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Monday, September 13, 1999 Published at 11:08 GMT 12:08 UK

Mark-up: Winners and losers in the lamb crisis

Without wishing to sound mercenary, one man's loss is another man's gain.

So while the "farmgate" price of lamb has plummeted over the past 12 months, shoppers might expect to see a corresponding price cut in the High Street.

Right? Wrong. Although farmers complain they are now sell lambs at a loss, the price in supermarkets has barely changed.

Farming in crisis
According to the Meat and Livestock Commission, the average supermarket price of a whole sheep last year was £83.60. In 1999, it is £82.20 - a relatively meagre reduction of £1.40.

In 1998, the farmer could expect to get £35.50 - almost half - of the final selling price. Yet this year, his cut has fallen to an average of £28.80.

Meanwhile, the abattoir and supermarkets have upped their take.

The biggest increase has gone to the abattoir, which has seen its share rise from £22.90 last year to £34.00 this year.

Their justification is an reinforcement in the treatment process - the result of fears that BSE could spread to sheep.

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Abattoirs are now obliged to carefully remove and dispose of "specified risk materials" - the head, spleen and tonsils of all lambs under one year old, as well as the spinal cord of old ewes.

The process is costly in terms of time, and lost income. In the past, the body parts would be sold or rendered down for fats.

Kevin Pearce, a sheep advisor with the National Farmers' Union, says the "BSE in sheep" scare tarnished the product, although BSE has never been detected in a commercial flock of sheep.

Abattoirs have taken a hit on sheep skins which sold for £7-£8 each and would be made into fleeces for Eastern Europe. Russia's economic collapse in August 1998 almost scuppered this market and fleeces now sell for less than £1, says Mr Pearce.

Legislation has also hit exports, since government rules prevent British farmers exporting sheep to European countries where abattoirs do not abide by the same rules.

This has effectively wiped out export markets such as Italy and Greece, says Mr Pearce.

[ image:  ]

The strength of sterling has also hit exports, as has the collapse in the wool market.

At the other end of the chain, supermarkets have increased their mark-up on the average sheep from £25.20 in 1998 to £29.40.

However, some appear more willing to acknowledge the mark-up than others. Tesco's premium on lamb is 26%, while Asda claims its mark-up is only 5%. In between are Sainsbury's (20%) and Safeway (10%).

Speaking for the supermarkets, the British Retail Consortium insists the increased processing costs have been passed on to retailers "with the result that their profit margins have shrunken almost to nothing".

From farm gate to dinner table, the lamb market is a carve up in which both farmers and individual consumers are the big losers.

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