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The challenges created by exceptionally cold weather this spring are becoming evident just one month into the new season lamb market, according to Stuart Ashworth, Head of Economics Services at Quality Meat Scotland.

Speaking at Scotsheep today (Wednesday, June 2 2010) Mr Ashworth said the smaller ewe flock meant there were fewer lambs to start with and slow grass growth has also hindered lamb growth rates.

"As a result, auction throughputs of new season lamb through May have been much lower than last year and, while prices in May started some 7-10% better than last year, that improvement had reduced to closer to 2% by the end of the month,” said Mr Ashworth.

Looking forward Mr Ashworth said it is clear there will be fewer lambs to sell than last year. This does not, he cautioned, mean that producer prices will automatically go up. With some 30% of lamb production being sold into Europe, exchange rate movements and wider European consumer confidence will also play heavily on the market.

“Over the past few weeks Sterling has strengthened considerably as financial markets continue to be concerned about the financial strength or weakness of, mainly, southern European countries within the Euro Zone.

“The pound had strengthened to only needing 83p to buy one Euro this week. At the current time few in the financial markets consider that the pound will weaken in the short term and a realistic expectation may be for Sterling to trade in the 83p to 85p range. Depending on the results of the emergency budget planned for 22nd June it may even be the case that Sterling strengthens towards 80p,” observed Mr Ashworth.

The challenge for the sheep sector is, he said, that as the year progresses an increased volume of lamb is exported and, not withstanding fewer lambs being available, a strong Sterling will constrain buyers’ confidence.

Looking at prices this week producers may only be getting 2% more than last year in Sterling terms but, when quoted in Euro terms, the UK price is some 13-14% higher than last year.

Cull ewe prices continue to be historically strong but can typically be expected to decline seasonally through to November, Mr Ashworth observed. In 2009 prices started to increase significantly in late October, the same time as Sterling weakened towards 90p, or more, and prime lamb prices increased.

However, he pointed out what is striking about the ewe trade is the substantial decline in the number of ewes and rams slaughtered in the UK over the past twelve months.

“In the twelve months ending April 2010, almost 14% fewer ewes and rams were slaughtered than in the previous year. While some reduction may have been expected because of a 1.3% decline in the UK breeding flock at December 2009, a fall of this size is much more than may have been expected and may be a precursor to some increase in the breeding flock in the medium term,” he added.

Sheepmeat supplies are also much reduced in Ireland. Since the turn of the year, Irish export abattoirs have handled 16% fewer lambs and 19% fewer ewes. Producer prices have responded by increasing substantially and are currently some 15% higher than this time last year.

“The challenge for both UK and Irish producers is that producer prices in France and Spain are much more subdued. French prices are currently very similar to last year while Spanish prices are 5-6% lower.

“The volume of sheep reaching French abattoirs over the first third of the year has been little changed from last year. The consumer market is equally subdued in France where the average retail price of sheepmeat has risen only1% in the twelve months to April compared to an almost 10% increase in the UK,” he added.