Sheep farmers told to optimise their profits

Many farmers were keen to reinvest in their business as a result of improved returns but caution was advised, the Bank of Scotland's head of agriculture, Sandy Hay, told journalists during a press visit to Mains of Burnbank, Blairdrummond, Stirling, where farmers Douglas and Lynda Graham will host Scotsheep on Wednesday, 2 June.

"The sheep market upturn has certainly prompted some farmers to consider capital investment, particularly in buildings and machinery replacement, which the sector has lacked recently," said Hay.

"The focus should be on capital expenditure aimed at improving the efficiency of labour utilisation and feeding practices with a view to optimising profit, not just turnover. All businesses are different and farmers should look at their own performance to see if and where investment would be best employed for the greatest return."

The bank, he said, was "very supportive" of applications for term loans and hire purchase but was encouraging farmers to think through the impact of a lower lamb price should lamb prices fall.

Lamb prices were likely to remain high if sterling remained weak but lower consumer demand could be an issue in the continued recession. Any strengthening of sterling as a result of the outcome of the election could also affect exports which were so important to the Scottish sheep industry.

He also warned the high price of lambs could result in a rationalisation of the supply chain and a reduction in the number of buyers of Scottish lambs.

Hay said there was some evidence that the decline in the Scottish sheep flock had stabilised, with ewe numbers down only 2 per cent compared with 2008.

With some farmers in the North-east and the Borders reporting a reduction in their lamb crop of up to 20 per cent because of the loss of lambs and pregnant ewes in the winter snowstorms, the market for all classes of sheep remains strong.

Scotsheep chairman Alastair Logan said older cross ewes with twin lambs were selling for as much as 150 – 156 and new season lamb had hit 238.5p.kg.

"Confidence has returned to the sheep industry, despite the winter losses, and we should be optimistic," he said. "Prices are at record levels. I expect the market to remain firm but producers should not be looking for the same lift in price as they received last year."

The biennial Scotsheep event, organised by the Scottish region of the National Sheep Association and sponsored by Bank of Scotland, looks set to be the biggest ever, with a total of 35 sheep breeds on display and 140 trade stands.