Further tightening of supplies provides optimistic outlook for medium term outlook
by Margaret McCarthy, Bord Bia
The low carryover of hoggets got 2011 off to a strong start and the market environment for sheep meat for the short to medium term is set to remain positive. And, although all indications are that flocks in the UK and Ireland are stabilising, there is a continued tightening of supplies in continental Europe with overall production set to fall 1% in the coming year, and to tighten by 3% by 2015.
Projections on Irish production for 2011 onwards are predicting modest increases in flock numbers of 2-3% per annum, conditional on the ability of the current price levels to prevail. In 2010, supplies at the Irish export plants had tightened by 12% or 310,000 head to 2.12m. This drop occurred in spite of a halving in the number of live exports to 47,000, and an increase of 11% in NI imports to 385,000. With the effects of higher retention rates during the 2010/2011 season, which according to the CSO showed an increase of 13% on under 2 year old ewe hoggets retained, this coming year we could see a further, though more marginal, decline of about 2% in export plant throughput. Total annual production for the 2011-2012 period will be in the region of 48,000 to 50,000 tonnes.
Average farm-gate prices for the 2011-2012 period should compare favourable to those of 2010, however moderate consumer demand on the home market and key export markets such as France will prevent any significant price strengthening. Average prices to June 2011 were €5.13/kg, a total of E0.55c or 12% up on the previous year.
Demand for Irish lamb exports is set to remain strong for the foreseeable future - with tighter global availability on all markets coupled with rising global demand for sheepmeat - global demand for lamb is in growth with experts predicting a rise of 6% in consumption over the next 10 years, driven mostly by China, North Africa and the Middle East. Despite a 10% fall-off in volumes during 2010, the value of Irish sheepmeat exports rose by 4% to E170m. The development of non-traditional markets is key to increasing the value of our output, and to help offset the challenge of weak domestic demand due to tightened consumer spending. Currency movements, in particular the strengthening of the NZ dollar, should support the competitiveness of Irish lamb overseas.
There’s a positive outlook from France, our largest export market, which is predicting a continued, though marginal, tightening of the national sheep flock , and with French consumption stabilising, their import requirement is set to increase over the coming years, with Ireland well positioned to increase our share of the French demand.
With regard to consumer demand on the home market – the most valuable to the Irish sheep industry, recent data from the Irish retail market is showing that the decline in demand for lamb has been stemmed to approximately 17,000 tonnes annually. The 6 months prior to April 2011 would suggest the decline may be stabilising, with marginal increases in volumes sold over the same period the previous year. Unless we are to see a significant hike in the price of other meats, it is unlikely that there will be any major changes to consumer demand on the Irish market given the prevailing economic climate. Ongoing Bord Bia promotions on the Irish market are focusing on increasing consumer demand for Quality Assured lamb. Combined with our programmes on the home market, promotions of Irish lamb and market developments in valuable export markets will continue to support stronger returns to the Irish sheep industry.