Outlook for Irish lamb
The Irish hogget trade has had a difficult start to 2023 with deadweight prices trending well behind 2022 levels. The weaker trade should also be considered alongside continued high input costs.
Seamus McMenamin, Bord Bia’s sheepmeat and livestock manager, sets out the factors at play and provides an outlook for the sector.
Weaker consumer demand
Lamb is a high cost protein relative to beef, pork and chicken and is therefore the most exposed to changes in consumer behaviour, both on the domestic market and in key export markets. Domestic consumption of lamb accounts for approximately 15% of total sheepmeat production with the balance being exported, primarily to Europe. This dependency on exports leaves us more exposed to shifts in the global marketplace than some of our European competitors who are much more domestically focussed in terms of end markets for their lamb.
The latest data from Kantar Worldpanel has indicated a 5% increase in the value of retail lamb sales in Ireland during the 12 weeks ending 25 December, 2022. However, this increase in the overall value was driven by a higher average unit price, with volume sales back by three per cent during the same period. This trend has also been obvious across key export markets in the EU where the impact of increasing living costs, high levels of food inflation and reduced consumer spending power has had a detrimental effect on lamb sales. Meat Shopper Insights data collected by Bord Bia in Q4 of 2022 has indicated declining consumer consideration for lamb in key export markets for Irish lamb, namely Belgium, Germany, Sweden, France and Italy, with the high price point being a key contributing factor to this trend. While consumers are continuing to buy meat in these markets there has been a shift in the balance across the proteins with consumers increasingly seeking lower cost options.
Current lamb supplies
Reduced consumer demand for lamb on the European market has coincided with increased availability of product which has contributed to the downward pressure on the Irish deadweight trade in early 2023. A downturn in demand for lamb imports in both the USA and China in the second half of 2022 increased the availability of lamb available for trading on the global market. Increased volumes of frozen New Zealand sheepmeat were exported to the EU in the final months of 2022 as a result. This increase coincided with a notable increase in the volume of UK product being shipped into EU markets with some reports indicating notable volumes of lamb being held in storage across the EU.
The 2023 lamb crop in Ireland is expected to contract in 2023 with higher ewe cullings, reports of reduced concentrate feeding due to high costs and reports of a poorer scanning ratio on some farms. All of this is expected to contribute to a decline in overall output. In the more immediate term local hogget thoughput is expected to hold fairly steady in the early months of 2023. Analysis has indicated an additional 60,000-70,000 hoggets have been carried into 2023 for processing when compared to 2022 levels however with fairly strong throughput being reported in local plants during January 2023 a proportion of these have already passed through the system.
Increases in lamb demand on the domestic and key export markets is also expected in line with key religious festivals in 2023. This year Ramadan falls on 22 March, Easter Sunday on 9 April and Eid al-Adha on 28 June. These festivals have become increasingly important dates in the sheep farming calendar and should help stimulate stronger demand for lamb from the marketplace.
Global trade dynamics
Increasing import demand in China in recent weeks is once again redirecting Australian and New Zealand lamb away from the EU market which should contribute to a reduction in sheepmeat availability in the region as 2023 progresses. Production is also expected to reduce across key lamb producing regions in the EU during 2023 with contractions in ewe numbers, high production costs and lower carcase weights all expected to contribute to this trend. Meanwhile production in the UK is expected to hold steady in 2023 following an increase in the ewe flock in 2022.
The value of Irish sheepmeat exports increased by 17% to total €476 million during 2022 with the volume of exports increasing by 10% to 75,000 tonne. However much of this increase, in both value and volume terms, was during the first half of the year with exports in the second half of 2022 largely similar to the corresponding period in 2021. Europe continues to be the main market outlet for Irish sheepmeat however securing access to the widest range of potential markets continues to be a key priority for Bord Bia. We continue to engage closely with the Department of Agriculture Food and Marine (DAFM) and sheepmeat processors in developing market access. There are significant opportunities for Irish lamb in the US and Chinese markets and achieving direct access to both markets remains a key focus of the sector in 2023.