Lamb market outlook
- 5% fall in UK sheep meat production expected in 2020
- Imports expected to fall further 6%, even after a significant decline this year.
- Export volumes expected to follow production, although scope to increase if global market remains tight, underpinned by China
In 2020, UK sheep meat production is expected to fall. The breeding flock is expected to be smaller, and slaughter of the 2019 lamb crop was brought forward, both contributing to the annual decline.
Chinese demand will continue to draw New Zealand product away from Europe. This will influence UK imports and exports.
UK sheep meat production is forecast to be between 300 and 307 thousand tonnes in 2019. Uncertainty concerning Brexit, as well as good grass growing weather early in the season, supported an earlier slaughter of the 2019 lamb crop.
Half way through the production year it seems that the lamb rear rate has been better than expected. Even so, compared to year earlier levels, the number of lambs slaughtered in Q4 2019 and the first five months of 2020 is likely to be lower – around 100 thousand head lower in November and December of 2019, and 265 thousand head during carry-over period in 2020.
Political uncertainty in 2019 appears to have knocked confidence in the industry and the breeding flock is expected to be slightly smaller in December 2019 than it was in 2018.
We assume that in 2020 the lamb rear rate will fall, returning towards the five year average.
Together these factors make for a smaller lamb crop. The central forecast for production in 2020 is therefore around 5% lower than in 2019, at 287 thousand tonnes.
UK sheep meat trade
China’s import requirement for all animal protein, not just pork, has the potential to shape global trade flows for the next few years. Although not directly connected by trade, the UK sheep meat market is already being influenced.
Production in New Zealand has been limited in 2019, which has reduced product available for export. Some of the volumes that have been exported have been diverted towards China, and away from Europe. This is a trend that began before ASF, but has been exaggerated by it.
This change in trade flows has two effects on the UK market, the first is to reduce imports from New Zealand directly, and the second is to allow UK exporters to backfill volumes left in other European countries, notably France and Germany. UK imports are therefore forecast to fall by a further 10%, despite having been at historically low levels for the last couple of years.
Exports on the other hand are typically around one third of domestic production, but have the scope to be higher in 2020 than they were in 2019. Domestic demand will be key, and a further annual decline will allow higher exports.
This forecast assumes business as usual access to European markets in 2020 and beyond.
Lamb consumption trends
Chicken and fish continue to record strong long-term growth within the protein market, highlighting the competitive landscape for red meat.
There remain significant challenges for the primary lamb category, with volumes down 0.6% year-on-year (Kantar 52 w/e 06 Oct 19), this comes on the back of a 7.9% decline in 2018.
Reductions are not isolated only to lamb, but primary beef volumes are also down year-on-year (-0.7%). There has been slight growth in pork volumes over the past year.
We expect a modest decline in primary red meat consumption in the short term, with ongoing pressure from the gradual shift from traditional meat and two veg options (such as roast dinners) towards dish-based cuisines.
There is further pressure from consumers aiming to moderate consumption, often referred to as flexitarians. Kantar defines flexitarians more tightly as consumers cutting down on red meat for health reasons, and sizes this group of people at 9% of the population (July 2019).
The lamb outlook might be mitigated, if the industry:
- Continues to innovate products to meet consumer needs of convenience and health
- Inspires relevant lamb dish-based cuisines
- Addresses health concerns by communicating the health benefits of lamb
- Maintains and builds consumer trust, demonstrating where farming values (animal welfare, environmental stewardship and expertise) are shared with consumers.
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