Signs looking good as sheep sector begins to spring back

Sheep producers, after one of the most difficult periods for many years, especially during the last quarter of 2007, are now enjoying something of a revival in their fortunes.

In the wake of foot-and-mouth disease in Surrey as well as the discovery of bluetongue in early September, most of the UK found that it was unable to export lamb to mainland Europe.

Prices crashed, with the live market falling at one stage to just below 80p per kilo – a return that was totally incompatible with making any sort of profit, even for the most efficient producers. This week the trade is now in the region of 120p per kilo, with the prospect of further increases as supplies run down.

At this time last year, the lamb market was hit by an early and huge influx of New Zealand product, which resulted in a major depression in UK prices. Imports from New Zealand are a factor of life for the industry and, indeed, they play a considerable part in maintaining consumption of lamb at a time when UK supplies are in short supply.

Last year, New Zealand exported almost 75,000 tonnes of lamb to the UK. However, the big problem was an increase in that trade of 13 per cent during the first six months of 2007.

The UK sheep industry has held discussions with its counterpart on the other side of the world in an effort to avoid a repeat of similar market disruption in the coming months.

To be fair to New Zealand, it has to be pointed out that during the final quarter of 2007 exports to the UK were down by 23 per cent with most of that lamb being diverted to France, the market from which UK product was excluded for many weeks during the autumn months.

However, that is now set to change, according to Mike Peterson, the chairman of Meat and Wool New Zealand.

He said: "The UK lamb market has recently shown signs of strengthening both in terms of farm-gate prices and consumer demand for lamb and it is now timely for us to return and make our presence felt once more."

But the good news is that New Zealand appears more sensitive to the wider market perspective: a depressed trade for lamb in the UK inevitably results in poor prices for New Zealand.

In addition, the NZ dollar is at a distinct trading disadvantage against sterling. This means that the UK can export competitively to France at prices that New Zealand is struggling to match.

Peterson appears to have grasped that fact of commercial life following a range of meetings and trade discussions during the latter months of 2007.

The UK National Sheep Association and Quality Meat Scotland were involved in these talks, which included a visit to New Zealand. The consensus was the sheep industry in both countries would be better served by a greater degree of collaboration.

There has been a succession of "bad news" stories over the future of the sheep industry in recent months, mostly relating to poor prices for lamb and wool.

What has angered farmers is that the gap between what they receive for their lamb and the price charged in supermarkets has never been higher. At one stage, for every £1 clocked up at the checkout, farmers were receivinglittle more than 45p.