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QMS (Quality Meat Scotland)

13 April 2015

QMS (Quality Meat Scotland) March 2015QMS (Quality Meat Scotland) March 2015

QMS - Quality Meat Scotland


Prices and Supplies

Having fallen back in late January / early February, prime sheep prices at GB price reporting abattoirs rebounded in the middle of February before edging higher again in the final week of the month. At 428p/kg dwt, hoggs were, on average, 1% more expensive than a year earlier in late February.

Carcase quality fell back at the end of January before recovering through February. In the 3 weeks to February 28, 58.5% of hoggs graded at R3L or better, up from 55% in the previous 3 weeks. Nevertheless, this was still a percentage point down on the same period last year.

Prime sheep prices at Scottish auctions showed stability through February, averaging 191-192p/kg lwt. They then picked up at the beginning of March as supplies tightened, reaching 194p/kg lwt. This was a fraction in front of the same week last year.

Hogg prices have generally held up well in recent weeks and months despite sterling rising steadily against the euro. In the second week of March, sterling reached its highest level against the euro since December 2007, with a euro buying 71p. This is likely to be squeezing the profitability of the export trade, forcing exporters to accept lower sterling prices if they want to maintain a competitive euro price. In turn, this is likely to be limiting their ability to pay higher prices to the producer. With the European Central Bank’s asset purchase scheme commencing on March 9, there is likely to be a prolonged period of euro weakness.

With more hoggs carried into the New Year than twelve months before, UK abattoir slaughterings increased by 8.5% to 1.14m head in January. This was the highest January level for six years. A substantial increase of 11% in E&W more than offset tighter supplies in Scotland and NI where throughput fell by 3% and 12%, respectively. Tighter supplies in Scotland and NI may reflect increased gimmer retention rates.

Average carcase weights at the UK level rose 0.4kg (2%) from a year earlier in January to 19.7kg. This was the highest since April 2014. Due to the combination of increased slaughterings and carcase weights, UK prime sheepmeat production rose 11% year-on-year to 22,500t in January. 

Looking at abattoirs north of the border, Scottish Government figures for January show that kill numbers quickly fell behind last year’s levels following a strong opening week. Monthly slaughterings were down 3% on the year at 133,850 head.

However, once significantly heavier carcase weights have been factored in (up 1kg (5%) to 21.2kg), prime sheepmeat production rose 2% year-on-year in Scotland in January.

At Scottish auctions, cull ewe prices steadied from late January to the end of February. However, supplies tightened significantly as March began, pushing up prices to a 7-week high of £79 a head. This was a record for the beginning of March. Compared to the same week last year, the market cleared 41% higher.

UK abattoirs handled nearly a quarter fewer ewes & rams during January than 12 months before. Numbers totalled 139,200 head. On a weekly average basis, the kill was at its lowest level since April 2002. Moreover, for the month of January, it has not been lower since 1988. Low levels of culling have been evident for a number of months, indicating that flock building has been taking place. Higher ewe prices have been the consequence of tight supply.

Due to the substantial decline in ewe & ram throughput, the overall increase in UK sheepmeat production was limited to 3% in January. Prime production accounted for 85.5% of the 26,300t total; an increase of 6 percentage points on January 2014.

Kantar Worldpanel data for the 4 weeks ending January 4 shows that the volume of lamb purchased by GB households edged up as spending fell by just over 1% but retail prices were down by an average of 1.5%. Declines in the volume of chops & steaks and shoulder roasts retailed of a respective 12% and 14% were offset by the combination of an 8.5% increase in leg roasts and 3% more lamb mince being sold. The sharp declines in chops & steaks and shoulder roasts came despite lower prices. By contrast, mince was more expensive and leg roasts averaged the same price as 12 months before.

As February ended, the EU heavy lamb average price was 2% higher than a month earlier, trading at €5.44/kg dwt (398p/kg). This was largely driven by the British market, where prices rose 5% in euro terms. By contrast, Irish prices fell by 1.5% and there were heavier declines of 3% in France, 6% in Spain and 7% in Romania.

Although prices have been sliding of late in much of the EU, the heavy lamb market has remained firmer than a year ago, largely down to tight supplies. The EU average price was nearly 10% above its year earlier level at the end of February. In France, Northern Ireland and the Irish Republic, prices were up by 7-8%. Meanwhile, heavy lambs were priced 13% higher in Spain and GB.

The average light lamb price in the EU showed a further seasonal decline in February, slipping 4% to close the month at €6.22/kg dwt (455p/kg). Greek producers saw prices fall 1.5% but there were 7% declines in Spain and Hungary. By contrast, Italian farmgate prices edged higher.

Despite recent seasonal declines, light lamb prices have held well above year earlier levels, averaging 16% higher. This was mainly down to Spain where tight supplies have pushed prices up by a quarter relative to last year. However, in Italy and Greece, price increases have been more subdued at 1% and 4%, respectively.

UK sheepmeat exports trailed year earlier levels for the fifth time in six months during December. Volumes were down by 11% at 8,900t.

Although overall exports declined, shipments to EU Member States picked up strongly from 12 months before, rising by 16%. Although, France, the main buyer, and Holland purchased less sheepmeat than a year earlier, trade with Germany, Belgium, Italy and Ireland firmed. The smaller markets of Spain, Portugal, Sweden, Austria and Denmark also showed increases. With lamb a traditional centrepiece of New Year meals in Spain and Portugal, their imports from the UK were 4 times and 3 times larger, respectively, in December than in any other month of 2015.

The main driver of the overall decline in UK sheepmeat exports in December was the continued cooling of the Hong Kong market. Whereas volumes had exceeded 1,100t in December 2013, monthly shipments totalled less than 300t a year later. Exports to Ghana were down by a similar degree at 50t. However, the Swiss market took delivery of a higher volume than a year earlier for a third consecutive month; exports jumped 70% to 35t.

During 2014, UK sheepmeat exports decreased by 2% to 102,100t. This was the second highest export volume since the year 2000. As a share of domestic production, exports fell to 34% compared with 36% in 2013. Nevertheless, this was the same share as in 2012. In the final month of 2014, the UK’s sheepmeat imports fell to a 7-year low for the month of December. Shipments totalled 5,900t; down 12% year-on-year. This is likely to reflect increased domestic production and lower exports.

However, in contrast to the overall trend, imports from New Zealand (NZ) increased, rising 6.5% to 4,200t. As a consequence, the share of NZ sheepmeat in total imports increased to 72%; the highest level since May and up 14 percentage points from a year earlier. With Australia coming close to filling its annual quota for the EU in November, its deliveries to the UK were limited to less than 1,000t in December 2014. This compared with nearly 1,600t 12 months before. Imports from the Irish Republic were also sharply lower, falling 37% to 400t.

During 2014, UK sheepmeat imports contracted by 6% to 92,800t. Since 2000, only 2011 and 2012 had seen lower import volumes.

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