Lamb exports more than just sterling effect
I read with interest Ed Bedington's comment in the 16 April edition: "The export market is currently gobbling up the lamb, with our weak sterling status giving lamb suppliers a competitive edge."
The exchange rate is one factor influencing exports, but supply and demand must also be considered. The weakness of sterling has mainly benefited farmers with higher prices. The price transmission mechanism has worked well for them, with abattoirs competing for supply.
However, the real issue is the acute shortage of lamb, not only in the UK but also in continental Europe and on the world market. In that sense, the market is reacting normally to a low supply situation.
Inevitably, with short supplies, the abattoirs have had to compete to secure lambs and this is having a negative influence on margins, which is a concern. Producers have only just returned to profitability, following years of low prices, and although confidence is returning slowly, higher prices and positive margins will need to be sustained before we can expect a longer-term recovery in production.
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