Inflation pressure, cheaper cuts of lamb and the decline in import demand from China and the US are some of the main factors contributing to the pressure on lamb price according to Bord Bia’s livestock and sheep sector manager, Seamus McMenamin.
McMenamin was speaking at the Irish Farmers’ Association (IFA) national sheep meeting on lamb prices which was held at the Radisson Blu Hotel in Athlone, Co. Westmeath on Monday evening (January 23).
Giving a brief overview of the Irish story in 2022, McMenamin said:
“2022 was a challenging year for sheep producers, issues with grass growth and high input costs in the second half of the year resulted in the average carcass weight in the last quarter of the year falling by 1.5kg to just over 20kg compared to near 22kg in 2021.
“There is an estimated 60,000-70,000 lambs/hoggets to be carried over into 2023 with nearly 15,000 of those processed already. We have seen high throughput in the first two week of the year.
“Looking at prices, averages can hide a lot. The average sheep price for 2022 was €6.80/kg which is just ahead of 2021,” he added.
“If you take a closer look though, strong gains were seen in the first half of the year and then once lambs became plentiful, pressure came on prices and a weaker demand was seen for lamb across major export markets.”
McMenamin stated that prices now are about 50c/kg [currently €6.24/kg] behind were they were this time last year.
“Looking at prices across our competitors, we are sitting just above Great Britain and Northern Ireland,” he continued,
“While we are are a good bit behind the French price of €8.26. France is very nationalistic country and they have a preference for their own product and that’s reflected in their own lamb prices whereas we are very much an exporting nation.
“We are mid-table on prices with New Zealand and Australia lamb price further down the table at €4.12/kg and €4.92/kg respectively which has and makes them very competitive in the EU market.”
Inflation pressures impacting price
McMenamin outlined how inflation pressures in key export markets have impacted demand.
He said: “In terms of markets where we promote Irish product, we export 80% of our sheepmeat to the EU market.
“There was 18% growth in volume in 2022, with France, Sweden and Germany seeing double digit growth.
“There was also growth in exports to the UK of 15% and also strong growth in Switzerland and Canada.
“There is positives in terms of the export volume. In the first half of the year, there was strong growth and returns for Irish sheepmeat.”
However he acknowledged that from June onwards, returns reflected what was seen in the same period in 2021 which he said was a symptom of the market due to inflation.
“Sheepmeat is the highest priced protein and when inflation occurs consumers tend to trade down to other products,” he continued.
“Inflation rates in the some of the countries we export to include Germany where food inflation rose to 20%, UK at 16% and Belgium at 14%.
“This causes difficulty in promoting and selling lamb into these markets when inflation occurs.”
EU outlook
Speaking about the outlook for sheepmeat in the EU, McMenamin said that the EU is 95% self-sufficient in sheepmeat.
“Sheepmeat consumption has been on a long-term decline but usually has only been 0.3-0.4%; however in 2022, consumption of sheepmeat fell again to a greater extent of about 2%.
“Two factors behind that increase were the high price and less availability of product.
“We didn’t see much southern hemisphere product in the first half of the year, but as we progressed into the second half the year, we saw a lot more New Zealand and Australian lamb come into the EU market,” he added.
“And as highlighted earlier, the price of lamb from these southern hemisphere countries made it attractive to buy for EU customers as well as lower transport costs.”
McMenamin told the meeting that there has been a change in the type of product coming from New Zealand onto the EU market.
“They had been selling chilled and high value frozen products but now they are selling frozen lower value products which is undercutting the EU market,” he said.
“As well as that, the UK [is] a major competitor in the EU market and in 2020 and 2021 they exported less sheepmeat but they became more export focused in 2022 which inserted more competition with key customers that we trade with in the EU.
“UK exports for the first three quarters of the year were up 12.5%,” the Bord Bia manager explained.
Domestic market
Turning to the domestic market, McMenamin said that in the last quarter of 2022, it took about 15% of what we produce.
He described it as a challenging market with a decline in the value and volume of higher value cuts and a turn by consumers to cheaper cuts.
China
One of the most frequent words heard at the meeting was ‘China’ and what moves they have made and will make, and how it that country is shaping markets globally.
Speaking about China, McMenamin said: “We have seen a lot more New Zealand sheepmeat entering the EU and the UK in the last quarter of 2022.
“However, in recent weeks we have seen a recovery in demand from China which is taking product away from the world market.
“China takes in about 40% of all the sheepmeat traded globally and so any change that it makes in terms of imports has a huge impact globally.
“So with China taking more New Zealand and Australian product off the market which means its being shifted away from the EU which is positive for us.
“Although inflation pressures are persisting in key markets, our [Bord Bia] focus will be targeting consumers to show them that sheepmeat is worth the extra few pound when they are shopping,” he stated.
McMenamin said Ireland will continue to receive competition from the UK on the EU market, but what will happen with southern hemisphere product is still unknown and will depend on what China does.
“The US had also been importing quite a bit of sheepmeat but that has fallen back as well.
“Because sheepmeat is such a globally traded product, a lot will depend on the US and China situation and what way it falls,” he said.
“The ‘take home’ mesaage is that EU production is expected to be lower, as well as in the UK, and with the Chinese market recovery, there [are] signs that product will be redirected away from the EU, which will help to create more opportunities for ourselves.”