Hopes return for lamb after woes

With the lifting of the EU export ban, lamb producers are faced with the challenge of re-establishing their markets, writes Chloe Smith

With the lifting of the EU export ban, lamb producers are faced with the challenge of re-establishing their markets, writes Chloe Smith

The good news is people are buying more lamb. The bad news is there has been more bad news than good this year. Foot-and-mouth disease (FMD) and the subsequent ban on red meat exports, in combination with low prices during spring, have made 2007 an especially difficult year for farmers. Trading conditions have been tough.

What's more, lamb prices for the remaining months of 2007 are uncertain. The European Commission (EC) has now eased export restrictions and traders can start fighting for their lost markets. But a statutory ban on exports to the rest of the world will be in place until at least November and lamb producers are likely to feel the pinch as the domestic market floods with more home-produced lamb than normal.

POOR START

"It has certainly been a poor start to the year," says Mark Topliff, from the Meat & Livestock Commission's (MLC) economic and policy analysis group. The year started with a much higher proportion of New Zealand's quota of lamb being imported to Europe than in previous years. Between January and March, imports were up 20% on the same period the previous year, according to data from the MLC. The same data shows that, by the end of May, deadweight British hogget prices were 21p/kg lower than the same period in 2006. As well as much more New Zealand lamb available than usual, there was a high number of old-season British lambs carried over on the market. Topliff says prices at

the beginning of the year were "fairly flat, then started improving through March

along the lines of what we would normally see seasonally."

Then came April. "The price came back significantly and was extremely disappointing in April, May and June with the old-season lambs," he adds.

Lower prices do not mean lower production costs, however. In fact, the opposite is true this year. Rising feed costs, as the global price of wheat soars, is just another problem farmers have had to contend with and, to complete the picture, this summer's unseasonal flooding has simply added to farmers' worries.

When the lower prices were passed on, consumers started to sit up and notice. A "price war" was how Ed MacDonald, from market research company TNS Worldpanel, described it, and it resulted in a 5-6% reduction in prices of lamb joints over Easter, compared to the same weekend in 2006. As prices dropped, people bought more lamb, and actually ended up spending more money overall than when lamb was more expensive. According to TNS data, the amount consumers spent on lamb is up 9.5% year-on-year in the 52 weeks ending 15 July, 2007. Frozen lamb has performed particularly well, showing remarkable growth of 23.9% year-on-year. Fresh lamb, which is a much bigger market than frozen (nearly five times the size and worth £499m in the 52 weeks ending 15 July) also grew, but by a less staggering 6.9% year-on-year. The frozen

lamb market was worth £107m at retail in the same period, making the total lamb market worth £606m.

NEW ZEALAND EFFECT

Bill Joyce, marketing manager for HCC - Meat Promotion Wales, puts the leap in spend on frozen lamb down to the influx of New Zealand product. "There is virtually no frozen lamb produced domestically," he says, "so all that would have come from New Zealand and, to a far lesser extent, Australia."

Joyce argues the influx of New Zealand imports in the first part of the year was not only damaging to farmgate prices here, but also harmed our export trade with the rest of Europe. "Exports of UK lamb were down and that's because of higher sendings of New Zealand lamb to France as well, so it had a double impact," he says. "Having said that, of course, New Zealand is limited by quota and because they've had heavier sendings in the earlier part of the year, their exports during the remainder of the year will be comparatively light."

The biggest lamb retailer, predictably, is Tesco, with a 23.3% share of the market, according to TNS Worldpanel data. Sainsbury's is the second-biggest seller of lamb, with a 17.8% share. Independent retail butchers hold their own well in the lamb market, taking 16.8% of all the money spent on lamb accor-ding to TNS Worldpanel data. Asda is third, with 9.5% and Morrisons fourth, with 8.5%.

As we enter late summer and early autumn, British lamb is in full season and New Zealand supply is tailing off. Prices paid to farmers had been predicted to rise, but then no-one predicted the outbreak of FMD. Mercifully contained, only three farmers in Surrey had to have their animals slaughtered, but the repercussions hit every farmer in the country. Perhaps most serious for the industry as a whole was the export ban, but the temporary movement ban also cost farmers money as they were forced to keep finished animals beyond their best, watching their value dete-riorate as they passed their prime and paying for the extra feed needed to keep them.

Before we had the good news that European vets who met in Brussels had decided to lift the export ban, both Joyce and Topliff argued it was crucial for the industry. Topliff says: "Thirty per cent of our sheepmeat is exported. Hopefully contact would have been maintained with the traders in Europe and we can get back to a fairly quick resumption of export volumes. France is one of the main markets. 70% of our exports

go to France so it's a key market for us to get back into."

IS A FIGHT ON?

So will producers have to fight to get their lamb back into the foreign markets they were supplying just a few weeks ago before the ban? "Rather than fight, I think they will have to work hard," says Joyce. "We hope that Welsh lamb has built up some loyalty with key customers in Continental markets and that they will come back very quickly to Welsh lamb. It will require hard work on behalf of the exporters to make sure that they get those markets back."

The decision to lift the ban was what

everyone had been hoping for and it is widely predicted this will lead to better, firmer prices in the coming months, but the industry is not home and dry yet, as exports to the rest of the world will not be lifted until November at the earliest. The situation is still uncertain. "At this stage it is almost impossible to say what will happen to producer prices," says Joyce.

In the face of the FMD crisis, promotional bodies for meat ploughed all their spare funds into advertising and other promotional activities to try and negate some of the damage. In order to try and create more demand for British lamb domestically, HCC - Meat Promotion Wales is bringing forward its planned autumn television advertisements to 10 September: "We were concerned that we were going to have to market quite considerably increased numbers of Welsh lamb on the British market," he says.

CONSUMER TARGETS

EBLEX is targeting consumers from every angle to promote Quality Standard Mark (QSM) lamb and beef. A television advertising campaign will begin in early September, with the characters Beefy and Lamby, and there will also be ads in women's magazines throughout the autumn. Retailers and the foodservice sector are also being urged by EBLEX to support the British meat industry, by supplying more QSM lamb and beef. The organisation has even unveiled a giant sheep on a hillside beside the M62 in Bradford. EBLEX estimates over 1.7m vehicles a week will pass the giant sheep, which is 1,000sq m in size.

John Cross, chairman of EBLEX, is

hopeful that consumers will be keen to support lamb producers hit during this hard year for the industry. "Beef and lamb exports combined are now worth a total of £30m a month to the industry," he says. "Many beef and sheep enterprises have only just started

to recover from the impact of the 2001

FMD epidemic, so encouraging consumers

to choose quality beef and lamb as a mark

of their support will help farmers at this

critical time."

He adds: "EBLEX is now investing a substantial amount of money in QSM promotional work, including a new lamb foodservice campaign being launched. In addition, we will be working with retailers to persuade them to go that extra mile in sourcing QSM product over the next few months and also, with the supply chain, to help maintain a balance between supply and demand."

SCOTS HIT TOO

The Scottish sheepmeat market has also

been hit by the export ban and Quality

Meat Scotland (QMS) has released funds normally held in reserve to try and help

the sector secure a bigger hold of the

domestic market.

Members of the QMS board met with leading members of the Scottish sheep industry to discuss ways of diverting funds to bolster domestic Scotch lamb marketing activities. QMS statistics show that around one-quarter of all Scottish sheep meat produced is exported and the trade is worth £18m annually. The ban on exports came at a time when the vast majority of Scotland's lamb crop is heading for the food chain. Scottish abattoirs process in the region of 32,000 sheep a week in a normal August. In addition to exports, 33% is sold in Scotland and 45% in England and Wales.

The fears were that a lack of progress in unwinding trading restrictions to the Continent could lead to an extra 1.3m British lambs, or a further 25,000t of product, hitting the UK market over the next three months.

QMS chairman Donald Biggar said: "Lamb exports from Scotland currently make up a quarter of all trade and to lose that, even in the short term, is likely to have a severe impact on sheep businesses."

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