The Lamb Market

Sainsbury’s has announced it is to increase the price it pays for its lamb until the end of February.  The retailer has said it will pay its 800 suppliers of Sainsbury’s own and Taste the Difference range £3.80 per kg.

Lamb prices have fallen dramatically over the last few months and are now at the lowest price they have been for a number of years.  The average liveweight price for medium lambs (39.1 to 45.5kg) in England and Wales in December 2012 was 153.4p per kg.   The last time prices were below this level for the same period was in December 2008.  The low prices are further exaggerated this year as they have come at a time when producers are seeing costs of production increasing and the terrible effects of the Schmallenberg disease.  The NFU recently released figures which showed producers were currently on average losing £29 per head.  

In contrast, beef prices continue to remain firm; the difference appears to be the availability of imports.  Domestic production for both sheepmeat and beef remains tight.  But whereas beef and veal imports are reported to be low, with November shipments 2% below year earlier levels imports of sheepmeat into the UK during November were 30% higher than 2011 levels.  This is the largest November imports since 2006.   Imports from New Zealand in November accounted for 62% of the total volume, an increase of 26% year on year; imports from Australia and Ireland were up by 21% and 79% respectively.  These imports arealso cheap, the AHDB reports the overall unit value averaging £3,700 per tonne down a quarter on year earlier levels, this is having a negative effect on domestic prices.

When we take a look at the retail price spread throughout 2012, farm gate prices have fallen whereas the average retail price for lamb has remained pretty stable.  Over the first three months of 2012 the share that farmers were receiving rose to nearly 60% of the final retail price, but since April this has reduced so that in November and December it had fallen to 45%.  Although Sainsbury’s decision will only affect a small amount of producers, hopefully it will be a catalyst for other retailers to follow.