NEWS that Sainsbury’s has agreed to increase the amount it pays for lamb until the end of February has been welcomed by the National Farmers Union.

It followed their call for retailers to show “genuine commitment” to British lamb suppliers after a 22 per cent drop in the farm gate price – despite prices increasing on supermarket shelves.

The NFU said farmers were now losing an average of £29 per lamb sold at market after new figures showed farm gate prices had fallen by a fifth over the past year.

Charles Sercombe, NFU livestock board chairman, said: “This isn’t helped by more imported cheaper lamb products on supermarket shelves.

“What puzzles me is that prices to consumers have increased. Demand from consumers has also remained strong, so what’s happening; where is the money going?”

Sainsbury’s has since announced its 800 farmers who supply its own brand and Taste the Difference ranges will receive £3.80/kg for lamb.

Mr Sercombe welcomed the decision as “positive” even though it only involved a limited number of farmers for a limited period.

“It lays down the challenge to other major retailers to ensure their lamb suppliers also receive a fair price,” he said.

Mr Sercombe said the NFU would be looking closely at the procurement activities of all the major retailers in the coming days.

He said: “The consumer showed last summer on milk that they will not accept retailers paying farmers below the costs of production for food.

“Sainsbury’s has recognised that sheep farmers cannot run businesses on current prices.

It is clearly time for the whole trade to now show they are committed to a sustainable UK lamb industry.”

The lowest lamb prices for three years, has coincided with rising production costs due to the extreme weather of 2012.

There are also worries about the impact Schmallenberg disease – which causes deformed lambs – will have this lambing season.

With the EU expected to agree a CAP reform package in the coming months, Mr Sercombe stressed the importance of ensuring a fair deal to support English farmers.

He said: “As CAP reform discussions continue we cannot ignore the fact that many sheep farmers are currently struggling to make ends meet in this new market-driven environment.

“Direct payments to farmers are currently a vital lifeline; the only way we can ride-out the volatility of world markets.

If this goes many sheep farmers and their families face a very uncertain future indeed.”

  •  The figure of £29 is based on farmers selling at current published prices against the average published cost of production for 2011/2012 and lambs at the midpoint of the weight range.

The farm price lost ten per cent of its value in the last quarter of 2012 alone. At the same time, the average retail price of lamb has remained largely unchanged.