The importance of religious festivals to Scottish lamb producers has been evident in the marketplace this month.
Prime lamb prices rose 7p/kg lwt in the two weeks running up to the Muslim festival, Eid, then losing that gain in the following week.
The latest market analysis from Quality Meat Scotland (QMS) shows that after particularly strong prices through June, prime lamb prices then dipped below last year’s levels through July and early August.
However, the current week indications are that prices have firmed and moved ahead of last year.
“A major factor contributing to the strong prices in June was a lack of supply,” said Stuart Ashworth, QMS director of economic services.
Weekly slaughterings of prime lamb in the UK during June were more than 15% lower than last year, while in July that shortfall had reduced to around 3%.
Indications from auction throughputs during August show that despite a seasonal increase in numbers sold, they remain well below last year’s levels.
“This tightness in supply, compared to last year, is not unexpected given the challenges of the lambing period,” added Ashworth.
“However, the closeness of prices to those received last year, suggests a sluggishness in demand persists.”
Prime sheep supply over the remainder of the 2018 UK lamb crop year, observed Ashworth, will remain limited, not only in the UK but elsewhere too.
“The Republic of Ireland also incurred significant losses at lambing, followed by the challenges of drought,” said Ashworth.
“Although their lamb kill estimates for August are higher than last year, which is contributing to producer prices which are 3.5% lower than last year, availability is expected to tighten later in the year.”
International lamb markets
Looking further afield, New Zealand has recently published its first estimates for their 2018-2019 lamb crop which shows an expected decline in lamb crop of more than 3%.
With New Zealand farmgate prices currently 20% higher than last year, a further reduction in production does not suggest any softening in their farmgate price.
Meanwhile, drought conditions in Australia are leading to the heavy culling of breeding sheep which suggests a smaller breeding flock for 2018-2019 and low Australian production in the coming months.
“The lack of prime lamb as the Australian production year draws to a close has seen producers who have stock to sell, benefiting from prices more than 20% higher than this time last year.
“However, the increase is higher in those areas hardest hit by droughts, like New South Wales, and less in Western Australia where the challenge has not been as great,” commented Ashworth.
Strong demand in the more easily reached Chinese and Middle East markets combined with lower production, observed Ashworth, is likely to constrain the volume of antipodean lamb reaching Europe in early 2019.
“Ultimately, though, farmgate prices will have to reflect consumer demand and willingness to pay,” said Ashworth.
“Kantar Worldpanel market research highlights this challenge by indicating that over the past quarter to early August, the growth in demand for beef steaks and burgers, coupled with increased lamb retail prices, means that the number of households buying lamb has dipped and, not surprisingly, the volume equally has also dipped.
“The need to reconnect with these consumers is being addressed by the current QMS Scotch Lamb campaign which is running for the next eight weeks.”
