Sheep Market Outlook Mark Kozlowski, AHDB Beef & Lamb AHDB Outlook Conference 9 February 2016
Overview Current situation UK Current situation rest of the world UK outlook Wildcards
Current situation in the UK
p/kg liveweight UK prices below year earlier levels for most of 2015 Increases seen recently 260 240 220 Better than expected start No seasonal peak Eid 200 180 160 140 120 Chart: GB liveweight lamb price Source: AHDB Market Intelligence; LAA; IASS 5 yr ave 2014 2015 2016
p/kg liveweight October prices lowest since 2009 250 230 210 190 170 150 130 110 90 70 50 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Standard Quality Quotation 12 month moving average Chart: GB liveweight lamb price Source: AHDB Market Intelligence; LAA; IASS
000 tonnes UK sheep meat production increased in 2015 overall production up 1% 340 330 320 310 300 290 280 270 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Chart: UK sheep meat production Source: Defra
000 heads UK lamb slaughterings in 2015 were higher than in 2014 - but fell back in Q4 200.0 Eid 150.0 Earlier Easter 100.0 50.0 0.0-50.0-100.0-150.0 Large carry over of lambs from 2014-200.0 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Year on year change in lamb slaughterings Chart: UK lamb slaughterings Source: Defra
Fewer lambs sold at liveweight have fallen within the SQQ weight band 100% 95% 90% 85% 80% 75% 70% 65% 60% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2014 2015 Five year average 2016 Chart: Percent of liveweight lambs within SQQ weight band Source: AHDB Market Intelligence; LAA; IASS
000 heads UK ewe slaughterings below year earlier levels for much of 2015 200 190 180 170 160 150 140 130 120 110 100 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Chart: UK adult sheep slaughterings Source: Defra 2014 2015
/ Strength of the pound influenced trade in 2015 1.45 1.4 1.35 1.3 1.25 1.2 1.15 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2014 2015 2016 Chart: Sterling vs Euros Source: Pacific exchange rate service
000 tonnes UK exports fell in first 11 months of 2015 - but doubts over the accuracy of the data 100 90 80 70 60 Shipments held at ports Exporters reluctant to send 50 40 30 20 Protests by French farmers Operation Stack / exchange rate 10 0 2014 2015 Chart: UK sheep meat exports Source: GTIS; HMRC France Germany Ireland Belgium Hong Kong Others
000 tonnes Overall UK sheep meat imports were lower in the first 11 months of 2015 - volumes from NZ actually increased 4% 90 80 70 60 50 40 30 /NZ$ exchange rate Lower volumes to China Higher production 20 10 0 2014 2015 New Zealand Australia Ireland Others Chart: UK sheep meat imports Source: GTIS; HMRC
/kg Due to exchange rates UK imports from New Zealand have been cheaper 5.5 5.3 5.1 4.9 4.7 4.5 4.3 4.1 3.9 3.7 3.5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Chart: Unit value of UK imports from New Zealand Source: GTIS; HMRC 5 yr ave 2014 2015
000 tonnes Total supplies for consumption in the UK have increased 5 4 3 2 1 0-1 -2-3 Production Imports Exports Supplies for consumption Chart: Estimated UK sheep meat supplies Source: AHDB forecasts based on information from HMRC and Defra
000 tonnes Retail sales level over the year but have been higher since September 13 12 11 10 9 8 7 6 5 Good Easter trade Summer sales were poor Sales have improved since September 4 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Chart: UK retail sales of lamb Source: Kantar Worldpanel 2013 2014 2015
Current UK situation summary Prices in 2015 have been low compared to recent years More recently prices have been increasing Production in 2015 was above 2014 However production declined in Q4 2015 Less sheep meat was imported to the UK Tough export conditions have led to a fall in shipments from the UK
Rest of the world
Million head New Zealand lamb crop fell in 2015/16 season 26.5 26 Lowest crop in almost 60 years 1.7 million lower than 2014/15 Due to drought and small breeding flock 25.5 25 24.5 24 23.5 23 22.5 2011/12 2012/13 2013/14 2014/15 2015/16 Chart: New Zealand lamb crop Source: Beef and Lamb New Zealand
Wk-1 Wk-3 Wk-5 Wk-7 Wk-9 Wk-11 Wk-13 Wk-15 Wk-17 Wk-19 Wk-21 Wk-23 Wk-25 Wk-27 Wk-29 Wk-31 Wk-33 Wk-35 Wk-37 Wk-39 Wk-41 Wk-43 Wk-45 Wk-47 Wk-49 Wk-51 Head New Zealand slaughter schedule earlier 900,000 800,000 2013/14 2014/15 2015/16 Though, exactly when it will fall is disputed 700,000 600,000 Before falling sharply 500,000 400,000 300,000 200,000 100,000 0 High slaughtering is expected to continue to cover the Easter trade Chart: New Zealand lamb slaughterings Source: New Zealand Meat Board
000 tonnes Australian sheep meat production is forecast to decline 800 700 600 500 400 300 200 100 0 2011 2012 2013 2014 2015 2016 Lamb Mutton Chart: Australian sheep meat production Source: MLA
EU sheep meat production continues to fall 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% -2.5% -3.0% -3.5% -4.0% Ireland Spain France Italy Romania EU 15 Chart: year on year percentage change in sheep meat production Source: EU commission
000 tonnes Lower Chinese imports in 2015 300 250 200 High stock levels High levels of domestic production Cheap pork 150 100 50 0 2010 2011 2012 2013 2014 2015 New Zealand Australia Uruguay Chile Chart: Chinese sheep meat imports Source: GTIS; China customs
Rest of world summary New Zealand's lamb crop in 2015/16 is its smallest for almost 60 years Production in New Zealand higher earlier in the season but expected to fall Australian production is expected to be lower in 2016 Production in the EU has been falling for the past few years Chinese demand declined in 2015; not expected to recover until late 2016
UK Outlook
Million head Forecasts based on size of the December breeding flock from Defra figures 16.0 Official figures AHDB forecasts 15.5 15.0 14.5 14.0 13.5 13.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Chart: UK breeding flock Source: Defra and AHDB forecasts
Changes to breeding flock normally reflected in lamb crop 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% -6% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Change in previous years breeding flock Change in lambs in June Chart: change in UK breeding flock and following lamb crop Source: Defra
Million head Previous forecasts for lamb slaughter revised downwards 4.3 4.1 3.9 3.7 3.5 3.3 3.1 2.9 2.7 2.5 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Previous forecasts New forecasts Chart: UK lamb slaughter forecasts Source: Defra and AHDB forecasts
however lamb slaughterings are likely to remain higher in 2016 6% 4% 2% 0% -2% -4% -6% -8% -10% -12% 2010 2011 2012 2013 2014 2015 2016 2017 Chart: year on year change in UK lamb slaughtering Source: Defra and AHDB forecasts
Million head Adult slaughterings are expected to increase in 2016 2.1 2 1.9 1.8 1.7 1.6 1.5 2010 2011 2012 2013 2014 2015 2016 2017 Chart: UK adult sheep slaughter forecasts Source: Defra and AHDB forecasts
kg Carcase weights expected to fall but stay above the 5-year average 20.5 20.0 19.5 19.0 18.5 18.0 Q1 Q2 Q3 Q4 5 year average 2015 2016 2017 Chart: UK lamb carcase weights Source: Defra and AHDB forecasts
000 tonnes Overall production in 2016 is forecast to rise 320 310 300 290 280 270 260 250 2010 2011 2012 2013 2014 2015 2016 2017 Chart: UK sheep meat production Source: Defra and AHDB forecasts
000 tonnes change UK imports forecast to rise in Q1 before falling back for rest of 2016 4.0 3.0 2.0 1.0 0.0-1.0-2.0-3.0-4.0-5.0-6.0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Chart: year on year change in UK sheep meat imports Source: HMRC and AHDB forecasts
000 tonnes Overall UK imports should fall in 2016 125.0 120.0 115.0 110.0 105.0 100.0 95.0 90.0 85.0 80.0 2010 2011 2012 2013 2014 2015 2016 2017 Chart: UK sheep meat imports Source: HMRC and AHDB forecasts
000 tonnes change Export volumes are expected to increase in 2016 3.0 2.0 1.0 0.0-1.0-2.0-3.0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Chart: year on year change in UK sheep meat exports Source: HMRC and AHDB forecasts
Change 000 tonnes Total supplies for UK consumption to continue increasing in 2016 15 10 5 0-5 -10 Production Imports Exports Supplies for consumption 2015 2016 Chart: Estimated UK sheep meat supplies Source: AHDB forecasts based on information from HMRC and Defra
Wild cards
Weather
p/kg (deadweight) Exchange rates will continue to influence the UK lamb price 550 500 450 400 350 300 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2015 (actual exchange rate) 2015 (exchange rate at June 2014) 2014 Chart: UK deadweight sheep price and potential price based on June14 exchange rate Source: HMRC and AHDB forecasts
Disease Disease will continue to be a risk with all forms of livestock Blue tongue outbreaks in France have led to movement restrictions for much of country Bluetongue also in Romania
UK forecasts summary Higher UK production in 2016 Driven by lower retentions and increased ewe culling UK production to fall back in 2017 Production difficulties in NZ Lower UK imports More favourable export conditions Disease, currency and weather wildcards could change this
UK forecasts summary continued The expected increase in supplies will put pressure on prices However anticipated improving retail sales and more competitive exports could give them some support Making sure lambs are marketed when they are at target spec will help producers ensure maximum returns
Thank you Mark Kozlowski Phone: 024 7647 38631 Email: mark.kozlowski@ahdb.org.uk Twitter: mkozlowski1