Ráðunautafundur - 15.02.2002, Page 180

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THE OUTLOOK FOR THE SHEEP SECTOR
After having reached a peak in 1998, the national sheep flock was already in decline, before the onset
ofFMD. Three consecutive years of declining gross margins on sheep farms in the hills, uplands and
lowlands has taken its toll. The lowland areas in particular have lost sheep and the pressure is on in
other areas as well. 2000 was one of the better years for the industry with prices reasonably stable and
almost nine per cent up on 1999. High exchange rates continued to make exporting difficult which
limited price improvements, and demand ffom southem Continental markets was lower, which limited
the demand for smaller hill-breed lambs.
The FMD crisis in 2001 severely disrupted the markets. Clean sheep slaughterings fell ffom 15.9
million in 2000 to about 11.16 million in 2001.
The increase in the supply of lamb on the domestic market (with no exports) had a major negative
impact on farmgate prices.
The sheep sector as a whole is heavily dependent on subsidies, when the SAP is added to the ‘rural
world supplement’, support payments accounted for an average of 39% of hill systems gross outputs,
30% of upland systems gross output and 24% of the gross output of low ground production systems.
This high level of market support has historically encouraged substantial increases in sheep numbers
of nationally 40%, since the introduction of the Sheepmeat Regime in 1980. This occurred in the
lowlands but has been particularly marked in the hills, were it encouraged the use of moorland and
unimproved pastures and led to some degradation through overgrazing of the semi- natural habitats in
some areas (English Nature, 2001).
Changing subsidy arrangements will in the future be likewise instrumental in reducing ewe numbers.
Changes introduced as a result of the Agenda 2000 arrangements, especially on the extensification
premium and its associated stocking density requirements, have so far resulted in some cutting back in
sheep numbers; taking the FMD effect into account the breeding flock could decline by almost 10% in
2001 over that at December 2000. This could gain further momentum in 2002 when stocking density
criteria are tightened.
Table 1. UK Breeding Flock Trends.
United Kingdom
1998
1999
2000
million head
20.6
19.9
18.5
2001
2002
Forecast
15.8
16.3
Source: MAFF census data - Dec (breeding sheep + ewe lambs put to the ram)
The impact of the change in the LFA payment scheme has also yet to be ascertained, but it could also
have the effect of reducing sheep numbers further. What is clear, however, is that ways have to be
found to address the income difficulties in the sector, particularly on the hills and uplands. Use of the
initiatives under the Rural Development Programme is one option, thus deriving sources of income
that are not directly eamed from the sheep business itself. There is a school of thought, therefore, that
sees the industry potentially splitting into two:
• with one sector - commercially driven sheep meat production in the lowlands in particular -
focussing more on the market
• while the other sector, particularly in the hills - will see a reliance on a wide range of
‘environment- land based’ subsidises and grants - where sheep meat production will not be
the main focus.
It is difficult to see how far such polarisation could go however, as sheep production in the UK is a
complex ‘structured’ industry with for cross breeding, store and fmishing purposes ‘sheep moving
down the hill’, and many of the lowland and hill farms being complimentary to each other.
A totally market orientated sheep meat business would for many be the preferable way for the sector
TTT\