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QMS (Quality Meat Scotland)


17 April 2015

QMS (Quality Meat Scotland) April 2015QMS (Quality Meat Scotland) April 2015


QMS - Quality Meat Scotland

Sheep

Prices and Supplies

Until the final week of March, when an increase in supply saw prices cool slightly, deadweight hogg prices at GB price reporting abattoirs had been rising steadily since early February. They ended March at an average of 450p/kg dwt, having traded at 428p/kg dwt in the last week of February. A seasonal lift in demand ahead of Easter is likely to have been the main driver. However, since the market had risen faster last spring, prices have fallen 6% behind 2014 levels.

Carcase quality followed its historical trend through the opening quarter of 2015 (Q1). Until the second half of March, when it reached a 4-year high, carcase quality had generally been slightly lower than in recent years. In the final week of March, 57% of hoggs graded at R3L or better. 57% was also the Q1 average; this was down 1 percentage point on Q1 2014.

At Scottish auctions, prime hogg prices picked up through the first three weeks of March before slipping back. It is likely that prices moved in line with the Easter trade, dipping back once the peak procurement period had drawn to a close. At the end of March, prices had fallen back to an 8-week low of 191p/kg lwt. Compared with a year earlier, hoggs were valued around 9% lower.

It is likely that in addition to a well supplied market, hogg prices have failed to match last year’s levels in the run up to Easter due to exchange rate movements. In the three weeks after the European Central Bank began its bond-buying programme on March 9, sterling averaged 16% stronger than a year earlier against the euro. As a consequence, exporters will have had to accept significantly lower sterling prices in order to keep their euro price competitive on the continent. In turn, lower margins on exports will have limited the price processors have been willing to pay for hoggs. However, the euro did regain some ground in late March after some positive economic data was released. This has pushed the euro up to 73.5p, its highest value since late February, and down 11% year-on-year.

February slaughter data for the UK showed that the hogg kill was up by 11% year-on-year in February at 889,000 head. Nevertheless, it remained slightly below February 2013 levels. Abattoir throughput in E&W continued to drive the overall increase, rising 13%, while there was a 3% increase in Scotland. By contrast, NI plants killed 16% fewer lambs than in February 2014.

The average carcase weight of the hoggs slaughtered in UK abattoirs during February was 20kg. Compared with a year earlier, this was up by 0.4kg. As a consequence, UK prime sheepmeat production was up by 13% year-on-year at 17,750t.

In terms of the Scottish abattoirs, February data from the Scottish Government shows that kill numbers were relatively stable through the month at 27-28,000 head. This meant that although they were running behind 2014 levels after three weeks of the month, they ended the month 3% higher because slaughterings had fallen back significantly in the final week of February 2014.

Scottish Government figures for February showed that hoggs reaching Scottish abattoirs continued to prove heavier than a year earlier. At 20.7kg, the average hogg carcase was 0.6kg heavier than 12 months before. This resulted in prime sheepmeat production rising by 6% year-on-year.

Cull ewe prices rose sharply at the beginning of March, reaching £79 a head. After falling back in the following week they then settled around the £75 mark for the remainder of the month. However, since prices had been on a seasonal upturn through March 2014, the premium over last year narrowed to 5%; its lowest level since late August. With auction volumes remaining much lower than last year, this suggests that demand has begun to cool.

Ewe slaughter at UK abattoirs was down by more than one-fifth year-on-year at 114,400 head. This was the lowest February kill since 1988. With latest census figures reporting an increased UK breeding flock in December, the continued low level of culling indicates that flock rebuilding is underway.

As lower ewe culling partially offset increased prime production, UK sheepmeat production rose at an annual pace of 6% in February. Volumes totalled 20,800t.

During February, Kantar Worldpanel data indicates that GB households bought 12% less lamb than a year earlier. This was despite lamb averaging 2% less expensive to buy. Looking deeper into the data shows that while chops & steaks and leg roasts struggled to sell, shoulder roasts and lamb mince performed much better than in the same period of 2014. While average prices for leg roasts were flat year-on-year, chops & steaks and shoulder roasting joints were 2.5% cheaper and mince prices averaged 8% lower. Sales volumes for both home produced and New Zealand lamb declined, falling 9% and 29%, respectively.

At the end of March, EU heavy lamb1 prices were 6% ahead of their late February level, averaging €5.74/kg dwt (£4.20/kg). UK and French prices rose slightly slower than the average. In Ireland, there was a stronger 10% increase and Romanian prices surged by more than 15%. By contrast, farmgate prices slipped back in Spain.

Compared to a year earlier, heavy lamb prices averaged 5.5% higher across the EU28 in the final week of March. Prices rose at a similar pace to the average in France, Spain, Ireland and the UK. However, in Romania, despite rising sharply in recent weeks, prices remained nearly 20% below year earlier levels.

The average light lamb2 price in the EU edged up through March. By the end of the month it stood at €6.24/kg dwt (457p/kg). Increases of 4% in Greece and Hungary and 14% in Italy were nearly offset by falling prices in Spain (-8%) and Portugal (-2%).

Light lamb prices continued to hold well ahead of last year in most reporting countries and the overall average was 16% higher. This was led by Italy, where prices ended March a third higher than 12 months before, and Hungary, where they were up by a fifth. Although prices rose more slowly than the average in Greece, Spain and Portugal, the gains were still significant at 6%, 12% and 14%, respectively.

The latest trade data shows that UK sheepmeat exports were down by 22% year-on-year in January. The slow start to the year came despite higher domestic production and reflects the difficulties caused by exchange rate movements. Export volumes totalled 6,300t and were at an 8-year low for the month. As a proportion of sheepmeat production, exports fell to 30%; down from 42% in the first month of 2014.

Export shipments to EU markets fell 10% year-on-year in the opening month of 2015. Sales to the key French market were down by 15% to 3,400t. Meanwhile, other important markets of Belgium, Germany and Holland showed declines of 21%, 13% and 10%, respectively. However, trade with Italy and Ireland increased by approximately 40%.

Non-EU trade was also lower than a year earlier at the beginning of 2015. Sheepmeat exports fell by 70% with most of the decline the result of reduced opportunities in Hong Kong. Although the Swiss market did pick up strongly, this growth was from a low base.

With UK production well above last year’s levels and the export trade struggling due to the strength of sterling, UK sheepmeat import requirements fell back in January. Import volumes totalled 7,000t; down 17% year-on-year.

At 4,450t, the volume of sheepmeat arriving in the UK from New Zealand (NZ) decreased by 19% year-on-year in January. This was despite it averaging 4% cheaper. The share of NZ product in total imports fell by 3 percentage points to 63%. By contrast, import volumes from Australia rose by a quarter to 1,850t, pushing its share of the total up 9 percentage points to 26.5%. In terms of the smaller suppliers, whereas imports from Ireland fell significantly, there were increases from France, Spain and Chile.

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