This week’s discussions in the sheep sector are predictably focused on the rate at which sheep prices have increased in recent weeks and the fact that top prices had such a short stay at €7/kg before moving swiftly upwards.

The latest increase leaves lamb prices running some €1.50/kg to €1.70/kg ahead of the corresponding period in 2020 or from €33 per head to €37 per head on a 22kg carcase.

It is not just Irish farmers, however, who are experiencing record prices for the time of year with global trade flying on the crest of a wave.

Figure 1 details the extent to which prices have increased.

The Bord Bia information is a couple of weeks behind current price trends due to delays in price reporting in some countries.

The least differentiation in year-on-year prices is seen in France (54c/kg higher) but this is due to the French farmgate price trending at a much higher level than other EU countries

If this week’s prices were included, the scale of the increase would be even greater. It is also worth noting that Irish prices are reported exclusive of the 5.6% flat-rate VAT addition which farmers not registered for VAT receive as a compensation payment for the payment of this tax on goods.

The least differentiation in year-on-year prices is seen in France (54c/kg higher) but this is due to the French farmgate price trending at a much higher level than other EU countries and having less scope to rise. In contrast, lamb prices in New Zealand have increased by a massive €1.83/kg on the corresponding period in 2020 .

Global influence

New Zealand sheepmeat or rather a lack of New Zealand sheepmeat entering the EU is one of two main factors underpinning the current buoyancy in EU farmgate prices. Global shipping costs have increased exponentially due to a severe shortage of freight containers driving costs upwards and, more recently, due to sharp increases in fuel costs.

demand has increased due to stocks of numerous products running low during the peak of the coronavirus pandemic and companies now trying to reverse this situation

The Agriculture and Horticulture Development Board (AHDB) report that the cost of accessing freight containers has experienced a five-fold increase, rising from in the region of $2,000 in September 2020 to over $10,000 in October 2021.

The AHDB outlines a number of factors responsible for this sharp increase. It says demand has increased due to stocks of numerous products running low during the peak of the coronavirus pandemic and companies now trying to reverse this situation.

However, varying quarantining, isolating and social distancing policies are limiting labour activity with many ports worldwide becoming “choke points” with vessels queuing up waiting to enter.

The closure of many Chinese ports at the start of the pandemic continues to see some containers being at the wrong ports further delaying business.

At the same time, demand from China and the US has recovered strongly

This situation is leaving it harder for New Zealand processors to access freight containers and secure shipping space to export sheepmeat to the EU, while the cost of servicing this supply channel has soared.

At the same time, demand from China and the US has recovered strongly making these two outlets much more economically attractive, especially given that New Zealand sheepmeat is also currently at a much higher price point.

Lower UK supplies

The AHDB reports that up to 26 October, New Zealand has filled just 33,215t of its 114,205t tariff-free quota. There is a similar sharp reduction in imports in to the EU from New Zealand with previous supply forecasts being revised downwards. This is occurring against a backdrop of 10% reduction in UK sheep production with throughput for the year-to-date falling by over 1m head of lambs.

This has the combined effect of tightening supplies in the domestic British market and curtailing the volume of sheepmeat exported from Britain to the EU. Irish and Northern Irish processors are capitalising on some of this void of sheepmeat in the market, which is fuelling the recent surge in prices with retailers putting measures in place to try to ensure continuity in supply, particularly for the Christmas trade.