2020 STRATEGY – LAMB Sector / April, 2010

2020 STRATEGY – Lamb Sector

National & International (Lamb) Context

Supply

  • Irish lamb production currently in decline; Similar evolution at EU level;
  • Irish National breeding flock has contracted by 1.5 million ewes (35%) in last decade;
  • Slaughterings have contracted by 1 million head (30%) in the same period;
  • Short term (2013) projections: sheep slaughtering -15%;
  • EU lamb production to fall by 9% by 2015 (from 2007 levels);
  • Reduced NZ production due to land use change;
  • EU lamb import volumes gradual increase; fresh : frozen ratio critical;

Demand

  • Global demand for protein increasing (population growth);
  • Lamb has strong image as healthy, natural product;
  • Potential for value added development and new niche markets;
  • Generic EU lamb promotion campaign essential;

Productivity / Competiveness

Farm:

  • Poor technical performance/farm structure & related lack of profitability;
  • Refocus on lamb drafting and presentation;

Processing:

  • Business costs (labour, energy, waste, etc.) out of line with target markets;
  • Over-capacity adding further cost disadvantage;
  • Modern processing infrastructure operating to highest technical standards;
  • Heavy reliance on carcase lamb exports - need to further shift to value added exports albeit difficult to compete with NZ chilled imports of cut lamb.

Enterprise Viability Test:

Review the potential viability of Sector at farm level by reference to its profitability on the best Irish sheep farms and by reference to NZ production efficiency norms; the possibility of replicating these performances on Irish farms representing a significant proportion of lamb production;base the analysis on a seasonal matrix of output prices premium to NZ chilled prices on EU markets (the percentage premium over NZ for each season needs to be agreed in discussion with stakeholders).

An assessment of how the targeted increase in lambs per ewe from 1.3 to 1.5 as per the Malone report is progressing should form part of this assessment.

The profitability measure needs to include incomes from EU/State sources (including post REPS funding ) to properly reflect the return from public funds.

The analysis should also seek to identify any key production or marketing competitive advantages that could underpin Irish lamb as a proposition to EU consumers designed to position Irish lamb prices close to the higher Continental EU domestic market prices.

If the above analysis is positive, identify where Irish lamb can compete within the EU at the given output prices. The marketing and promotional initiatives proposed in this document are intended to dovetail with the delivery of the outcomes if this analysis.

This analysis should be undertaken by Teagasc and Bord Bia specialists under the direction of the secretariat to the 2020 Strategy Group.

Page 1 / Meat Industry Ireland Submission
2020 STRATEGY – LAMB Sector / April, 2010

Lamb Sector Strategy Analysis

Factor Influencing Growth: / Actions Required:
  1. Direct Supports, CAP Policy & International Trade Agreements:
  • CAP has, in the past, discriminated against sheep enterprise
  • CAP Post-2013 outcome is critical to the sheep sector – sheep production in the EU cannot survive without direct producer supports
  • EU lamb market is already undermined by cheap imports; A WTO deal that reduced duties and grants further import quotas for sensitive product status will further reduce EU & Irish sheep production
/
  • Protect CAP budget, maximise Ireland’s share of CAP payments & ensure allocation that supports active producers
  • National discretion on CAP is important
  • Continued appropriation of unused CAP funds to sheep sector important
  • Better management of current import quota regime at EU level would greatly improve the market prospects for Irish and EU lamb
  • Current EU offer on Agriculture should be withdrawn – global environment for food has changed
  • Any new import quotas (against sensitive product status) should be for frozen lamb and managed at EU level to balance seasonal variations in supply/demand and avoid competing with peak EU production cycle.

  1. Lamb Quality & Presentation
  • Carcase weight and fat cover are critical determinants of lamb quality – there is currently major variation in both and significant proportion of deliveries outside market specification
  • Improved farm husbandry - castration & Clean Livestock policy
/
  • Critical need for producers to re-focus on lamb presentation for slaughter in terms of specification and husbandry issues
  • Important that processors clearly define market specifications and re-engage in communication of these requirements to producers/Teagasc
  • Lamb payment system should reward in-spec animals
  • Review of knowledge transfer and Teagasc resourcing for the sheep sector

  1. Supply
  • Producer Profitability is the critical determinant of future growth potential
  • Recent upturn in producer prices beginning to restore a fragile confidence
  • Recent announcement of additional CAP support for the Sector will give further boost
  • Renewed focus on adoption of technical innovation at farm level will be critical
  • Significant difference in performance between farms and compared to Teagasc optimum lamb system blueprints
  • Demography and farm structures
/ Farm Structure
  • Demography and fragmentation; need fiscal incentives to hasten change.
  • National Livestock Farm template to incorporate mixed beef & sheep enterprises, refocusing on the complementary nature of the mixed enterprise
Farm profitability: –
Need to address flock and farm productivity
  • Technology/Knowledge transfer – refocus
  • Increase in National lambing ratio possible
  • Incentivise new entrants
  • Shared farm resources
  • Jobs and value added being ‘exported’in carcase form
  • Continued focus on production of in-spec lamb
  • QPS to be established
  • LQAS to be expanded
  • Critical mass of Sector must be maintained – must maintain market relevance

  1. Demand Marketplace
  • Lamb is the most expensive meat offering
  • Consumer perception regarding value, convenience, fat/bone waste are factors contributing to an ongoing decline in lamb consumption across Europe
  • Lamb is perceived as a healthy and natural (sustainable) product
  • Strong seasonal/festive image (advantage and disadvantage)
  • Opportunities for lamb sales to Muslim communities in the UK and Europe
  • Potential for Irish lamb in UK retail market
  • New Niche market opportunities
  • Growing global populations will drive protein demand
  • EU retail buying versus fragmented EU supply chain and competitively priced NZ imports
/
  • Need to differentiate ‘Brand Ireland’ first in market place: what are points of difference? Decide on ‘national’ lamb viability and export strategy.
  • Secure EU promotional budget for generic EU lamb marketing campaign. Generic EU lamb promotion campaign urgently required to convince consumers of the merits of supporting domestically produced over imported lamb
  • ABB Marketing strategy – continued diversification away from reliance on French market; penetration of UK retail; new niche markets identified in ‘National Viability Test referred to in introduction to this document.
  • Product development –add more convenience to offer.
  • Further development of market opportunities for offals and skins
  • Introduce EU/non-EU labelling
  • Retail buying v/s fragmented supply chain - EU collaborative approach needed. Is there a role for a Bord ‘Uain’ (a la Bord Bainne/NZ Lamb & Wool Boards)?

  1. Environment / Climate Change
  • Sheep production is environmentally sustainable
  • Sheep farming critical to preserving the biodiversity and eco-systems in many regions
  • 20% GHG reduction target (possibly 30%)
  • Irish Agriculture accounting for 26.8% of total Irish emissions (EU ave. 9%)
  • Marketing potential of sustainable Irish lamb production
/
  • Establish key customer requirements to guide industry efforts to respond to market lead needs.
  • Sheep production has a key role to play in preservation of sensitive eco-systems
  • Develop marketing opportunities centred on undoubted positive environmental attributes.

  1. Competitiveness
  • Irish labour, energy and ‘business’ costs are out of line with those of target markets
  • Industry has capacity to slaughter 4 million sheep/annum (current throughput heading for 2 million) – 3 days weeks unsustainable
  • Value added opportunities contingent on ‘profitability’ (Profitability will be a function of margin/costs)
/
  • Re-aligning business costs with competitors – labour, energy, waste…
  • Over-capacity – restructuring of slaughtering capacity required
  • Investment in lamb value-added/convenience product formats.
  • Waste-to-Energy initiatives

  1. Regulatory Burden
  • One of the most regulated sectors in the Irish economy; Over-regulation generating unacceptable cost burden
  • Processing facilities operating above legislative standards to satisfy customer demands
  • Meat inspection regime out-dated
  • EU regulatory framework too slow to change/revise
/
  • Service contract/charter to be established between Competent Authorities and Processing Industry
  • Cost/Benefit analysis to be incorporated for all future legislation
  • Need State to adopt lowest cost/simplest application of EU regulations-not the case always.
  • Regulatory reform/simplification process
  • Modernisation of meat inspection

  1. Research / Training
  • Research & training resource critical for advancing farm productivity and production system change
  • Advances in breeding are too slow and not a sufficiently high priority on commercial farms.
/
  • Teagasc Sheep advisory & research resource
  • Support for Lamb Discussion Groups
  • Cooperation of Stimulus & FIRM funding
  • Need ICBF/Teagasc sheep work to be adopted at farm level.

Page 1 / Meat Industry Ireland Submission
2020 STRATEGY – LAMB Sector / April, 2010

Conclusions

  1. The sheep sector in Ireland (and the wider EU) has gone through a period of significant decline over the last decade due to a range of factors including: poor profitability at farm level, discriminatory CAP measures, decoupling and impact of imports on marketplace returns.
  1. The sector in Ireland has lost 1 million breeding ewes and annual slaughterings have fallen by 30% over the last 10 years. Maintaining critical mass in the Sector is now a real issue, particularly in terms of retaining supply relevance in the marketplace. As a consequence to the exodus of producers from this farming enterprise, we now face the prospect of processing facility closures and job losses.
  1. However, the recent, supply driven, improvement in producer returns, coupled with the injection of additional unused CAP Funds into the Sector has brought about a degree of positivity, albeit fragile. Furthermore, lamb as a product, retains a strong image in terms of healthiness and sustainability and therefore a good platform from which to work on consumption levels.
  1. With concerted action on the points outlined in the Strategy Analysis above, the Sector can recover and generate new growth:
  • Rebuild the National breeding flock to 3 million;
  • Improve National lambing ratio to 1.5 lamb weaned per ewe
  • Restore annual slaughterings to 3.5 million
  • Grow export of value added lamb
  1. In the absence of targeted stimuli the sector is more likely to further decline by 2020.

Page1 / 2020 Strategy - Lamb Sector