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Falling lamb prices make U.K., Irish sheep farmers fear for future

Reuters / Sheep farmers in Britain and Ireland fear for their future as oversupply of lamb in Europe drags farm gate prices to three-year lows while production costs soar, giving efficient New Zealand exporters a vital edge.

Most British sheep farmers have been selling at a loss since November because an influx of cheap imports coincided with the delayed sales of homegrown lambs that had been held up by wet weather causing poor feeding conditions.

Meanwhile, much of the European Union, the biggest market for British lamb, is in recession.

Lamb prices at British farms were down 24 per cent year on year in early February while Ireland recorded a 20 per cent drop.

Britain and Ireland are the EU’s top lamb producers and major exporters alongside world leaders New Zealand and Australia.

But farmers and analysts say falling incomes could push hundreds to leave the business and thousands more to reduce their flocks, making the animal that shapes much of the current landscape of the islands, through its grazing, a rarer sight.

“If this trend continues, and producers are forced to sell lambs at less than the cost of production, then ultimately they will look at alternative ways of making a living,” said Charles Sercombe, a sheep breeder in central England in charge of livestock issues for Britain’s National Farmers Union (NFU).

The drop in farm gate prices to 3.40 pounds per kg ($2.35 per lb.) has yet to show on British supermarket shelves, where lamb fetches between seven and 15 pounds a kg. According to the NFU, while December wholesale prices for legs of lamb slid 17 per cent from a year ago, retail prices edged down only two per cent.

“Farmers’ costs are rising, but retailers’ costs are too,” said Richard Dodd, spokesman for the British Retail Consortium, adding that the country’s supermarkets regularly ran promotions on lamb but that higher costs for processing, transport and running stores needed to be reflected in headline shop prices.

Rising costs

Input costs for British and Irish sheep farmers have increased by around 30 per cent in the past five years, with feed, fuel and fertilizers biting particularly hard.

“Those are the three things that have really put the guys under pressure here with the reduction in (lamb) price,” said Gabriel Gilmartin, president of the Irish Cattle and Sheep Farmers’ Association.

The situation for producers could get worse as New Zealand has leeway in its export quotas to further increase shipments to the EU, where appetite for lamb remains solid but incomes are squeezed.

Despite a strengthening currency, export-driven New Zealand farmers can produce lamb more cheaply than those in Britain and Ireland, largely through economies of scale.

In Ireland a large farm might have 500 to 600 sheep, compared with 3,000 to 5,000 in New Zealand, Gilmartin said.

The Agriculture Ministry forecast last month that average incomes for English farms with grazing livestock would fall by up to 52 per cent in 2012-13 to between 14,000 and 18,000 pounds.

The ministry cited lower sheep values and higher feed costs.

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