Lamb market outlook

July 2021

  • 7% fall in UK sheep meat production forecast for 2021.
  • Imports to decline again, driven by reduced product availability in New Zealand and higher shipping costs.
  • Export volumes limited by product availability, reduction in consumer demand in Europe and trade friction.
Image of staff member Rebecca Wright

Rebecca Wright

Analyst - Red Meat

Overview

UK sheep meat production is expected to contract this year driven by a reduction in both lamb and ewe slaughter. Demand is forecast to be steady on the year and above pre-pandemic levels. There have been some logistical challenges with exports to the continent and this is likely to remain the case for some time. Despite these challenges, the tight domestic supply and buoyant domestic demand have helped prices reach record breaking levels. 

A more detailed look at the sheep meat production outlook can be found here.

UK production

During the first six months of this year production totalled 119,000 tonnes, down 10% on year earlier levels. Lamb kill levels have been driven down, in part, due to concerns in 2020 around what the post-Brexit trade environment might look like. At the time lambs were sent forwards at a rapid rate. Around 400,000 additional lambs, over and above what we would expect in a typical year, came forwards in 2020 from the 2020 lamb crop. As these lambs came forwards pre-Christmas they were then not available to be killed in Q1. Equally ewe kill has been exceptionally low over the past 18 months. Read more about our thoughts on the low ewe kill numbers and what this might mean for the flock on page four of the AHDB sheep market outlook.

The breeding flock coming into this year was similar to other recent years in size. Coupling this with good average conditions, the lamb crop is forecast to be 17.2 million head. This is similar to 2020. After last year when lambs came forwards at a rapid speed, we are expecting kill patterns to be more typical this year. Lamb kill is therefore forecast to decline 4% in H2 2021, and record some growth in H1 2022.

In total during 2021 sheep meat production is forecast to total 274,000 tonnes, down 7% on the year.

UK sheep meat trade

Imports of sheep meat have been under pressure for some time. Production in New Zealand and Australia have been low in historic terms recently and demand in Asia rising. There is no reason to presume a sharp divergence from recent levels. Global shipping costs remain high, and container availability is challenged.

Imports are important in balancing demand in the UK, both in terms of cuts preferred by UK consumers, and the seasonality of supply. Longer term we forecast volumes to stabilise reflecting the UK’s continued need for imports to balance domestic production. This year import volumes are expected to drop 13%, to 58,000 tonnes.

Export volumes are traditionally closely correlated to domestic production trends. The decline in production will therefore limit exports, as will on going logistical challenges due to the new arrangement surrounding UK/EU trade. Reflecting these elements, export volumes are forecast to decline 20% in 2021, to 73,000 tonnes. This decline is weighted towards earlier in the year.

Lamb consumption trends

In retail, lamb is the fastest growing protein in volume terms over the last year with year-on-year spend up 15.9% and volumes growing 11.4%, for the 52 w/e 13 June 2021 according to Kantar. Lamb volumes had more mixed results at the start of the pandemic. Volumes dropped dramatically in the first half of 2020 as Easter plans were cancelled during the first lockdown but now we see a positive performance in comparison, while other meats struggle to compare to the heights of panic buying.

Britain consumed an additional nine billion meals and snacks at home in the year to 16 May 2021 (Kantar Usage) and consumers were increasingly looking for variety in the meals they cooked at home. This led many to choosing lamb. Consumers were also buying more luxury foods, as they couldn’t eat out, with two in five shoppers saying they bought more treat or indulgent foods in May 2021 (according to AHDB research with YouGov). This fits in with consumer views of lamb being for a treat or reward, which was the fastest growing need for lamb in the last year, although from a small base (Kantar Usage). Roasting joints contributed the most to growth, highlighting a much improved Easter performance. However, consumers were still looking for their foods to be convenient, with lamb mince and processed volumes up 18% and added-value products up 22%.

These retail gains, along with the takeaway and delivery boom, has compensated for eating-out losses in lamb. AHDB estimates lamb volumes in foodservice have grown 3% over the last year (AHDB estimates based on Kantar Out-of-Home, 52 w/e 13 June 2021). This growth has been driven by takeaways and deliveries, which were up 37%, compensating for a decrease of 56% from eating-out. Near the start of lockdown lamb outperformed other proteins by remaining in growth as kebab shops were one of the few foodservice outlets which remained open. Kebabs have remained the biggest contributor to lamb takeaway growth over the last year accounting for more than half of volume growth; Indian food has also seen strong growth. Chinese was the fastest growing cuisine for lamb, up 120% but as it is from a smaller base, contributed 9% of growth. Within eating out, lamb-centred meals, such as roasts and shepherd’s pie, have contributed most to volume decline.

What next?

As lockdowns gradually ease consumers have showed signs of getting back to some normality. ‘Freedom day’ during July means we anticipate more of a return to eating out in the second half of 2021 but the market will not fully recover to pre-COVID levels due to closures, the economic back drop and still some levels of uncertainty.

In retail, we predict lamb will not maintain the high levels seen in 2020 experiencing a small decline year-on-year, but we do expect it to track significantly above 2019 levels. In-home occasions are expected to fall as eating out restrictions continue to ease but these will not return to 2019 levels as many will continue to work from home at least a few days a week. Lamb may also be impacted in the coming months by its higher price point.

Lamb in the foodservice market is expected to continue to see growth through 2021 compared to 2020 and 2019 levels. The reopening of restaurants will drive most of the growth for lamb but deliveries and takeaways are also predicted to see volume increases. This growth in the foodservice market will balance out the losses from retail.

Overall lamb is expected to maintain the total volume levels for the full year 2021, and see growth of 3% compared to 2019.

For 2022, AHDB predicts many of these trends will remain as we see the retail and foodservice sectors find the balance of the new normal. Eating-out will not return to pre-COVID levels this year and retail sales of red meat may start to suffer again as media noise around the industry accelerates. Overall lamb volumes for the full year 2022 are expected to be down -4% versus 2021 and down -1% versus 2019.

To maintain momentum:

  • Encourage consumers back out-of-home. Opportunities in the eating-out market include personalisation, indulgence, quality cues and pushing reputational factors such as health, sustainability and backing British.
  • Encourage shopper’s in-store by improving the experience of the meat aisle. AHDB has commissioned a research project on the opportunities here with the report due to be published in September.
  • Continue to tap in to seasonal events such as Easter and Christmas, which dominate lamb sales, while also justifying the higher price point of lamb through quality and taste messaging.
  • Innovate lamb offerings to appeal to a wider range of occasions such as BBQs or fake-aways, through convenient and tasty options.
  • 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. For more information on consumer views on the environment see here.

For more detail see the full Sheep Market Outlook

Visit the retail and consumer page for more insight

Visit the Trade section for more information


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