Cattle and Sheep

Market Update
July 2015, Issue 37

In this issue...
New supply forecasts for the UK
The latest AHDB Beef & Lamb production forecasts are
published. The effects of reduced calf registrations in
late 2012 and 2013 will influence the availability of
cattle for slaughter in the remaining part of the year.
Consequently, the supply of beef and veal in the UK
this year is still expected to be modestly lower than
last year. Find further details on page 3. For sheep
meat, the latest forecasts indicate that another large
lamb crop means the supply of sheep meat available
to the UK market is expected to be higher this year,
heading towards 320,000 tonnes for the first time
since 2008. Find further details on page 8.

Firmer EU cow market in 2015 so far

The EU cow market was under some pressure in 2014
when prices were consistently lower than the year
earlier and fell sharply in the autumn. However, in the
first half of this year trade has demonstrated some
robustness. Read more about this development on
page 4.

Global long term prospects for UK sheep

meat exports
The recent AHDB Meat Export Conference included a
presentation on the long term prospects for UK sheep
meat exports. It highlighted the changing global
environment and especially the emergence of China,
now the largest importer, which has substantially
changed the trade dynamics for sheep meat. For a
synopsis of the presentation go to page 9.

Jun

%
change
month

%
change
year

GB prime cattle price p/kg dw

335.1

+2.8

+2.5

GB cull cow price p/kg dw

232.7

+2.2

-0.2

UK prime cattle slaughter

000 head

141.0

-1.6

-7.1

UK adult cattle slaughter

000 head

40.2

+6.3

-2.7

UK beef and veal production

000 tonnes (carcase weight)

63.2

-6.4

UK frs/frz beef imports - May

000 tonnes (product weight)

20.5

-4.8

+3.4

UK frs/frz beef exports - May

000 tonnes (product weight)

7.9

+1.8

-20.9

Sheep

Jun

%
change
month

%
change
year

NSL SQQ - p/kg dw

401.8

-0.7

-19.7

Cull ewe price - /head

70.5

-11.6

-1.9

UK clean sheep slaughter

000 head

956.6

+14.9

+3.2

UK adult sheep slaughter

000 head

118.4

+13.8

-9.9

UK sheep meat production

000 tonnes (carcase weight)

22.2

+11.7

+4.3

UK frs/frz sheep meat imports

000 tonnes (product weight) - May

8.3

-23.0

-24.0

Cattle

UK frs/frz sheep meat exports

5.3
-15.5
-29.0
000
tonnes (product
weight)
- May
Interested
in data? Get
more
detail about these and other
areas
fromin
http://www.eblex.org.uk/markets/
Interested
data? Get more detail about these and other
areas from http://beefandlamb.ahdb.org.uk/markets/

AHDB Beef & Lamb publishes latest yearbook.

The UK Cattle and Sheep Yearbook for 2015 provides farmers, auction markets, processors, retailers and other stakeholders
with essential facts and figures about the beef and sheep meat industry in the UK over the last year. .
The book is available free of charge on request, subject to availability.
To request a copy, email redmeat.mi@ahdb.org.uk or call 024 7647 8711.
It is also available on the AHDB Beef & Lamb website in two pdf files, one for sheep and one for cattle.
You can find them in the MI Publications section.

www.ahdb.org.uk

beefandlamb.ahdb.org.uk

Cattle and Sheep Market Update/Published July 2015/Issue 37 - Page 1

UK Beef snapshot
Prime cattle trade continues to firm
The prime cattle trade has for the most part
continued its upwards movement throughout July.
This upwards pressure on price has evidently come as
supplies fell short of retail demand and confirms the
predictions made a short while ago that the
imbalance in the trade was likely to change. With the
trade much more in producers favour, competition
from processors is reported to have been solid over
the early part of the month, in particular. As such,
waiting lists have shortened and while cattle out of
spec may have proved trickier to place, they have still
found a home easily enough with limited, if any,
penalty.
With reports suggesting that the trade in Scotland has
been setting the tempo, amid particularly tight
supplies, the GB all prime average in week ended 25
July was 354.4p/kg. It broke through the 350p/kg
threshold mid-way through the month for the first
time since late March. While it has strengthened
almost 30p over the past eight weeks, it is worth
remembering that prices were at a particularly low
level earlier in the year. However, they have moved to
be well above the five-year average in only a matter
of weeks.
Steers meeting target specification strengthened 12p
since the start of the month to average 365.3p/kg,
while R4L heifers were up 11p at 363.8p/kg. R3 young
bulls were 5p dearer at 343.1p/kg. With penalties for
out-of-spec cattle having been less harsh in recent
weeks, particularly for over-age young bulls, prices
have converged closer to those of other prime cattle.
In early March the differential between the average
steer price and the average young bull price was as
much as 36p/kg. In the latest week it was just 15p/kg.
Deadweight prime cattle average prices 2014-15

370

Production back significantly again in

June
June UK prime cattle slaughterings were back seven
per cent on the year to 141,000 head a fall of 10,700
head. For another month, all categories of prime
cattle recorded reduced throughputs. For the second
month in a row steer numbers were back significantly,
down four per cent, or 3,000 head, on the
corresponding month last year at 70,900 head. This
marks a shift in the supply/demand balance which has
dominated the trade over the past year. Much of this
reduction in throughputs came from across the
regions of Great Britain and provides further evidence
that the anticipated tightening of supplies has come
about. Heifer throughputs were six per cent back at
49,600 head. The impact of increased castrations
continued to have a bearing on young bull numbers,
down 18 per cent on the year at 20,400 head. For only
the second month this year, the first being in May,
cow throughputs were back on the year earlier, down
two per cent at 38,700 head.
Higher carcase weights of heifers and young bulls did
little to offset the lower numbers. As such beef and
veal production in June was back six per cent, or
4,300 tonnes, on the year at 63,200 tonnes.
Change in UK beef and veal production 2015/14
000 tonnes
2

1
0

p/kg dw
380

suggesting that more cows have come forward, trade

in the past fortnight has been much more subdued. In
the latest week, at 252.3p/kg, -O4L cows were a
fraction cheaper over the month but had fallen 7p/kg
in the past fortnight.

Steers

-1

Young bulls

-2

Heifers

-3

360

-4

350
340

-5

330

-6
Jan

Feb

Mar

Apr

May

Jun

320

Source: DEFRA

310

Despite higher numbers in January and February, the

lower throughputs in the last four months have meant
that, at 958,000 head, the total number of prime
cattle slaughtered at UK abattoirs in the first half of
the year was three per cent back on the year. The UK
adult cattle kill for the six-month period is still
trending higher on the year at 282,500 head, albeit
only a fraction ahead. Increased throughputs in
England and Wales have driven this increase. Overall

Jul

Jun

May

Apr

Mar

Feb

Jan

Dec

Nov

Oct

Sep

Aug

300

Source: AHDB Beef & Lamb

Competition in the cow trade was intense at the start of

the month with processors specific requirements for
heavier, well finished cows driving the momentum in
the trade. However, with the on-set of the holiday
period across the continent looming and estimates
www.ahdb.org.uk

beefandlamb.ahdb.org.uk

Cattle and Sheep Market Update/Published July 2015/Issue 37 - Page 2

beef and veal production totalled just over 430,200

tonnes in the first six months of the year, back two
per cent, or 9,300 tonnes, on the corresponding
period in 2014.

Increase in beef and veal imports slows

down again in May
Imports of beef to the UK were up 670 tonnes in May,
compared with the same month in 2014, to 20,500
tonnes. Most notably, after being up on the year
earlier last month, imports from Ireland were back
350 tonnes year-on-year. Despite an increase in
shipments from some other member states, such as
the Netherlands, Poland and Germany, the overall
increase in product coming into the UK was at its
lowest level in the year so far, despite the
advantageous exchange rate.
Demonstrating the effect that the exchange rate is
having on the attractiveness of the UK to EU
exporters, while only two per cent up on the year in
sterling terms, the average unit value in euro terms
was up 12 per cent. Consequently, the UK market
remains very attractive to other member states.
Shipments from outside the EU are led by Australia;
as the quota year draws to a close volumes were 30
per cent back on the year.
UK beef and veal imports, change on year 2015/14
tonnes
3,000
2,500

Overall

From Ireland

2,000

1,500
1,000
500
0
-500
Jan

Feb

Mar

Apr

May

Source: HMRC, GTIS

Exports of beef in May were still challenging. At 7,870

tonnes they were down 21 per cent, compared to
May 2014. Shipments to Ireland were back, but still
amounted to well over a third of all trade. The
commodity nature of the cow beef trade against the
backdrop of the challenging exchange rate scenario
meant that trade onto the Continent was difficult
again. Shipments to the Netherlands were back by
half and to Belgium by 40 per cent. Trade to France
and Italy performed better, with shipments to France
stable year on year, and to Italy back just three per
cent. As has been the case for some time this mixed
picture is partly due to a shift from exports of
carcases, which make up a high share of trade to the
www.ahdb.org.uk

beefandlamb.ahdb.org.uk

Netherlands and Belgium, to higher value boneless

cuts, which dominate trade with Italy and France.
Again, giving some evidence to the impact the
exchange rate is having on trade, the average unit
price in Euro terms was up 21 per cent on the year,
while in sterling terms returns were up 10 per cent.
Outside the EU, the difficulties in trade to Hong Kong
meant that shipments were back 30 per cent on May
2014.
Debbie Butcher, Senior Analyst, AHDB Beef and Lamb
debbie.butcher@ahdb.org.uk

Lower cattle supplies ahead

There have been some challenges for the cattle trade
this year so far. The combination of slow consumer
demand, difficulties on the export market and ample
supplies of both domestic and imported beef drove
some restraint amongst processors in the early
months of the year. In turn, this resulted in consistent
downwards pressure on farmgate prices. However,
with some notable upwards movement throughout
most of June and July, the predictions made earlier in
the year that the imbalance in the trade was likely to
change came to fruition. With the equilibrium in the
trade so fine, it was clear that it would not take much
stimulus from either side of the equation to move the
trade into a position less out of kilter fairly quickly.
Latest AHDB Beef & Lamb forecasts for beef and veal
supplies suggest that there will be fewer cattle
around on both sides of the Irish Sea. This could offer
support to the market in the medium term, even if
some of the demand drivers may be no better for the
rest of the year, perhaps even worse. The effects of
reduced calf registrations in late 2012 and 2013 will
be felt, with a clear implication for production.
However, moderating that, it is possible that the
challenges in the dairy sector could lead to an
increase in the number of cows coming forward,
particularly as producers look at housing options later
in the year. Although lower feed, fertiliser and fuel
prices will have countered some of the difficulties for
some producers, for many these remain challenging
times.
BCMS data in April this year recorded fewer cattle on
the ground in the imminent slaughter age ranges.
Consequently, supplies are expected to tighten up as
the rest of the year progresses. For the year as a
whole, prime cattle numbers are forecast to be back
to around 1.90 million head and production back two
per cent at 860,000 tonnes. Looking further ahead,
with the improved productivity in 2014 and the early
part of this year, the number of younger cattle on the
ground in April was up on the year. Consequently, a
more ample position is expected in 2016 and 2017.
Cattle and Sheep Market Update/Published July 2015/Issue 37 - Page 3

Change in cattle population, April 2015/14

35,000
30,000
25,000
20,000

Dairy female

Beef female

Dairy male

Beef male

15,000
10,000
5,000
0

-5,000
-10,000
-15,000
-20,000
-25,000
Under 6

6 to 12

12 to 18

18-24

24-30

Source: BCMS

Although it is evident that lower domestic

throughputs are on the horizon, supplies on the
market will also be affected by the trade position. So
far this year, imports have been ahead of 2014 levels,
with shipments from Ireland up. Import volumes for
the year as a whole are still forecast to be below the
raised levels of 2014. However, they have been
revised upwards given the sterling/euro relationship
in the year so far and what that means for the
competitiveness of Irish beef on the UK market.
Despite production in Ireland already starting to slow
down, it remains to be seen to what extent this will
translate into a fall in shipments to the UK. Although
the announcements of the reopening of the US and
Chinese markets to Irish beef have come as welcome
news, it is unlikely that the full effect of these
developments will be felt this year. Into 2016, with
Irish production slightly higher, imports are forecast to
edge back up again. Imports from outside the EU are
not likely to increase to any significant degree this
year or next.
Actual and forecast UK beef and veal production
tonnes
240

2014

235

2015 (f)

2016 (f)

230
225
220
215

on the year earlier, despite only a small fall in

production. Unless the pound weakens, this looks
likely to be the situation for the rest of the year.
However, on the flip side, if the exchange rate does
stabilise, given the commodity nature of the cow beef
trade and lower production in Ireland, a significant
competitor, prospects could well be better in the
second half of the year. Nevertheless, exports are
forecast to be lower than in 2014. Despite the
difficulties, the focus on exporting cuts will continue,
as will making full use of the carcase, in order to
attempt to maximise returns for the whole industry
supply chain. Exports in 2016 are forecast to increase
in line with production, to account for around 16 per
cent of total beef and veal production.
Annual change in UK beef and veal supplies
000 tonnes
25

2015 (f)

2016 (f)

20
15
10
5
0
-5
-10
-15
-20
Production

Imports

Exports

Consumption

Source: AHDB, HMRC, DEFRA

With the tight supply outlook for the second half of

the year relatively clear, as always much will depend
on developments on the retail side of the equation. In
contrast with the EU, the UK economy has continued
to strengthen. There is the possibility that growth in
disposable income could lead to increased consumer
confidence and spending, which may offer better
prospects for beef sales for the rest of this year and
next. This is of particular importance given the euro
exchange rate and its impact on the competitiveness
of exports, while imports could well continue to offer
some downside risk to the trade.
More in-depth details on the forecast for beef and
veal supplies are available on the AHDB Beef & Lamb
website.

210
205
200
195

Debbie Butcher, Senior Analyst, AHDB Beef and Lamb

debbie.butcher@ahdb.org.uk

190
185

Jan - Mar

Apr - Jun

Jul - Sep

Oct - Dec

Source: (actual) Defra, (forecasts) AHDB

The export trade this year is being significantly

influenced by the strength of sterling against the
euro, which is making it harder for exports to
compete on the continent. As a result, UK beef and
veal exports in the first five months of 2015 were back
www.ahdb.org.uk

beefandlamb.ahdb.org.uk

Firmer EU cow market in 2015 so far

The EU cow market was under some pressure in 2014
when prices were consistently lower than the year
earlier and fell sharply in the autumn. However, in the
first half of this year trade has demonstrated some
robustness.
Cattle and Sheep Market Update/Published July 2015/Issue 37 - Page 4

Last years fall was mainly in response to increased

dairy cow cullings, both seasonally and compared
with a year earlier. It was largely led by developments
in France, the largest cow beef market in the EU in
terms of both production and consumption. In
addition, while lower demand for cow beef across the
continent had been mainly confined to hindquarter
cuts, the Russian ban on imports of EU agricultural
products had a notable impact on some member
states. Germany and Poland, for example, had
previously exported modest quantities of cow beef to
Russia and this trade had been increasing during the
course of last year.
However, in the first half of this year prices have
increased on the back of firm demand for
manufacturing beef, despite the further increases in
dairy cow cullings, on-going Russian ban and falling
pig meat prices. At 3.12 per kg the EU average price
of grade O3 cows at the end of June had moved up 17
per cent since the turn of the year. With this
evolution, the EU average price has been tracking
above year earlier levels since early February, and at
the end of June was around five per cent up year on
year.
The deterioration of the milk market during the
course of 2014 slowed down the growth in the total
dairy herd last year. Although in December it was still
up a fraction on the year, this compared with a rise of
over one per cent in the year to December 2013.
Despite this, breeding dairy cow numbers still
expanded for the third consecutive year and were at
their highest since December 2009. Milk producers in
some regions have been expanding in response to
better milk prices and the end of milk quotas.
O3 cow price in selected member states, 2014-15
EU average

France

Germany

Poland

UK

Prices on the key French market, which had fallen

very sharply in the last three months of 2014, have
steadily recovered. By the last week of June, the O3
cow price had increased 12 per cent since the turn of
the year. There was also a marked uplift in Germany,
with prices up around 30 per cent over the same
period. In euro terms, UK prices have also surged,
being up 18 per cent since January and averaging
around 15 per cent up on the first six months of last
year.
Cow beef exports represent a significant proportion of
the UK market and the EU cow beef trade is very
much a commodity one, which the UK is inevitably a
part of. Such has been the strength of sterling in
recent months that there is now no discount for UK
cows compared to French ones. In fact the differential
has flipped around and UK cow prices, in euro terms,
have averaged around 23 per 100 kg ahead of French
prices in the year so far. Although lower than
historical levels throughout 2014, UK cow prices had
still been trending behind French prices. This
development does have the potential to impact on
returns to UK producers. However, on a positive note,
the cow trade in the UK has in fact held up remarkably
well as the demand for manufacturing beef has been
robust.
While there is little sign of any change in consumer
confidence in some regions, there may be better
prospects on the cow market this year than previously
expected, despite the Russian ban being in place for
another year. However, strong competition from pig
meat on the ground meat and charcuterie markets,
especially in Germany, does have the potential to
have some adverse impact on the market for cheaper
commodity type beef. Milk price developments will
also continue to have an effect on the availability of
cow beef in the coming months.

Jun

Apr

May

Feb

Mar

Jan

Dec

Oct

Nov

Sep

Jul

Aug

Jun

Apr

May

Debbie Butcher, Senior Analyst, AHDB Beef and Lamb

debbie.butcher@ahdb.org.uk
Mar

Jan

Feb

per 100kg
370
360
350
340
330
320
310
300
290
280
270
260
250
240
230
220

exception of Germany, there were increases in all

major producing countries, especially in Poland. As a
result, the growth in the EU dairy herd may be
slowing down and even coming to an end. This
development is already apparent in Germany, which
has the largest dairy cow herd in the EU.

Source: EU Commission

However, dairy cow cullings in recent months have

still been high, with the difficulties in the milk market
contributing to this development. In the first four
months of 2015 total cow slaughterings in the EU
were up five per cent on a year earlier and, with the
www.ahdb.org.uk

beefandlamb.ahdb.org.uk

Sharp downturn in Brazilian exports in the

first half of 2015
In the first six months of 2015 beef exports from Brazil
were back 18 per cent on 2014 levels at 491,000
tonnes. Despite this, the EU remains a premium market
for Brazils high quality beef, with shipments in the first
half of the year up four per cent on the year.
Cattle and Sheep Market Update/Published July 2015/Issue 37 - Page 5

Overall, Brazilian beef has had a difficult start to 2015.

There have been a number of significant international
developments that are likely to have contributed to
the current reduction in trade, compared to the same
period in 2014. The ripple effect of the crude oil crash
could well be having an impact, as oil-producing
countries buy less meat. At the domestic level, a
nationwide protest amongst truck drivers earlier in
the year provided some challenges for Brazilian
exporters in getting access to ports.
Although the situation may be more challenging, as
Brazil faces more intense competition in low value
markets such as the Middle East, it has also not seen
the previously anticipated increase in trade with
Russia. The announcement in 2014 of exports to
Russia from the EU and the US being banned was
expected to benefit Brazil, among others. Although
there was some evidence to support this conclusion in
the autumn months last year, trade to Russia has
since fallen to levels well below what they were prior
to the announcement of the ban. In the first half of
the year shipments to Russia were back well over a
third, accounting for 18 per cent of all shipments from
Brazil. Three years ago it accounted for as much as a
third of all shipments out of Brazil. It is likely that the
difficulties in Russias economy and the huge
devaluation of the Rouble has had a significant impact
on the Brazilian trade. In the longer term, Russia has
again reportedly made agriculture one of its top
priorities, dashing hopes amongst South American
countries that they would have the opportunity to fill
the void left by US and European farmers.
Brazilian beef exports, January-June
tonnes
700,000
600,000

Others
EU 28

500,000

Venezuela

400,000

Iran
Egypt

300,000

Hong Kong
200,000

Russia

100,000
0
2014

2015

Source: Foreign Trade Secretariat, GTIS

Hong Kong has become an increasingly important and

attractive market amongst exporting countries in
recent years, including Brazil. Export data suggests
that Brazilian exports in the first three months of the
year were continuing to do well. However, with the
more recent difficulties on the Hong Kong market
starting to take their toll, shipments have fallen off
dramatically as the year has progressed. Consequently
www.ahdb.org.uk

beefandlamb.ahdb.org.uk

trade in the year to June was back over 20 per cent on

the year earlier.
Venezuela, previously Brazils third most important
market, has not only had to deal with plummeting oil
prices but also a dramatic increase in inflation and
shortages of basic consumer goods, including beef,
have become commonplace. The Venezuelan
government has taken measures to reduce overall
imports of many commodities. This has seen Brazilian
beef exports fall by half, compared to the first six
months of 2014. Egypt appears to have been a strong
market for Brazil in 2015 so far, with shipments
increasing more than a quarter on the year. However
this masks some differing trends in the year. The
overall uplift is on the back of a surge in trade in May,
and a significant increase in June, as food was being
stockpiled ahead of Ramadan. In other months
exports were notably down on year earlier levels.
Shipments to Iran, the most significant destination in
the Middle East for Brazil, were back over two per
cent on the year.
Looking ahead, the outlook is for limited cattle
supplies for slaughter in the rest of 2015. Since most
cattle in Brazil is pasture-fed, the droughts of the last
two years have had a major impact in some leading
cattle producing regions. The dry weather has also
affected pregnancy rates and the development of
calves. USDA have revised down their forecast for
production to be only a fraction ahead of 2014 levels.
They still maintain that the marginal growth in
production will support increased exports, as
domestic demand continues to struggle because of
the difficult economic environment and high
indebtedness of Brazilian consumers.
The evolution of trade in the year so far, however, is
indicating a reduction in demand for Brazilian beef
globally. Nevertheless, the announcement of Brazil
gaining access to the Chinese and US markets could
result in a change in fortunes for the sector, in
particular given the depreciation of the Brazilian
currency is making its product more competitive in
the world market. It is anticipated that Brazilian fresh
beef exporters will begin shipping to the United States
for the first time in 15 years in September. The US
breakthrough for Brazilian fresh beef exports could, in
time, spur Canada, Central American countries and
Japan to follow the USs lead. These factors,
combined with an outlook for higher beef exports, are
likely to contribute to maintaining cattle prices at high
levels for the rest of the year, despite the negative
economic outlook for Brazil.
Debbie Butcher, Senior Analyst, AHDB Beef and Lamb
debbie.butcher@ahdb.org.uk

Cattle and Sheep Market Update/Published July 2015/Issue 37 - Page 6

UK Lamb snapshot
Other than a slight increase seen in the first week of the
month, the lamb trade in GB during July has been
trending downwards. It has continued to fall as supplies
have been coming forward at a high level, while
demand both domestically and on exports markets has
been subdued. In the week ended 25 July, the SQQ fell
by 6p on the week to 149.4p/kg. This is the lowest price
for lamb since January 2013 and the lowest level for this
time of year since 2009. Prices were over 17p down on
those seen four weeks previously and over 24p below
prices from 2014. These falls so far this month have
come despite numbers being at a similar level to those
seen in 2014 as the low prices have put producers off
marketing their lambs. Numbers sold at GB auction
marts in the week ended 25 July were down 17 per cent
on the previous week and 19 per cent lower than the
same week in 2014.

2015

240

p/kg

2014
5 yr Average

220

200
180

160
140
Apr May

Jun

Jul

Aug

Sep

Oct

Nov Dec

Source: AHDB/LAA/IASS

The deadweight trade has been following the trends seen

in the liveweight market. However, the falls throughout
the month were more consistent than those seen in the
liveweight trade. In the week ended 25 July the
deadweight SQQ was down 5p on the week at 339.6p/kg,
its fourth consecutive decline, with prices down by over
45p/kg on four weeks earlier. This leaves prices over 64p
below those seen in 2014.
Despite numbers coming to GB markets being at a high
level, overall they have been similar to those seen last
year. As this years lamb crop is thought to have been
larger than last year, numbers are likely to increase as we
move through the summer. The weakness in the euro
continues to reduce returns in sterling terms, despite the
talk of a Grexit being more subdued in recent weeks.

June slaughterings increase

In June, clean sheep slaughterings were up three per cent,
compared to 2014 at 956,600 head, the highest June
levels since 2007. The figures for clean sheep
slaughterings in May were also revised upwards in the
latest data release, now showing an increase of four per
www.ahdb.org.uk

350
2013

2014

May

Jun

2015

300
250
200
150
100
50
0
Feb

Mar

Apr

Jul

Aug

Sep

Oct

Nov

Dec

Source DEFRA

260

Feb Mar

UK weekly clean sheep slaughterings

Jan

GB lw overall SQQ

Jan

cent on the year, having been previously recorded as

unchanged. As a result, clean sheep slaughterings in the
first half of the year were up six per cent on last year at
over 5.8 million head, the highest half-year position
since 2008.

000 head

Lamb prices continue to fall

beefandlamb.ahdb.org.uk

Slaughterings of adult sheep continue to be down on the

year, with numbers in June back 10 per cent at 118,400
head. Producers appear to be continuing to hold on to
their breeding flocks, despite the current difficulties in the
lamb sector. As with clean sheep slaughterings, the May
data for adult sheep slaughterings was also revised
upwards, to 104,000 head, but this is still 13 per cent
lower than 2014. This leaves adult slaughterings in the
first half of the year down 17 per cent at 727,300 head.
This is the lowest number in the first half of the year since
1988, apart from the foot & mouth affected year of 2001.
The average carcase weight for lambs was up by almost a
kilo on the year, although it fell compared to the previous
month at 19.9kg. The average carcase weight for adult
sheep was down both on the year and the previous
month at 27.4kg.
This all left overall sheep meat production in June up by
four per cent at 22,200 tonnes. The higher slaughterings
of heavier lambs has more than offset the fall in adult
sheep production. This is the highest June production
level since 2007 and the third consecutive year in which
UK sheep meat production in June has increased. This
leaves production in the first half of the year up by three
per cent year on year at 136,800 tonnes.

May imports down year on year

During May, volumes of sheep meat coming into the UK
fell by almost a quarter to 8,300 tonnes. With production
in New Zealand starting to slow in April, imports in May
were down by 29 per cent on the year at 6,000 tonnes.
Shipments from Australia were back six per cent, although
volumes coming from Ireland increased significantly, by
45 per cent, as the weak euro made imports more
competitive. The average value of shipments in May fell
year on year, leading the total value of sheep meat
Cattle and Sheep Market Update/Published July 2015/Issue 37 - Page 7

imports in the month to be down by over a quarter at

34.2 million. In the year to date, at 49,400 tonnes,
imports are now back two per cent on the same period
in 2014.
UK sheep meat imports, May
12

New Zealand

Australia

Ireland

Others

10

000 tonnes

6
4
2
0
2013

2014

2015

Source: HMRC; GTIS

With a significant rise in the breeding flock recorded in

the December survey, this should mean that the lamb
crop is even bigger than last years. Indeed, the forecasts
suggest that it could be the largest lamb crop in a decade
and be more than 10 per cent up on the low point of five
years ago. It is also likely that fewer ewe lambs will be
retained than last year, given the very low level of ewe
slaughterings over the last year and that low prices may
limit any future breeding flock expansion. This will add
further to the supply of lambs for slaughter, as will an
expected reduction in the export of live lambs for
slaughter in Ireland.
Taking all these factors into account, there could be as
many as 900,000 extra lambs slaughtered during the
2015/16 season. This comes on top of an increase of
650,000 head in the previous season, demonstrating the
abundance of supplies which is likely in the coming
months.

Shipments to France are recorded as being down 17 per

cent at 2,700 tonnes, while to Germany and Ireland they
were up 11 per cent and 18 per cent respectively.

Last year, after a strong start, production growth slowed

in the late summer and early autumn as lambs were
somewhat slow to finish. This year, the pattern of
marketing may be closer to the normal seasonal pattern.
However, reports of a strong store lamb trade may
encourage some producers to sell lambs as stores rather
than finishing them, while low prices may mean others
add extra weight to lambs before marketing. Both could
delay their appearance at slaughter, meaning the
strongest growth may be seen in the final quarter of this
year. Nevertheless, strong year-on-year growth is
expected throughout the season, given the large increase
in overall numbers.

Mark Kozlowski, Senior Analyst, AHDB Beef and Lamb

mark.kozlowski@ahdb.org.uk

Actual and forecast year-on-year change in UK lamb

slaughterings

The export data for May continues to show sharp falls.

However, as has been the case since September last year,
the data may not show the true picture and could be
subject to revision. Volumes were reported to be down by
29 per cent on the year at 5,300 tonnes. Once again,
much of the reported fall continued to be as a result of a
drop in trade to Hong Kong, which was sharply down
compared to the previous year for the ninth consecutive
month.

15

Plentiful supplies set to keep pressure on

prices

The carryover from last years bumper lamb crop was the
main reason that slaughterings were up six per cent over
the last six months and lamb production was up eight per
cent. Latest AHDB Beef & Lamb forecasts for sheep meat
supplies suggest that similar growth can be expected
during the rest of this season. With seasonal conditions
this season not very different from those in the previous
12 months, the lambing rate is thought to have been
close to last years level.
www.ahdb.org.uk

beefandlamb.ahdb.org.uk

% change

The first half of 2015 has been a challenging one for sheep
producers, with prices averaging nearly 10 per cent lower
than last year. With no real seasonal peak this spring, the
annual price gap was much higher than this at times.
Factors such as the weak skin market, imports from New
Zealand and the exchange rate between the pound and
the euro have contributed to price developments.
However, domestic demand and, particularly, supply have
also had a significant influence.

10

Actual

Forecast

-5

-10
Q1

Q2

Q3
2014

Q4

Q1

Q2

Q3
2015

Q4

Q1

Q2
2016

Source: (Actual) Defra, (Forecasts) AHDB

Unless weather conditions change, carcase weights are

expected to remain relatively high, although probably no
higher than last year. While they may, therefore, not add
much to supply levels, ewe slaughterings in the second
half of the year could. Although cullings are not expected
to be unusually high, they are forecast to be substantially
above the low levels of the last year. Even this may only
be enough to ensure that throughputs for 2015 as a
whole match those of 2014.
Cattle and Sheep Market Update/Published July 2015/Issue 37 - Page 8

Exports are somewhat harder to predict, especially as

there are concerns about the accuracy of recent official
figures. These show a sharp reduction in shipments during
the first five months of the year. While some of this is due
to known problems affecting trade with Hong Kong, the
figures also show a big fall in exports to other EU member
states. However, reports elsewhere suggest that volumes
traded to the EU have held up well, although the weak
euro means that export prices have been much lower in
sterling terms. Therefore, the true fall in shipments is
likely to be smaller than the official data suggest.
However, the situation in Hong Kong does mean that
some decline in exports is forecast for the year as a
whole, despite the rise in production, even if demand
from EU markets holds up.

Global long term prospects for UK sheep

meat exports
The recent AHDB Meat Export Conference included a
presentation on the long term prospects for UK sheep
meat exports. It highlighted the changing global
environment and especially the emergence of China
now the largest importer which has substantially
changed the trade dynamics for sheep meat. The
growth in China from 2011 onwards has resulted in a
switch for Australia and New Zealand from their more
traditional markets.
Chinese imports of sheep meat by country of origin
(Includes Hong Kong)
350
300

Australia

200

New Zealand
150

50
0
2008

2009

2010

2011

2012

2013

2014

Source: GTIS, China Customs, HK Census and Statistics Dept

25

Long term historical growth in global demand is

reflected in increasing global export prices, both in
current terms, and after adjusting for global inflation in
the 2003 to 2011 period. However, there have been
some setbacks. In 2012 and 2013 for example, lamb
became too expensive at a time when demand was
becoming more subdued outside China and there was
increased availability in Australia.

20

000 tonnes (cwe)

Uruguay

100

Annual change in UK sheep meat supplies

2014 (actual)

15

Other

250
000 tonnes

Although its clear that the bumper lamb crop means that
sheep meat supplies will be plentiful in the coming
months, availability will also be affected by imports and
exports. So far this year, imports have been mixed, with
increased shipments in the first quarter offset by lower
volumes in the following two months. This reflects
developments in New Zealand, the main supplier, where
drought led to higher production early in the year but
tighter supplies since then. Overall, imports were slightly
down on the same period last year, a trend which is
expected to continue for most of the rest of 2015.

2015 (forecast)
10

5
0

Global sheep meat export price, 2003-2014

-5

8,000

-10
Production

Imports

Exports

Current price

Supplies available for

consumption

7,000

Real price

With both imports and exports forecast to be lower, the

plentiful domestic supply will be the main influence on
overall availability. Therefore, with the other factors
influencing prices not expected to change markedly,
prices are likely to remain under some pressure for the
rest of this season. The extent of price falls will depend on
how demand responds to the increased supplies, both
domestically and on export markets. However, with
consumer confidence still relatively weak, stimulating
extra demand for sheep meat wont be easy. Whether it
can be achieved will depend partly on the effectiveness of
any promotional activity in the coming months.
Stephen Howarth, MS Manager, AHDB Beef and Lamb
stephen.howarth@ahdb.org.uk
www.ahdb.org.uk

beefandlamb.ahdb.org.uk

US$ per tonne

Source: AHDB, HMRC, Defra

6,000

5,000

4,000

3,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: Based on FAO, AHDB MI

The UK is the third largest global sheep meat exporter

after Australia and New Zealand. For the UK, while the
EU will continue to offer the best prospects for
premium lamb, opportunities should further develop
for cheaper front end cuts like flank, breast and ribs to
markets outside of the EU, especially China. However,
Cattle and Sheep Market Update/Published July 2015/Issue 37 - Page 9

There are also some other premium markets outside of

the EU offering potential for the UK, especially North
America and the Gulf States, and even China in the long
term. However, the UK would face strong competition
from both Australian and New Zealand lamb, both already
being well established exporters on such markets. Some
UK processors involved in the discussions gave their own
views on the positivity for UK sheep meat exports on the
global market especially for premium cuts. The
conference presentations, including the Medium and
long-term prospects for UK sheep meat can be found on
the meat export conference page of the website.
Lionel Colby, Consultant

Chinese sheep meat imports fall

In the first six months of 2015, Chinese sheep meat
imports fell by a quarter to 130,700 tonnes. Volumes
from New Zealand, the largest supplier of sheep meat
to China, fell by 22 per cent on the year to 85,400
tonnes. However due to larger declines in imports
from other major suppliers, New Zealands share of
the Chinese market grew to 65 per cent. Imports from
Australia fell by 22 per cent to 43,500 tonnes, while
shipments from Uruguay dropped to 1,600 tonnes,
down almost three quarters on the first half of last
year. Despite the lower imports compared to 2014,
volumes are only a fraction down on levels in 2013.
Over 95 per cent of the sheep meat imported into
China so far this year has been as cuts, as larger falls
have been seen in imports of whole carcases.
China has held an increasingly important role in the
global sheep meat market over the past five years.
Therefore, events there can have an effect on the UK
market, despite the UK not currently having access to
the Chinese market. China has been the ultimate
market for exporters of a wide range of products and
commodities for a number of years due to its huge

population and rapidly expanding middle class. It has

been the largest producer of sheep meat in the world
for a number of years and was traditionally largely selfsufficient. However, since 2010, Chinese sheep meat
imports have been increasing steadily and in 2012 it
overtook France as the worlds largest importer.
Chinese sheep meat imports Jan-Jun
180
160
140

Chile

120
Uruguay
000 tonnes

market access still needs to be agreed with China, and UK

product would face strong competition from New Zealand
and Australia. This would not be helped by the fact that
from next year New Zealand product can be imported
duty-free as a result of the Free Trade Agreement (FTA)
signed with China in April 2008. The same will apply to
Australia, following the signing of its own FTA last
November, although there will be an eight-year transition
period over which tariffs will be progressively reduced. It
would certainly help if the EU had its own FTA with China,
which included sheep meat. If Chinese demand does
show further rapid increases there could even be a global
shortage of sheep meat. The Chinese market now
accounts for 27 per cent of the global sheep meat trade
(including intra-EU trade).

100
Australia

80
60

New Zealand

40
20
0
2011

2012

2013

2014

2015

Source: GTIS

Sheep meat imports to China followed trends seen in

other meats and dairy, increasing sharply in 2011, 2012
and 2013 following rapid urbanisation and growth of
the more affluent middle class. However, high prices for
sheep meat in China and low supplies of breeding
animals have led local governments to offer subsidy
schemes for producing more sheep meat. As a result
domestic production has grown at the same time as
imports have been increasing, leading to higher levels of
stock in cold storage. Meanwhile, a slowdown in growth
in the Chinese economy and a drive to curb
extravagance from the government has contributed to a
slowdown in demand for meat in China.
The reduced demand for meat and ample sheep meat
supplies resulted in prices beginning to decline in the
middle of 2014, which has continued in this year so far.
The average price of mutton at wholesale markets in
China in June 2014 was 56 yuan/kg; by June 2015 it had
fallen to 49 yuan/kg, down 12 per cent year-on-year,
according to the Chinese Ministry of Agriculture.
This fall in prices has led many Chinese producers to
reduce the size of their flocks, culling more sheep, with
some leaving the industry altogether. This has led to
more sheep being put on the market in the short-term,
putting further pressure on prices. However as
domestic producers have been culling their breeding
ewes, this should lead to tighter supplies in the long
term, potentially leading to a resumption of increasing
import demand.
Mark Kozlowski, Senior Analyst, AHDB Beef and Lamb
mark.kozlowski@ahdb.org.uk

While the Agriculture and Horticulture Development Board seeks to ensure that the information contained within this document is accurate at the time
of printing, no warranty is given in respect thereof and, to the maximum extent permitted by law, the Agriculture and Horticulture Development Board
accepts no liability for loss, damage or injury howsoever caused (including that caused by negligence) or suffered directly or indirectly in relation to
information and opinions contained in or omitted from this document. AHDB Beef and Lamb is a division of the Agriculture and Horticulture
Development Board.
Agriculture and Horticulture Development Board 2015.
All rights
reserved.
www.ahdb.org.uk
beefandlamb.ahdb.org.uk
Cattle
and Sheep
Market Update/Published July 2015/Issue 37 - Page 10