressure on hogget prices but with spring lamb prices strengthening, this position is likely to remain unchanged for last week and leading into this week.
The prices are being underpinned by a number of factors with the main contributing factor being tighter supplies of sheepmeat not just in Europe but also globally. Sheep production in Europe is forecast to decline by 1.4% in 2021, following a decline of in excess of 3% from 2019 to 2020.
This forecast is across the full production year and the predicted decline is even greater for the first half of the year. Throughput in Irish processing plants up to the week ending 27 March at 556,497 head is running 50,497 head, or 11% lower.
The fact that the hogget kill is running over 39,000 head lower despite the sharp increase in price shows just how tight supplies are
Within this the ewe and ram kill of 64,549 head is running 11,499 head lower with year-to-date throughput at the lowest level for over five years.
The fact that the hogget kill is running over 39,000 head lower despite the sharp increase in price shows just how tight supplies are with a significant part of the kill supported in recent weeks by throughput of ewe hoggets.
Lower NI imports
Lower numbers of sheep imported for direct slaughter from Northern Ireland is also a significant contributor. Figures published by the Department of Environment and Rural Affairs (DAERA) in Northern Ireland show the number of sheep exported from Northern Ireland for direct slaughter in ROI processing plants is running at 64,023 head for the week ending 27 March, a reduction of 24,599 head on the corresponding period in 2020.
The reduction has helped to support throughput in Northern plants with the kill for the year to date of 87,020 head running 4,602 ahead of 2020. In contrast, throughput in British plants, at 2,117,643 head, is running some 211,351 head lower.
A recent Agriculture and Horticulture Development Board (AHDB) market update reported that with prices running at such a strong level there has been a tendency to retain sheep to heavier weights before drafting and this is reflected in the average carcase weight of 20.3kg increasing by 0.3kg on January 2021 levels and 0.2kg on February 2020.
This only slightly compensated, however, for the significant fall-off in throughput with a total sheepmeat production figure of 18,000t for February running 1,300t behind January production figures and 1,800t lower than February 2020. This was highlighted as being the lowest monthly production figure reported since May 2013.
Lower EU imports
The lower production volumes, Brexit-related trade disruption and a marketing focus by a number of British retailers in support of domestic produce has resulted in a significant reduction in the volume of UK sheepmeat being exported on to the EU market. Another factor driving higher consumption in the UK is reduced supplies of New Zealand sheepmeat in the system.
The latest European Commission sheep price dashboard includes import figures for January 2021
This is also a contributing factor to greater demand in EU markets. Sheepmeat import and export figures generally have a one- to two-month time lag from their occurrence to figures being collated and reported. The latest European Commission sheep price dashboard includes import figures for January 2021. This shows the volume of sheepmeat imported in to the EU recorded at 3,283t. This represents a 33% reduction with volumes imported from New Zealand falling by 1,306t, or 31%, to 2,933. The volume imported from Australia also fell sharply from 477t to 212t.
Tight global supplies
The EU dashboard also emphasises the tightness in supplies globally. The volume of sheepmeat exported to the global market from Australia in January 2020 fell by in excess of 22,000t (close to halved) with export volumes recorded in the region of 27,000t. The lower volumes are being driven by reduced production caused by successive weather events and some flock rebuilding reducing. New Zealand exports reduced marginally by about 4,000t in January while as mentioned already UK sheepmeat exports reduced significantly from about 7,000t to 3,500t.