With lamb prices being squeezed in spite of an increase in retail prices, NFU Scotland is telling the supply chain that if it wants quality, it must pay for it. NFUS is also urging sheep producers to be resolute in their demands for a fair price.

The latest average deadweight price for lamb was 228p/kg compared to 246p/kg for the same week last year. This seven per cent drop in farmgate prices contrasts with a 10 per cent rise in retail prices between 2004 and 2005 suggesting that retailer profits are increasing on the back of a farmgate price squeeze.

Whilst emphasising the importance of farmers meeting market specification and striving for quality, NFUS is stressing that both short-term and long-term action is required to secure a viable return for sheep producers and, in return, to secure the environmental, social and economic benefits of the hill sheep industry.

In the short-term, NFUS believes that last year’s sheep price must be used both by farmers, processors and retailers as a benchmark. To get over short-term difficulties, it is vital prices rise to at least this level. That involves producers holding out for a decent price and the market delivering it. In the longer-term, price must rise to a more sustainable level, which covers costs of production and secures a viable future for the industry.

Chairman of the NFUS Livestock Committee Nigel Miller said:

“The price plunge of late is sending a brutal signal to sheep producers that the major buyers do not value domestic production after the New Year. As buyers seek to grasp market advantage, downward pressure has pushed prices way below the same period last year and, critically, way below the cost of production.

“The impact of that message not only has immediate financial implications for the sheep industry, but has serious implications for the future of hill sheep farms, which provide the foundation of economic activity in many areas of the country.

“Of course we have to make sure we are producing quality lamb to the right specification. But even when doing that, our returns are being hammered.

“The industry has to stand firm and demand a fair price - and retailers and processors have to ensure they are delivering at least last year’s lamb price to get over this short-term nightmare. Longer-term we have to develop a sustainable supply chain. We are writing to all the major retailers to engage them in developing this chain - we won’t sit back and watch retailer margins increase while farmgate returns head in the opposite direction. Given their oft-stated commitment to quality-assured food, with high animal welfare and environmental standards, it is in their interests to develop a year-round supply chain which doesn’t just reward them.”

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