Lamb market outlook

July 2020
  • 7% fall in UK sheep meat production expected in 2020.
  • Imports to decline again, driven by reduced product availability in New Zealand.
  • Consumer demand across Europe under pressure from COVID-19.

Overview

There is much uncertainty in the lamb market at the moment, including Brexit and COVID-19. Overall, production is forecast to decline this year. Initially it looked like the market could be tight, supporting prices this year, but this has now changed. With the global economy shaken, demand both domestically and in Europe is under pressure.

UK production

During 2020, UK sheep meat production is forecast to drop to 287,000 tonnes cwe. This is a significant drop on the year, although 2019 production was the highest in recent years. So far in 2020 production has already dropped, with production down by more than 11,000 tonnes since the end of March.  

During the second half of the year, the lamb kill is forecast to record marginal growth, whereas the adult kill is expected to remain low. The lower adult kill more than offsets the marginal increase in the lamb kill, with sheep meat production forecast to fall 2% in H2 2020.

Economic uncertainty from both COVID-19 and the ongoing UK-EU negotiations currently offers little incentive for farmers to expand the size of their breeding flocks. This is likely to push production further down. Future developments to farm subsidy payments could also put further pressure on the size of the breeding flock.

UK sheep meat trade

UK imports are again forecast to decline this year, driven by a lack of product availability in New Zealand and continued higher demand from China. New Zealand and Australia have both now had rain after a prolonged period of drought, which means farmers there are looking to re-stock. In the short term, this will negatively affect production in these countries.

Typically, UK exports reflect domestic production trends. As such, volumes in 2020 are forecast to decline, to reflect the lower production. However, demand in Europe is under pressure for similar reasons as in the UK – COVID-19. In this forecast we have assumed Europe will recover from COVID-19 in a similar manner as described here for the UK in ‘scenario A’. Should recovery be slower and closer to either of the other scenarios, then this is likely to put even more downwards pressure on demand and prices.

Lamb consumption trends

There have been long-term challenges for the lamb category, with retail volumes down -3.7% prior to COVID-19 (Kantar, 52 w/e 23rd Feb 2020). Shoppers turned away from almost every type of lamb cut, with only mince in growth, driven by the need for versatility and convenience. There was also a decline for lamb in the eating-out market, of -4% (MCA, Y/E Dec 2019), as it struggled to maintain relevance in popular dishes such as curries and roast dinners. However, despite its losses, the eating out market was not insignificant for lamb, accounting for approximately 14% of total lamb volumes in 2019.

Lamb has been significantly impacted by lockdown. Retail volumes declined -7.5%, well behind total food and drink growth of +14.7% (Kantar, 12 w/e 17 May 2020). With consumers being unable to hold larger gatherings, Easter and Eid al-Fitr celebrations have been significantly impacted – proving detrimental for roasting joints, which account for almost a half of primary lamb volumes.

In addition, the shopper profile for lamb is also heavily skewed towards an older demographic. These older shoppers have been most impacted by social distancing measures, which has limited their ability to go out and purchase lamb in the usual manner. Many have turned to online shopping, where lamb tends to under-trade.

Takeaway has an important role to play for lamb, mainly in the form of kebabs. This has seen significant uplifts during lockdown; Kantar Out of Home data shows that takeaway lamb volumes rose by almost 70% between March to May, leading to a 10% share of total lamb volumes.

What next?

In all scenarios, lamb volumes in the second half of 2020 are expected to remain below 2019 levels. The retail market for lamb is not expected to grow in any scenario, mitigating any opportunity to compensate for the contraction of the eating out market. Under Scenario A, lamb volumes are expected to decline by 9%.

Losses for lamb in the retail market during lockdown are expected to continue, linked to the perception of lamb being a less versatile protein, as well as having a higher price point, meaning people feeling the pinch on household budgets may switch to cheaper proteins.

With a constricted eating-out market, takeaways will play an important role for those consumers with some spending power. In Scenario A we would expect the takeaway market for lamb to remain elevated, mitigating some of the losses from other areas. However, in Scenarios B and C, where financial worries are heightened, there may be an absence of any significant uplift for the takeaway market, as well as further detriment to retail sales. This would result in overall demand for lamb worsening to -14% in Scenario B and -19% in Scenario C.

To mitigate losses:

  • The quality and product benefits of lamb need to be clearly communicated to consumers, to justify its higher price point.
  • Inspire consumers to recreate foodservice experiences in home, perhaps with a steak night or to recreate lamb kebabs
  • There is a need to broaden the appeal of lamb to a younger demographic. Demonstrate the relevance of lamb to everyday dishes, rather than just a treat or special occasion
  • Address health concerns by communicating the health benefits of lamb
  • In the longer term look to maintain and build consumer trust, demonstrating where farming values (animal welfare, environmental stewardship and expertise) are shared with consumers

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Beef & Lamb: At A Glance

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Gallery: Beef & Lamb at a glance

Click on the thumbnails below for simple visual explanations as to how the beef and lamb markets have performed, according to the latest data. Here we look at GB and international prices, consumption, slaughterings and trade figures.