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AHDB Cattle and Sheep Weekly


05 May 2015

EBLEX Cattle and Sheep Weekly - 5 May 2015EBLEX Cattle and Sheep Weekly - 5 May 2015


Lamb trade continues to fall

Old season lamb prices at GB auction markets eased again in week ended 29 April, with the OSL SQQ down 9p at 175.6p/kg. This has increased the difference, compared to the same period last year, to 31p. This is despite numbers in the corresponding week of 2014 being over 20% higher, although this could have been due to some restocking last year following the later Easter period. This means that the daily OSL SQQ has been trending below week earlier levels for over two weeks. Notwithstanding this, prices did steady somewhat as the week progressed, with the SQQ on 29 April showing the smallest week-on-week fall in over two weeks. Numbers of old season lambs coming forward have started to tail off slightly as the season moves towards the switchover, but they do still remain high.

The new season trade has continued to pick up pace, with lambs coming forward in increasing numbers in week ended 29 April. Throughputs were up 14% on the previous week. Combined with the high number of old season lambs being marketed, this contributed to prices falling. The NSL SQQ fell 14p to 206.9p/kg, 40p below the level seen in 2014 and the same price as that received for old season lambs in the equivalent week last year.

After showing more stability than the liveweight market last week, the deadweight lamb price also fell sharply in the week ended 25 April, being back over 28p on the week earlier to 417.2p/kg, 59p/kg lower than the same period in 2014.

The cull ewe market has also come under some pressure in the past few weeks, reflecting the falling price of lamb. Until recently the cull ewe price had been tracking at record levels. However, the GB cull ewe price has fallen to £73 per head, £16 per head below levels seen just two weeks before. Despite this, in a historical context cull ewe prices are still high.

High lamb supplies set to continue

Lamb slaughterings have been high in the first few months of this year as the remainder of last year’s bumper lamb crop comes to the market. With a larger breeding flock recorded in the December survey and seasonal conditions good once again, latest AHDB forecasts anticipate another large lamb crop. Consequently, high supplies are set to remain the norm for the rest of this year. At the same time, cull ewe numbers, which have been very low over the last year, are likely to return to more normal levels. As a result, sheep meat production is forecast to rise by 6%, compared with 2014, to the highest level for seven years. While increased exports may mitigate this growth to some extent, there will be more sheep meat on the UK market over the coming year. How this impacts on the market will depend on demand but it seems likely that prices will remain under some pressure.

 

No let up on falling cattle prices

With the market fundamentals continuing to prove unfavourable for producers and processors still exerting some downwards pressure on the market, deadweight prime cattle prices have fallen again. In week ended 25 April the rate of decline showed no signs of slowing down and the GB all prime average fell by another 3p on the week to 336.3p/kg. The all prime average has now fallen 25p since the turn of the year and is only around 5p/kg ahead of the five-year (2010-2014) average. While the trend is still overwhelmingly downwards, some differing price movements crept into the trade. Steers and heifers meeting R4L specification both came back 4p on the week earlier to 346.8p/kg and 345.0p/kg respectively while young bull prices actually increased. R3 young bulls were a penny dearer at 327.2p/kg.

With Irish prices remaining relatively stable against falling prices in the UK, the price differential with the UK trade has narrowed in recent weeks. In early March it was around 70p/kg, while more recently it is closer to 50p/kg. Despite this, it is still fairly high in a historical context and consequently is likely to be adding to the pressure on the GB/UK cattle trade as the two markets attempt to move closer to each other. However, offering better prospects for the UK trade, Irish supplies are starting to show signs of slowing, meaning that the availability of cheaper Irish product could be on the verge of tightening.

 

The cull cow trade has fared better than the prime trade over recent weeks, with some moderate price strengthening. In the latest week, at 250.3p/kg, the -O4L cow average was up 3p on the week. Despite the euro/ sterling exchange rate making exports less competitive, there continues to be robust demand for cow beef both at home and abroad. However, there is a risk that if prime cattle prices continue to fall, those with poorer confirmation may come close in price to better cows giving rise to the opportunity for some product substitution.

Tight beef supply situation forecast to continue

The latest AHDB forecasts for beef and veal confirm that 2015 will be a year of lower cattle availability and reduced beef and veal production. The effects of reduced calf registrations in late 2012 and 2013 will start to influence the availability of cattle for slaughter later this year. While this is likely to offer some support to the market, as will lower imports, there are still some downside risks to the trade including exchange rate movements, difficulties in the dairy sector and consumer behaviour.

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