AHDB Cattle and Sheep Weekly
30 January 2015
Lamb trade remains firm
In week ended 28 January the SQQ at GB auction marts fell slightly to 185.8p/kg. Despite being back around 5p on the week overall, lambs this month have been trading at their highest level in three years. The modest easing of the trade is on the back of more lambs coming forward again this week, compared with a week earlier. However, with inclement weather arriving in some regions, there is the possibility of some movement disruptions which may affect trade.
While trade appears to be remaining firm, there has been a drift downwards as the week progressed. Having started the week at 187p/kg, the SQQ fell to 182p/kg by Wednesday 28 and Thursday’s trade looks set to be continuing this trend. It may be that the relentless rise of sterling is starting to impact on the market. The pound has hit a seven year high against the euro in the last few days. Sterling had already been appreciating slowly but steadily since July 2013 but now, with the Eurozone once more on the brink of recession and growing fears about Greece leaving the Single Currency, it has moved up even further. By 27 January, sterling had appreciated to €1.34 compared with €1.28 at the start of the year and €1.16 in July 2013. This inevitably reduces the price competiveness of UK sheep meat exports to other EU markets.
Whilst also remaining relatively firm and still tracking above year earlier levels, the deadweight lamb trade also levelled on the week. In week ended 24 January, at 424.3p/kg, the SQQ edged up less than a penny. Somewhat unexpectedly, estimates suggest that fewer lambs came forward compared to the week before.
Further fall in New Zealand EU sheep meat quota usage
New Zealand’s utilisation of its EU sheep meat quota fell to below 70% in 2014 and probably represented an unprecedented low. Based on data from the European Commission, until recently New Zealand utilised virtually all of its quota allocation and it was only from 2010 onwards that it started to fall well below it. In 2013, the proportion increased for the first time in four years but at the sacrifice of price, which put pressure on the UK market in that year, and so utilisation fell again in 2014.
In contrast, Australia virtually filled its quota for the second consecutive year; it has a much lower quota than New Zealand and as the EU is a premium market it normally fills it. The EU market only accounts for a small proportion of Australian sheep meat trade, whereas the proportion for New Zealand is nearer one third, although it is falling. Looking ahead there seems no reason to suggest that there will be a significant increase in utilisation by New Zealand exporters. Export availability is likely to remain tight in the 2014/15 season and there is the on-going demand from the Chinese market for New Zealand lamb.
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