The lamb deadweight price heading into 2022 remains around the £6 per kg mark but there is some uncertainty as to whether it can maintain this record high over the next couple of months until the seasonal increase in demand around Easter puts some renewed impetus into the market. With rising fuel prices, inflation, and consumers naturally more cautious post-Christmas, some may avoid the premium product of lamb over the next few months.
With the expensive trade given to store lambs in autumn 2021 and rising feed costs many store lamb finishers need the trade to continue in an upward trajectory if they are to see positive margins.
More lambs will have been carried over into 2022 than in 2021 and first quarter slaughterings could be up on last year, hence it may be Easter before prices firm on those currently seen.
The import threat of New Zealand lamb remains low with Chinese demand for meat still strong as their pig herd recovers from the African Swine Fever outbreak in 2018. The New Zealand sheep flock is also rebuilding after several years of drought with an increased number of ewe lambs being retained for breeding reducing numbers available for slaughter. Higher freight costs are also making imports more expensive to the benefit of UK producers.
Anecdotal reports from New Zealand suggest an increasing number of beef and sheep units being planted with trees for carbon sequestration which may limit future levels of production there to the longer-term benefit of UK producers.
The Export market typical accounts for around 30% of our output as an industry, however 2021 saw this dip due to fewer lambs being available and an increase in domestic consumption during lock down. Looking forward to 2022 if current high prices are to be maintained the export market is likely to become more important as numbers may well increase due to better weather at lambing and some increase in the breeding flock. In addition, as the service sector reopens, and more meals are eaten out of the home consumption may fall back to pre-pandemic levels.
On balance we remain optimistic of prices remaining above the long-term average in 2022 but perhaps below the record prices seen in 2021.
Moving on to the make-up of the UK flock, the last decade has seen a noticeable shift in the popularity of certain sheep breeds. The latest Breed Survey in 2019, the previous one being 2012, suggests a decrease in the traditional stratified sheep system of hill bred ewes (typically Scottish Blackface and Swaledales) breeding cross-ewe lambs to use in low ground systems. Increasing numbers of white-faced sheep breeds such as Cheviots, which saw an increase of 4%, along with Llyens and Easy-care was noted. This move away from the traditional stratified system is perhaps due to farmers looking to close their flocks and breed their own replacements. The main concern of buying in replacements is often the increased risk to the health and biosecurity of the flock. The increased prevalence of the incurable disease OPA or “Jaagsiekte” in many hill flocks is an added concern.
Moving away from the traditional stratified system is seen by an increasing number of producers as a route to improving efficiencies and lowering costs of production by enabling more effective performance recording and selection and maximising the benefits of things such as Estimated Breeding Values (EBV)s when selecting rams.
In our experience the best performing flocks tend understand their costs of production, are involved in benchmarking and monitoring and have often adopted forage-based systems involving pasture improvement and modern grazing techniques.
Whilst the sheep sector is less exposed to the spiralling costs of fuel, feed and fertiliser than many other sectors in agriculture, costs of production are increasing. In addition, many sheep producers are reliant on the Basic Payment, which will be phased out by 2027, to cross subsidise their systems. Pressure is mounting on the sector to become more efficient and for those with the enthusiasm we believe there is significant scope to do so. Simply relying on ever higher prices looks a risky strategy for most.