Lamb prices look good, but beware sterling

But finishers were warned at Scotsheep last week, that picture could change.

Sterling has been strengthening and with significantly fewer (14 per cent) ewes and rams killed in recent months, there could even be an increase in the size of the breeding flock medium term, to affect the supply-demand balance, said Stuart Ashworth, head of economics services at Quality Meat Scotland.

It was clear there would be fewer lambs to sell than last year, but this did not mean producer prices would automatically go up.

With some 30 per cent of lamb production being sold into Europe, exchange rate movements and wider European consumer confidence would also play heavily on the market.

“At the current time few in the financial markets consider the pound will weaken in the short term and a realistic expectation may be for sterling to trade in the 83p to 85p range. Depending on the results of the budget planned for June 22 it may even be the case sterling strengthens towards 80p,” Mr Ashworth said.

Constrained

The challenge for the sheep sector was, he said, that as the year progressed an increased volume of lamb was normally exported and, not withstanding fewer lambs being available, a strong sterling would constrain buyers’ confidence.

“Looking at prices this week (Scotsheep) producers may only be getting 2 per cent more than last year in sterling terms but, when quoted in Euro terms, the UK price is some 13-14 per cent higher than last year.

Another challenge for both UK and Irish producers was prices in France and Spain were much more subdued and the consumer market was equally subdued in France where the average sheepmeat retail price had risen only 1 per cent in the 12 months to April, compared to an almost 10 per cent increase in the UK, said Mr Ashworth.

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