Sending lambs to market that are “fit not fat" is the best way for producers to maximise returns as sheep prices fall, according to EBLEX.
Concerns have been growing in the industry about the apparent steep fall in the sheep price over the last month.
But EBLEX sector director Nick Allen says a variety of factors have come together to influence the price and the reality is it is following an annual trend but simply running a few weeks earlier than normal.
And he has urged producers to concentrate on selling stock as they reach the target specification for weight and fatness to maximise returns and benefit from the higher end prices hidden within the SQQ average.
“There is growing concern about the direction the sheep price has gone set against the backdrop of such strong performance of the last few years, but especially in the previous 12 months,” said Nick.
“However, historically we do see a dip in price this time of year. We are slightly ahead of ourselves this year with lambs finishing two to three weeks early as a result of the favourable weather conditions. Bearing that in mind, in week ending 15 June 2011, the SQQ liveweight dropped more than 15p to 211p/kg. In 2010, week ending June 16, the SQQ dropped 20p to 175p/kg. Comparing that to the latest week here, ending 30 May, we saw the SQQ fall 19p, reaching 186p/kg. Remember as well that prices this time last year were exceptionally high so may make the gap between then and now look artificially big. The price trend is actually in kilter with 2009 and 2010 early season, which in hindsight were seen by producers as good years.
“There are, of course, many other factors affecting the market and it is important to view it in context. Internationally, there has been a fall in lamb prices across the board, including in New Zealand, Australia, France and Ireland.
“Strengthening Sterling does have an impact on the price, though this does not ultimately affect volumes we export so there is no collapse in trade, just the money we get for the product sold is lower.
“There is also evidence of farmers holding on to their lambs too long waiting for the price to go up, which can create a sudden spike in supply which of course affects the prices. Last week we saw around 35 per cent more lambs coming on to the market than the week before, this week about 20 per cent. The problem is compounded when a lot of those animals are overweight so we have a glut of sub-prime quality lambs, which drives the price down further.
“It is apparent though that for those producers who are selling lambs to specification, they are still getting good returns. The SQQ is an average so if you look within that at the high end, those animals hitting the hypothetical export spec weight band of 25.5kg to 43kg – the top 25 per cent of animals coming onto market are export quality lambs – the average price there was 227.6p/kg in the week ending 26 May, showing a 25p/kg premium over the average. Looking at the top 50%, there was an average premium of almost 12p/kg over the SQQ average so it is hiding some good prices which are holding up well.
“Our message to producers is to ensure you are selling lambs that are fit not fat in order to capitalise on the higher end prices.”
He added that the seasonal price fall would recover later in the year, perhaps even starting earlier than normal.
A full analysis of the sheep market and recent trends is included in this week’s UK Market Survey, published on June 1, and available to download from the markets section of the EBLEX website.
You can check out latest prices in the market prices section at www.eblex.org.uk/markets.