Sheep farmers have enjoyed a positive 12-month period, with markets performing better than anticipated and prices currently running significantly ahead of the five-year average.

Demand for sheepmeat has held solid throughout the coronavirus pandemic and numerous lockdowns across the EU. We caught up with Seamus McMenamin, Bord Bia livestock sector manager, to see what lies in store for the 2021 lamb crop.

According to McMenamin, this result was driven by a reduction in the supply of sheepmeat in EU markets and retail demand for sheepmeat actually benefiting from COVID-19, with customers investing more time in preparing home-cooked meals.

This trend looks set to continue for at least the first half of 2021. McMenamin outlined how EU sheepmeat production declined by 3% in 2020, with an additional 1% drop in production forecast for 2021.

Of great significance, there was also a 4% drop in sheepmeat imports into the EU, primarily due to New Zealand only utilising 46% of its tariff-free quota and UK exports to the EU reducing by 12% on 2019 volumes.

Sheepmeat imports into the EU are predicted to reduce by a further 3% in 2021.

This level of imports from New Zealand is the lowest level since the quota was negotiated and is being driven by the country targeting the Chinese market, with an increasing volume of sheepmeat exports and tighter domestic supplies.

McMenamin cautioned that there was a drop-off in New Zealand exports to China in the latter half of 2020, due to increased pork availability, but this rebounded in November and is hopefully a strong sign of renewed appetite for sheepmeat in China.

Lower UK exports

The volume of sheepmeat exported from the UK to the EU is expected to reduce significantly during the first quarter of 2021.

While the UK sheep sector will benefit from avoiding tariffs on sheepmeat exports, McMenamin said its exit from the EU means it will face increased costs of doing business.

Along with this, logistical challenges in moving product due to transport disruption and increased paperwork is expected to curtail volumes of sheepmeat moving into EU markets during quarter one of 2021.

Leaving aside these challenges, the UK is also expected to focus more on servicing its domestic supply, to account for lower levels of imports.

A 4% decline in the UK breeding flock in 2021 is expected to bring about a further decline in the number of hoggets carried forward to 2021, which McMenamin said will further hit short-term supplies.

The recently released AHDB 2021 market outlook forecasts supplies will be 3% lower in quarter one of 2021 with this situation intensifying and supplies declining by 6% in quarter two and 7% in quarter three.

Tighter Irish supplies

McMenamin also predicted tighter supplies on the Irish market for at least the first quarter of 2021, leading well into quarter two.

He predicted the carryover of hoggets available for slaughter in quarter one of 2021 will reduce by some 90,000 head, to in the region of 550,000 head.

This is being influenced by higher lamb throughput in 2020 and greater retention of ewe lambs at farm level.

Imports of sheep from Northern Ireland are also predicted to tighten in the first quarter of 2021.

McMenamin recapped on the positive performance for the sector in 2020, with sheepmeat export volumes increasing by 4% to reach 75,000t, while the value of these exports increased by a sizeable level of 12% to reach €360m.

This increase stemmed from higher volumes moving into EU markets, with exports to the UK declining by 17% and exports to non-EU destinations reducing by 9%.

While export volumes reduced, the value of product moving increased significantly, meaning the value of exports to the UK increased by 5%, while the value of exports to non-EU destinations increased by 26%.

2021 price prospects

McMenamin expects the trade will hold robust throughout quarter one of 2021.

Easter and Ramadan are also falling within two weeks of each other in early April, and it is likely that this will keep a strong floor under the trade leading into quarter two.

He said the focus will remain on the EU market, capitalising on the opportunity to displace UK supply.

Longer term, McMenamin cautioned of a possible recovery of New Zealand imports into the EU, with performance in EU markets dictated by the supply-demand balance. This will also be strongly influenced – in an Irish context – by the rate at which lambs come on to the market.

Reports suggest some producers have pulled lambing dates forward and this could see more lamb coming on to the market earlier in the year. The earlier date of Eid al-Adha in mid-July should hopefully help to increase demand, should this materialise.

China will continue to influence global sheepmeat demand and McMenamin said finally securing access to the Chinese and US markets would provide a wider scope for Irish processors to expand their customer base, and achieve a greater balance in demand for different carcase components.

Increase in quality assurance participation required

McMenamin said a key goal for the sector in 2021 has to be increasing participation in the Bord Bia Sustainable Beef and Lamb Assurance Scheme (SBLAS). The number of sheep farmers participating has recorded some improvement in the last year, but is still relatively low compared to other sectors.

At present, there are in the region of 12,000 farmers participating from a total flock size of over 34,000 farmers.

There is huge scope to increase the proportion of lambs produced under the SBLAS banner with output from scheme members currently accounting for just less than 60% of lamb throughput. Seamus says the renewed focus on SBLAS is stemming from a growing interest in sourcing quality assured lamb from customers in key export markets.

“Historically, the greatest demand for lamb produced under SBLAS was in the domestic market, but this is changing fast, with key customers in export markets now looking for lamb produced under this banner.

“Some of our existing customers purchasing a range of Irish produce are asking why the sheepmeat they are purchasing may not be carrying the SBLAS seal of approval.

“There are also opportunities at present to expand our customer base, but a key question arising in some negotiations refer to SBLAS being a prerequisite to doing business. It is a challenge the sheep sector must address if we are to maintain access to our existing portfolio of customers and expand into new markets.”