The prices Scottish producers are receiving for prime sheep in the auction ring remain 6% higher than this time last year, while the GB deadweight average increased by 14.5% year-on-year, according to the latest analysis from Quality Meat Scotland (QMS).
Hogg prices have been running well ahead of early 2013 levels so far this year and, according to QMS economics analyst Iain Macdonald, the increases can be attributed to tight supplies.
“The latest slaughter data from Defra showed that in January 2014, Scottish abattoirs killed 2.5% more hoggs than a year earlier,” said Mr Macdonald.
“However, at the UK level, supplies were much tighter with UK abattoir throughput 5.5% lower on the year at 1.04m head.
“Moving forward into February, both auction market and abattoir data suggest that supply remained tight.
“Indeed, the number of hoggs at price reporting abattoirs was down by 12% on the year in February, while auction volumes fell 20% short in Scotland and 19% short south of the border.
“With fewer hoggs, processors have had to bid higher to secure sufficient volumes to cover their orders.”
The main drivers behind the lower supplies were better weather and feed availability over the second half of 2013 compared to 2012, resulting in lamb growth rates being boosted and finishing periods being shortened, meaning fewer hoggs were carried into 2014.
“While the 2013 lamb crop was around 5% smaller than a year earlier in Scotland, it was 1% higher at the UK level, meaning an additional 152,000 lambs on the ground,” said Mr Macdonald.
“However, by the year-end, UK abattoirs had slaughtered an additional 233,000 lambs compared to a year earlier, a 3% increase which accounted for more than the entire increase in the lamb crop.
“This is before considering that the Welsh census figures appeared surprisingly high up 7.5% and that higher prices for finished lambs may well have led producers to retain more lambs for future breeding, potentially limiting the pool of slaughter stock even further.”
A tighter market, however, does not necessarily follow on from lower supplies the demand side is also important.
Looking at the current situation, auction supplies were down 24% year-on-year at the beginning of March but prices were up by just 6%, perhaps signalling a softening of demand, he said.
With regard to consumer consumption, according to Kantar Worldpanel data, in the 12 weeks leading up to January 5 2014, GB households bought 1.5% less lamb than a year earlier as the average retail price was 4% higher.
However, looking at a longer period, sales in the 52 weeks to January 5th were up by 11.5%, helped by an average price that was 3.5% lower.
“These figures indicate that as the higher producer prices have begun to pass through the supply chain in recent months, the gains to consumption that had been driven by the increased price competitiveness of lamb relative to other proteins have now started to be eroded.”