With lambing done for most of us, things are generally just a little more relaxed. Apart from worries about the impact of the weather on grass growth, this does provide a little breathing space, an opportunity for reflection and, for some, consideration of how we approach the post-Brexit future for the sheep sector.
There is no doubt some still hold the view that things will carry on as normal. This approach has been encouraged somewhat by the buffering effect of very good lamb prices since the new year, which has tended to mask the real impact of Brexit. Unfortunately, the prices that we have enjoyed over the past few months have more to do with tight supplies resulting from producer marketing behaviour at the end of 2020 than anything else. They are not, as some seem to want to think, a result of our departure from the EU.
In reality exports are down; prices are simply getting too high for continental buyers. Even with tight supplies on the continent, UK deadweight prices for the last week in April exceeded those in both France and Germany, where supplies will soon begin to rise; not a good situation for exports.
At times, in the past, many lamb producers avidly watched fluctuations in the Sterling/Euro exchange rate, knowing that a fraction of a percentage change in the wrong direction would have an inevitable impact on exports and a consequential effect on lamb prices. We now have a situation where the additional paperwork and bureaucracy associated with lamb exports has added between £1 and £1.50 per lamb, an increase which, even at current prices, equates to a good 1% increase on the cost of exporting a lamb, something that has gone largely unnoticed. This combination of high domestic prices and additional costs is challenging for exports - a challenge that is yet to have a significant impact on prices.
Current prices have given the sheep sector a much-needed confidence boost, but sadly they are simply not sustainable. It would be a real bonus if they were, but we all need to be aware of the impact that high prices can have, not just on exports but also on domestic demand; there is the inevitable risk of consumers shifting to cheaper meat alternatives. The buoyant beef market has so far limited this shift somewhat, but for the catering trade lamb is already becoming too expensive.
Even with the opening up of the catering sector, if hospitality customers can’t make a margin on the lamb dishes on their menus they will simply walk away. As more new season lambs come onto the market, prices will very likely drop back. This isn’t trying to talk down the market; it is simply being realistic. The last thing that we need is for producers to rush to get lambs sold before prices drop. A glut of lambs, particularly if poorly presented, will only hasten the decline. Orderly marketing of quality lambs is important, and going forward the latter must be one of our key selling points.
In addition, we are facing a situation where BPS payments are being phased out at a time when there is a high degree of uncertainty as to what is involved in the new support mechanisms and just how they are going to operate at a farm level. It is inevitable that some will simply choose not to get involved with the new measures and forego any support; an approach that will have cost implications but will almost certainly make life a little less complicated.
Add to this the additional pressures arising from things such as changing weather patterns; it already looks as if we could be facing yet another summer of near drought conditions even before the grazing season has really got going. There is also an expectation that as an industry we will need to make some significant contributions towards carbon reduction. We will undoubtedly come under increasing public scrutiny and there are plenty out there, many with their own agendas, who will use whatever arguments, reasonable or otherwise, truthful or otherwise, to drive that scrutiny. They cannot and will not be ignored; whatever our personal views, they will not go away. To add to our woes, production costs are increasing. Hay and straw are twice what they were 12 months ago and fertiliser is 20%+ above where it was last year. Quite apart from the direct costs for grass and forage crop production, the impact on the arable sector will have cost implications for sheep producers.
The default response to this sort of situation has been to intensify, to increase output per ewe, per hectare, etc, which is great in a situation where there is a growing market for lambs, but in a finite market increasing the supply of lambs will simply depress prices further. There is a limit to how far one can proceed in this direction; the inevitable consequences of larger producers having the ability to produce lambs cheaply (economies of scale etc.) are a further depression of market prices to the point where the smaller producers simply cannot compete and cease to produce. Such an approach is certainly contrary to the public’s perception of sheep production and one that might ultimately generate questions of consumer and policy acceptability. It is also an area that is likely to be subject to increased levels of both public and institutional scrutiny.
The default position is, however, not the only option available. It is a route that tends to ignore the contribution that sheep flocks can make towards sustainable, well balanced, mixed farming systems. It was, after all, sheep flocks that maintained arable production on lighter soils for hundreds of years before the discovery of artificial fertilisers, and it is also far too easy to overlook the role that sheep have within the landscape. A rather more considered and science-based approach to traditional mixed farming systems, which are generally more in tune with both environmental and landscape considerations, is likely to provide more acceptable options, but do need to be recognised as such within support measures. Lamb produced to more publicly and politically acceptable standards will generally tend to have higher production costs which, if cheap food policies are to continue, should be compensated for as public goods. In addition, such approaches tend to have a greater level of resilience to adverse weather patterns and provide the whole of the agricultural sector with greater opportunities for improving soil health, contributing to significant carbon reduction and sequestration.
There also needs to be some recognition of the not insignificant contribution made by the large number of smaller pedigree flocks maintained by enthusiastic breeders nationwide towards the genetic improvement of the national flock. Many of these breeders also make an enormous contribution to public relations and the promotion, not just of their own breeds, but of the sheep sector as a whole at agricultural shows across the UK.
On the plus side, the wool market situation shows some positive signs. A 100% clearance at the last six Bradford auctions and an expectation of no hangover of the 2021 clip by the end of this marketing year, plus a price rise of almost a third (although 30% of next to nothing isn’t a great deal), are moves in the right direction.