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3.2. Organic lamb
Seasonal production of lamb has an inevitable knock on effect on the level of imports required to meet consumer demands. The majority of organic lamb imported into the UK comes from New Zealand. In 2004 the numbers available from New Zealand were lower than usual and the cost higher, resulting in more UK sourcing. UK organic lamb supplies are failing to meet out of season demands, so imports are relied on to fill the gaps. According to the British Retail Consortium, 89% of organic lamb sold through multiple retailers in 2004, was sourced from the UK15.
Before market information started to be systematically gathered by the OML project, previous estimates for annual Scottish organic lamb numbers ranged from 120,000 to 163,000 19 many of which would have been sold as stores and finished outwith Scotland, or sold into the non-organic market. The OML project found that between July 2003 and June 2004, approximately 74,800 organic lambs were finished in Scotland and it was predicted that 91,700 organic lambs would be finished between July 2004 and June 2005. Due to the seasonal concentration of production at certain times of year, lambs coming onto the market exceed retail demand. Consequently, 35% were sold as non organic with the remainder (60,000) being sold as organic, accounting for 38% of the UK's total organic lamb production of 158,912 1. Figure 3.3. illustrates the production cycle of organic lambs between July 2004 and June 2005 19.
Figure 3.3. Finished organic lamb produced in Scotland between July 04 and June 05
Source: SAC, OML survey, 2005 19
Figure 3.3. shows that the market is inundated with finished lambs from September to December. The predominance of upland organic sheep production is primarily responsible for this glut in the market. Farmers aim to have lambs finished from grass and off the farm before winter because of the additional costs involved in keeping lambs late into the season. If the supply of organic lambs can be spread more evenly through the year, despite associated costs it is likely to provide better annual returns for producers. This can be achieved by later lambing where appropriate, better co-ordination of store lamb sales to finishers and better collaboration throughout the supply network.
3.2.1. Survey results- volumes and market outlets
The survey conducted for the purposes of this project elicited responses from 44 producers who rear store lambs and 122 producers involved in finishing lambs. For the year July 2004 to June 2005, they account for a total of 16,810 stores and 64,274 finished lambs, 71% of the predicted number of finished organic lambs in Scotland. Of the 122 producers involved in finishing lambs, 77 provided details of their market outlets, which accounted for 52% (33,742) of the reported finished organic lambs. The survey results can therefore be assumed to be representative of the entire population.
Of these, 92% were sold direct to a processor, 5% were sold through 'other' outlets, including a range of butchers and the non-organic markets and the remaining 3% were sold through direct sales, farmers markets (1.1%), via mail order (0.8%) and farm shops (0.5%)
3.2.2. Direct to processors
The survey shows that approximately 92% of the lamb produced in Scotland is sold directly to abattoirs. Of this, a large proportion (over 90% of the total) was sold on to supermarkets. It is unclear exactly where Scottish organic lamb is sold by the multiple-retailers but it is apparent that Scottish organic lamb is sold throughout the U.K. A small proportion, approximately 2% (of the total) was sold to independent retailers and the remainder was sent back to producers for further processing and/or sale.
Scottish abattoirs procured over 85 % of the Scottish organic lambs during July 2004 and June 2005, the remaining 7 % being sold to companies based outside of Scotland. Although the majority are slaughtered or procured in Scotland, further processing and marketing of the end product is often done outwith Scotland (total amounts are unknown).
The seasonal variation in production levels is reflected in the price paid by abattoirs for finished organic lamb. Throughout the year, producers received an average of £2.64 per kilo with the price reaching a high of £3.30 and a low of £2.15 per kilo.
3.2.3. Direct to consumer
The survey results suggest that the 'direct market' accounts for 3% of sales (by weight). Producers may be missing out on a very lucrative market outlet with the average price received for organic lamb sold directly being £4.90 per kilo but additional associated costs such as killing and cutting must be taken into account. Prices received by the respondents range from a peak of £8.00 to a low value of £1.20 per kilo for lamb sold as non-organic through a farmers market.
3.2.4. Value at farm gate
The farm gate value for organic lamb, sold as organic, during June 2004 and July 2005 was an estimated £3.3 million. When there is a lull in supply in the spring (March to June), the price paid to producers is approximately 25% higher than the annual average. However the costs of production are also greater during this same period so profits will remain at a similar level. Obviously the price received by producers would improve if all of their lambs were sold with an organic premium rather than as non organic.
3.2.5. Penetration
Traditionally lamb is an exported product with production far exceeding domestic demand. According to TNS research carried out on behalf of the research team (see section 4) Scottish consumers represent only 5.4% of the UK's retail value of organic food, which equates to an estimated demand equivalent to 9,500 lambs per year. The survey suggests that 90% of Scottish organic lambs are sold around the UK through supermarkets with complete loss of provenance. Based on feedback from processors, retailers and stakeholders, including direct sales and sales through independent retailers, it is estimated that 30% (18,000 lambs) remain in Scotland for retail and further processing. Therefore, it is feasible that market penetration for organic lamb is 100%. However, whilst demand for organic lamb remains constant throughout the year, production does not. Subsequently, during the months April, May and June when production is at its lowest, there is likely to be a shortfall resulting in an overall market penetration level of 96%.
3.2.6. Summary
- Of the 91,000 organic lambs finished in Scotland, an estimated 65% were sold into the organic market from July 2004 - June 2005;
- Between July 2004 and June 2005, Scotland supplied 36% of all organic lambs slaughtered and sold as organic in the UK;
- During 2004, multiple retailers imported 11% of the organic lamb sold in the UK;
- Farm gate value for organic lamb, sold as organic, in Scotland for 2004/05 season is an estimated £3.3 million;
- Scottish organic lamb has achieved 96% market penetration.
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