The reduction in spreading fertiliser last summer and a reduced amount of feed being given as a result of high input costs has resulted in an excess of lambs in the system which is contributing to lower prices.
There is also expected to be a decline of 1.8% in consumption of lamb products this year.
That’s according to sheepmeat and livestock sector manager with Bord Bia, Seamus McMenamin, who addressed a meeting of farmers organised by the Irish Cattle and Sheep Farmers’ Association (ICSA) in Carrick-on-Shannon, Co. Leitrim last night (Tuesday, March 22).
The meeting was organised to discuss the “crisis” in the sheep sector and what the outlook is with current prices ranging from €6.25/kg to €6.50/kg.
“This is all dating back to last summer when there was less fertiliser being spread, less feed being fed, and it’s just that we now have a lot more lambs still in the system,” McMenamin told the meeting.
“Feedback from the factories, they are telling us that about 10% of the lambs are coming in too light and under-finished, they’re just ‘middlin’ decent stores at best, then there is a fair proportion of lambs that are coming in overweight and under-finished.
“That creates a real challenge then when you’re trying to export that lamb. There is about 35-40% of lamb that is exported in carcass form.”
More lambs in system
The Bord Bia representative said that there was an extra 200,000 hoggets carried into 2022.
This year so far, with the smaller lamb kill in the back end of 2022, the hogget number has increased by about another 50,000 or 60,000 head.
Average carcass weights year-on-year are also about 1kg lighter, according to McMenamin.
Imports from Northern Ireland for the year to date stand at about 60,000 head, which the Bord Bia manager said is slightly behind the figure for the same period last year.
“There is weaker demand on the domestic market and the key export markets and a lot of that is being driven by inflation and the higher cost,” McMenamin said.
He added that the hogget and lamb kill for the year to date is running about 2.5% ahead of last year.
Lamb prices
McMenamin told farmers that lamb prices in Ireland, Northern Ireland and Great Britain are all around a similar mark, whereas Australia and New Zealand have very competitive pricing.
He noted that prices in the southern hemisphere countries have, however, come under pressure in recent weeks as demand in China and the US has fallen slightly.
“There has also been a reduction in transport costs to Europe. I suppose this time last year, they [NZ and Oz] would have been locked out of Europe to some degree because of the very high transport costs, but those have fallen,” he said.
Overall lamb exports from Ireland increased by 14% in 2022 according to Bord Bia, with a value of €464 million.
“That was driven in part by a 10% increase in volume. The key market continues to be the EU. We exported 75% of our lamb, maybe a bit more, into the European market,” McMenamin continued.
In terms of demand and what is impacting lamb price at the moment, McMenamin said: “15% of the lamb produced here is consumed domestically and the balance is then exported.
“You can see the average [retail] price is up by 9% and that is one of the key factors putting consumers off buying.”
McMenamin added that there has also been a shift within the category of people who purchase lamb, from the more expensive cuts to cheaper cuts.
“The one [market] that stands out the most is Germany, which has seen food inflation of 20% and that is then obviously impacting the consumers’ choice when they go to make their purchases,” he said.
Food inflation is markedly above general inflation according to the European data referred to by the Bord Bia manager.
Demand for lamb
According to surveys conducted in key export markets, all have seen a decline in demand for lamb products, which is driven by price primarily, with consumers looking for what they perceive to be better-value proteins.
“Lamb, because it is such a high-cost protein, once people switch out of it, it’s hard to get them to switch back into it and it’s not like beef where you can sort of trade down in products, there is not really as much of that option,” McMenamin said.
He added that the EU’s apparent self-sufficiency in lamb is increasing as consumption has fallen faster than production over the past five years, so an overall decline in production is expected this year.
“Overall, we would expect to see a drop in production just because of less ewes and lighter carcasses,” McMenamin continued.
“A key thing that we have seen in Europe in the last couple of years is that there has been a real decline in the volume of New Zealand and Australian product that has been available in the market.
“That has actually contributed to the nearly 2% decline in consumption because it reduces the shelf space that is given over to lamb in big retailers.”
However, towards the end of 2022 and into 2023, there has been somewhat of a recovery in imports from New Zealand and Australia according to the Bord Bia manager.
“Sheepmeat has become a very globally traded product so, basically, whenever China or the US switch off, more product then ends up coming to Europe.”
Markets
McMenamin explained that the UK is Ireland’s key competitor in terms of the EU market.
In 2020 and 2021, the UK was very domestically focused in terms of production, allowing Irish market exporters the opportunity to gain market share.
However, in 2022, they increased their exports again by about 9%, in direct competition with the Republic of Ireland. According to McMenamin, the UK used to export about 90% of sheepmeat to Europe, but last year, that increased to 98%.
The trade deals that the UK made with Australia and New Zealand will also have an impact on Irish exports as the product entering the UK from ‘Down Under’ will allow the UK to free up some of its own sheepmeat product for export, increasing its competition with Ireland.
McMenamin told farmers that China is the biggest driver of the global sheepmeat trade.
“The year before last, they [China] imported 440,000t. To put that into context, we export about 75,000t,” McMenamin stated.
However, imports to China declined by 17% in 2022. “Which just happened to be exactly what we exported, so basically, what they dropped in one year, was the entire volume of sheepmeat that we export,” McMenamin added.
Despite this, the Bord Bia representative said there is expected to be a recovery this year, albeit not back to previous levels.
“There has also been a shift in the type of product that they [China] are taking, down to a cheaper product than would have been taken previously and a lot of frozen.”
McMenamin explained to the meeting that New Zealand has experienced a long-term decline in its sheep flock since a drought a few years ago, which the sector has not fully recovered from.
He added that the country is losing a lot of land to forestry also, with a 2% or more decline expected in the lamb crop this year.
“It’s cheaper frozen product that they are exporting into the EU, whereas previously it would have been chilled product. Now we’re having to compete against it,” McMenamin said.
But overall production and exports of sheepmeat in New Zealand is expected to decline next year.