global outlook

The UK is the world's fifth-largest producer of sheep meat behind China, Australia, New Zealand and Iran. It is also the third-largest sheep meat exporter, with export values likely to exceed 350m in 2009.

The fall in world production is striking. In the EU, following changes to the subsidy system, production is falling steadily, with Spain seeing the biggest drop between 2003 and 2009. Production in both France and Ireland has also been affected. Sheep numbers should stabilise in France, following the aid package announced last year, which means additional demand for English, Welsh and Scottish lamb in Continental Europe.

Production in North Africa and the Middle East, which rose over the past few decades due to growing populations and demand, is now falling, due to drought, over-grazing and poor profitability. Yet consumption of mutton and lamb remains strong, due to the cultural importance of the product.

For the main suppliers to these markets Australia and New Zealand drought and floods, high currencies and a basic lack of profitability are taking their toll. In the 1970-2009 period, the number of sheep in Australia fell from 170 to 71 million, and in New Zealand from 60 to 33 million; even though productivity has risen, these are large falls.

Industry analysts and leaders point to the poor productivity in the sector, which cannot be compensated for by high prices alone. In this light, only the UK and New Zealand can demonstrate a strong record in improving the profitability of sheep meat production. UK sheep farmers have now seen two years of high prices and are in a good position to benefit from positive international market conditions for 2010.

Jean-Pierre Garnier,Bpex/Eblex export manager