The cooling in lamb prices over the past five weeks highlights the extra availability of lambs on the market, according to Stuart Ashworth, Quality Meat Scotland’s head of economics services.
Since the beginning of June, Scottish auctions have handled around 50% more lambs than last year, and English and Welsh auctions more than 20% more.
“Last year there was some evidence to suggest Ramadan had a positive effect on price in the weeks preceding the start of the festival.
“Even though it was a fortnight later than this year, prices did not start to fall steeply until after the festival,” Mr Ashworth said.
“It is harder to identify an affect this year as the price has slipped steadily since the beginning of June.
“However, one significant difference between the two years has been the number of lambs on the market.”
A similar pattern has emerged in the Republic of Ireland, where abattoir throughputs of lamb are running around 20% up on the year.
Producer prices are falling, as in the UK, but are currently very similar to this time last year.
French and Spanish farmers are also receiving prices very similar to last year but on lower supplies.
During May, French abattoirs handled 5% fewer lambs than last year while the UK killed nearly 10% more.
“The challenge for the UK is that with one euro currently buying about 80p compared to around 86p a year ago, the euro price for UK lamb is, like Ireland, France and Spain, little changed on the year but the sterling price is much lower,” said Mr Ashworth.
A second challenge for sheep producers will be the flow of the 2014 lamb crop onto the market.
“By comparing the number of lambs reaching abattoirs during June with historic precedent, we can begin to develop a view on the size of the 2014 lamb crop.
“For example between 5-6% of the lamb crop typically reaches the market in June,” said Mr Ashworth.
“On the basis of this proportion of the lamb crop sold by the end of June, there will be a significant increase in the 2014 lamb crop.
“Comparing that information with December data on breeding sheep numbers helps to refine expectation.”
Accepting that the 2014 lamb performance has returned to the long-run average after a poor 2013 would suggest that the 2014 GB lamb crop could be up to 7% higher than last year because of higher breeding sheep numbers in England in particular.
Notwithstanding the need for replacements, there is a certain degree of inevitability to a rise in the number of lambs to be sold off Scottish and GB farms over the next nine months.
This is evidenced by the rise which was seen during last month, according to Mr Ashworth.
“This does not necessarily mean that the wider marketplace will be over-supplied with lamb,” added Mr Ashworth.
He said even if these extra lambs reached the market, it would still leave the annual total well below the levels which were seen only four years ago.
European Union forecasts of EU production for the second half of 2014 are little changed from last year, and New Zealand is increasingly exploiting export opportunities closer to home and sent almost 16% less sheep meat to Europe in the first third of 2014.
“Growth in UK and Irish production by itself may not be too destabilising,” Mr Ashworth commented.
“The bigger influence on market returns is likely to remain exchange rates and consumer confidence.
“In this respect, the latest consumer confidence indicators for the UK are at their highest level since 2005.”