Tighter lamb supplies here and in Britain have helped offset weak consumer demand for lamb, and boosted prices over the last six months.
To date this year, Irish lamb prices are running almost 17%, or more than 60c/kg, ahead of last year. Prices in Britain are up by 15%, while French prices are largely unchanged to date.
Supplies are set to increase seasonally over the coming weeks, although forecasts for the year indicate lower production in Ireland, Britain and France.
Price developments will be largely driven by supply levels over the coming months, combined with developments in consumer demand across key markets for Irish lamb, and the level of competition from other exporters, such as Britain and New Zealand.
Low Irish supplies
Up to the middle of April, Irish sheep supplies at export meat plants were 16%, or almost 100,000 below the same period in 2009, reflecting the lack of carryover into the spring of 2009 following higher than anticipated supplies last autumn.
A further decline of more than 6% in the breeding flock in the December 2009 livestock survey suggests another fall in this year's lamb crop of 100,000 to 150,000 head. For the year, supplies at export meat plants are expected to fall by 8% to just over 2.2 million head.
Figure 2 shows that due to the higher costs associated with early lambing systems over recent years, the Irish production window is being compressed and pushed later into the summer. Consequently, Irish exporters are left competing more directly with Britain on overseas markets.
European decline
Forecasts for EU sheepmeat production in 2010 suggest a further fall of more than 3% or 24,000 tonnes, reflecting reduced output anticipated in Britain, France and Ireland in particular.
Figures from Quality Meat Scotland and the AHDB suggest a drop of just over 3% in British production levels during 2010 to 293,000 tonnes.
During the first quarter of 2010, British sheep supplies fell by almost 19% due to a lower carryover of old season lambs, a smaller 2009 lamb crop and increased ewe lamb retentions. This would suggest that supplies for the remainder of the year are likely to be broadly in line with 2009 levels. Poor weather during the spring is likely to slow down new season lamb supplies, as grass growth has been slow in many parts of Britain.
One positive for Irish lamb producers is the fact that French production continues to decline, with a drop of 3% forecast for 2010. This would leave French production more than 15% lower than 2007 levels.
exports increase
Despite the drop in British production levels, the ongoing relative weakness of sterling, combined with lower consumption levels in Britain, is expected to result in export volumes rising by around 4% to just over 100,000 tonnes in 2010.
Exports to date in 2010 have been lower due to the tighter disposal levels. Some pick up in export volumes is anticipated over the coming months. Because of the anticipated rise in exports, the British import requirement looks set to rise by 2% to 139,000 tonnes in 2010. Britain is now Ireland's second largest export market, with shipments over recent years averaging 12,000 tonnes.
Global supplies
New Zealand lamb production is forecast to experience a modest recovery of approximately 4% to 412,000 tonnes in the 2009/2010 season, which commenced in October 2009. This follows their lowest production for 20 years, during the 2008/2009 season.
A recovery of almost 10% in their lambing percentage is the key driver of their increased output.
A stronger New Zealand dollar is lowering export returns, with average producer prices currently 5% higher than last year, at the equivalent of €2.19/kg.
New Zealand is expected to fill its European quota, concentrating on the French and British markets which, combined, account for approximately two thirds of its EU exports. The growth in New Zealand chilled shipments to Europe continues, with a rise of almost 9% recorded in 2009, up to 55,000 tonnes, despite overall volumes falling by 5%.
Strengthened demand from Asia, improved climatic conditions and a rebuilding of the ewe flock has improved the situation for the lamb exporting trade for Australia.
Producers are experiencing a 40% rise in farm-gate prices, helped by the fact that overall production is expected to drop by more than 3% in the current season, which ends on 30 September.
Domestic demand
The Irish market remains critically important to the Irish sheepmeat sector, accounting for some 30% of output in 2009.
However, the market has been badly affected by slower consumer spending over the last year in particular.
As one of the more expensive meats on the supermarket shelf, lamb is no exception to the above trend.
Average retail prices for lamb are more than 25% higher than beef, and almost twice that of chicken.
Lamb sales have suffered from consumers trading down to cheaper meats and an increased level of buying on promotion.
As a result, there has been a significant fall in the value and volume of retail sales of lamb.
For the year ending 21 March, both volume and value recorded double digit declines.
While the downward trend has continued over recent months, data from Kantar, (formerly TNS) would suggest the rate of decline has slowed. Over the last year, the average retail price for lamb has dropped by 3%.
Increasing consumption of quality assured lamb on the domestic market is a major priority of the Bord Bia promotional strategy.
Bord Bia is currently conducting research into existing consumers and lapsed users of lamb, with the objective of addressing the above decline with more targeted messaging, in an enhanced consumer campaign this coming year.
The main consumer promotions will run from mid-June to early July, and will feature adverts on radio, press and outdoor posters, as well as having in-store promotions with sampling and recipe leaflets.
French imports
The French market continues to account for half of our exports, with shipments reaching some 23,000 tonnes in 2009. Given that Britain accounts for around 60% of French imports, sterling exchange rate movements are the key driver in dictating the market environment for Irish lamb.
As of late April, sterling remains almost 30% weaker against the euro than it was three years ago, which significantly undermines the competitiveness of Irish lamb on the market. However, lower domestic production, combined with a more stable consumption situation, is forecast to result in a marginally higher French import demand during 2010 - up to 133,000 tonnes. While the industry has successfully reduced its dependency on the French market over recent years, its requirement for large volumes of lamb at times of the year when Irish disposals are at their highest means it will remain the key market for Irish exports.
The profile of Irish exports in France has also changed, with value-added chilled boneless shipments accounting for 15% of exports in 2009, compared with 5% in 2000.
promotion
Last year, for the first time in 10 years, lamb consumption increased in the French retail market. This rise is all the more significant when the current economic conditions are taken into consideration.
The increase is largely attributed to the Agneau Presto campaign - a three-year, €1.2m promotional campaign, now in its final year, which was co-funded by Bord Bia, Eblex and Interbev.
Kantar data for the year ending 21 March shows lamb volumes are up 6%, with the frying/grilling cuts driving this increase.
Targeting younger consumers, the campaign repositions lamb as a quick to cook, modern and versatile meat. The promotional campaign mechanics have a primarily PR and internet focus, with different key events organised to create a media buzz: these include press lunches, lamb weeks in Paris and the regions, web TV, e-newsletter, free cookery classes for internet users, audio press packs, butcher training, promotional activity at store level and on-pack recipes.
Other markets
Bord Bia continues to assist exporters in their efforts to diversify into non-traditional markets, mostly across Northern Europe. Value-added boneless product form the majority of sales to these markets, though volumes are low. The most significant of these markets are Italy, Germany and Belgium. Promotional budgets in these markets are spent supporting value-added direct sales in retail and foodservice accounts.
farmersjournal.ie