Outlook 2017: Access to EU markets crucial for sheep sector

The UK sheep sector is highly dependent on exports, so the decision to leave the EU is likely to be the most important factor affecting profitability in the year ahead and in the longer term.

The weakness of the pound has helped prices – this autumn the market was about 15% higher than the previous year’s lows, says Andersons director David Siddle.

“With the national flock appearing to have stabilised at about 16 million ewes and production in 2017 likely to remain broadly similar, we are hopeful prices in 2017 will not return to the lows of 2015.”

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Maintaining unimpeded access to EU markets will be crucial, says Mr Siddle. “The main factor influencing UK exports further ahead may be the nature of trade deals struck with the EU and the larger exporting nations of Australia and New Zealand.”

Costs of production, unlike trading arrangements, can be directly influenced by sheep farmers, says Mr Siddle. Some farmers can produce 1kg of lamb liveweight for less than 165p. “We’re optimistic that the market will deliver a higher return for significant periods in the years ahead.”

Producers must scrutinise all costs, in particular overheads, the single biggest differentiating factor between the best and worst performers.

“Most discussion in the sector and, disappointingly, much industry analysis focuses on technical performance and gross margins,” he says.

Maximum use of grass

Businesses that can make genuine profits share common themes, says Mr Siddle. “They maximise use of grazed grass and use various degrees of ‘easy care’.”

Outdoor lambing, the use of modern genetics and stringent culling for time-consuming traits such as feet, dags, ease of lambing and worm resistance are common.

So is the principle of taking sheep to feed, rather than feed to the sheep, he adds.

“Many such producers have little need for machinery much in excess of a quad bike, and aim to optimise rather than maximise output from their flocks from a low overhead cost base.”