Friday, February 22 17:06:11
Sheep farmers in Ireland and Britain fear for their future as oversupply of lamb in Europe drags farm-gate prices to three-year lows while production costs soar, giving efficient New Zealand exporters a vital edge.
Most British sheep farmers have been selling at a loss since November because an influx of cheap imports coincided with the delayed sales of home-grown lambs that had been held up by wet weather causing poor feeding conditions.
Meanwhile, much of the European Union, the biggest market for British lamb, is in recession.
Lamb prices at British farms were down 24 percent year-on-year in early February while Ireland recorded a 20 percent drop.
Britain and Ireland are the EU's top lamb producers and major exporters alongside world leaders New Zealand and Australia.
But farmers and analysts say falling incomes could push hundreds to leave the business and thousands more to reduce their flocks, making the animal that shapes much of the current landscape of the islands, through its grazing, a rarer sight.
"If this trend continues, and producers are forced to sell lambs at less than the cost of production, then ultimately they will look at alternative ways of making a living," said Charles Sercombe, a sheep breeder in central England in charge of livestock issues for Britain's National Farmers Union (NFU).
The drop in farm gate prices - to 3.40 pounds per kg ($2.35 per lb)- has yet to show on British supermarket shelves, where lamb fetches between 7 and 15 pounds a kg. According to the NFU, while December wholesale prices for legs of lamb slid 17 percent from a year ago, retail prices edged down only 2 percent.
"Farmers' costs are rising, but retailers' costs are too," said Richard Dodd, spokesman for the British Retail Consortium, adding that the country's supermarkets regularly ran promotions on lamb but that higher costs for processing, transport and running stores needed to be reflected in headline shop prices.
Input costs for British and Irish sheep farmers have increased by around 30 percent in the past five years, with feed, fuel and fertilisers biting particularly hard.
"Those are the three things that have really put the guys under pressure here with the reduction in (lamb) price," said Gabriel Gilmartin, president of the Irish Cattle and Sheep Farmers' Association.
The situation for producers could get worse as New Zealand has leeway in its export quotas to further increase shipments to the EU, where appetite for lamb remains solid but incomes are squeezed.
Despite a strengthening currency, export-driven New Zealand farmers can produce lamb more cheaply than those in Britain and Ireland, largely through economies of scale.
In Ireland a large farm might have 500 to 600 sheep, compared with 3,000 to 5,000 in New Zealand, Gilmartin said.
"There is too much fragmentation of land in Ireland and the holdings are too small," he said.
Britain has been importing lamb from the Southern Hemisphere for over a century to guarantee supply at any season, with peak shipments traditionally arriving in the first half of the year, when domestic supply is lowest.
But the heavy rain of 2012 delayed Britain's peak of production by two months because lambs do not thrive on soaked grass, as they get less nutrients and are prone to diseases. Reuters