British farmers feel the chill as Russians stop buying sheepskin

IN the same way that a butterfly flapping its wings in Peru can supposedly cause a hurricane on the other side of the world, it appears the shopping habits of fashionable Muscovites may have caused chaos for Britain's sheep farmers.

Hide for the sheepskin jacket, an essential statement of affluence in post-Soviet Russia, has been a lucrative trade for British farmers for many years. But the collapse of the Russian economy this summer has forced the fashionable to be more frugal with their roubles.

Prices for a British sheep hide, and particularly for that of the prized "dresswear" lambskin, have collapsed by almost 90 per cent. This time last year, a 40kg sheep would fetch around pounds 40 at auction, with the skin accounting for almost a quarter of the price. Now, hides have fallen to a little above pounds 1.50 each.

The Meat and Livestock Commission estimates that the collapse of hide prices has cut the price sheep fetch at auction by perhaps 20 per cent, as wholesalers try to pass off the losses to the farmers themselves by forcing down auction prices.

Asda's announcement last week that it would be stocking British lamb rather than selling the New Zealand variety won it applause for coming to the aid of the British farmer.

The crisis has prompted some farmers to slaughter their animals rather than lose money on their feed and maintenance. Sheep-farm values have tumbled by up to 35 per cent in some areas. With hides stockpiling around the country, their prices are going to take longer to recover - unlike meat prices which are much more sensitive to fluctuations in the pound and consumer demand.

Dave Croston, the commission's head of sheep strategy, said the issue has serious ramifications. "The first thing that Russians wanted when the Soviet Union broke up was a new sheepskin coat," he said. "British hides were snapped up by the Turks to supply them (to Russia) and that has been a major part of the British sheep industry.

"But when the Russian economy collapsed so did the demand for the sheepskin coats. The wholesalers and slaughterhouses already face increased costs for disposing of sheep material under the BSE provisions and cannot sell sheep heads, offal demand is down and now hide prices have collapsed. They simply will not wear it and that is passed on, inevitably, to the producer; the farmer, to absorb."

The concerns are shared by the National Sheep Association, which has said the industry is facing "a disaster of unquantifiable magnitude".

NSA chief executive John Thornley is calling on the supermarket chains, which account for half of all lamb sold in Britain, to agree to a minimum price of 95p per kilo, to enable farmers to ride out the current crisis. That would still be below the estimated pounds 1.02 per kilo that hill farmers say they need to break even. Supermarkets currently pay about 70p a kilo.

The association has yet to receive a concrete response, but Asda's response to National Farmers' Union demands to reduce foreign imports was a step forward. Asda has decided not to renew contracts worth pounds 2.5m to stock chilled New Zealand lamb in its 220 stores from December.

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