Wool Growers conference looks for positive signs in market
Jackson – For the first time, the Idaho, Utah and Wyoming Wool Growers Association’s met in a joint Tri-State Convention on Nov. 9-11 in Jackson and heard from a wide variety of speakers addressing important issues affecting the sheep industry.
Over 330 attendees were registered for the conference, which was packed full of information ranging from market consideration and animal health to management strategies and public lands issues.
Among top concerns for lamb producers is the situation affecting markets, a topic that was addressed by a panel of speakers representing various facets of the lamb marketing industry.
In a look at the lamb market situation, the four panelists saw some positive notes in the lamb markets, despite recent turmoil in the industry.
“If you look back to 2009, we had fairly stable markets, we had good demand and good prices, and everyone was recovering from the 2008 economic crash – things were looking pretty good,” commented Frank Moore of Mountain States Lamb Cooperative. “As we started into 2010, we were trying to increase the demand for lamb, and we were getting some takers. All of a sudden, the problem was there wasn’t enough lamb.”
“If we are going to grow our business and grow demand, we need more production,” he added. “We have to be able to provide the product.”
Addressing the market
With backed up lamb markets and dropping prices dominating most of 2012, Lamb Feeder Mike Harper of Eaton, Colo. said, “On a positive note, we did finally clean out our old crops on the third week of October.”
With the last of the overweight lambs gone to slaughter, Harper looked toward the future.
“We’re back to handier weights now, still heavy, but a whole lot better than where we were,” he said. “One advantage – if there is any advantage – of the drought is that it gave us a little break on our feeder weights this fall.”
As lighter lambs came into feedlots, Harper noted it helped to ease oversupply problems that have plagued the industry lately. However, lighter lambs also cost more to feed to gain.
“Gain costs are at record highs,” he commented. “I like to be a little optimistic, and I think gain will be $1.30 to $1.35 per pound.”
The difference in prices received for lambs and prices to feed lambs aren’t enough to help feeders and producers break even.
“We are going to need to get prices back to where we can break even soon,” Harper commented. “We just need a little more demand to get to those prices.”
“Break-evens aren’t good enough,” Moore commented. “We have to get back to a point where we are profitable.”
In looking at the possibility of returning to a state of profitability, an analysis of market trends was required.
“I went back to August 2010, because a couple of things stand out,” said Jeff Evanston of Superior Farms in Davis, Calif. of the market data he looked at. “There were 51 million pounds of lamb sold in the 12-month period ending August 2010 – a 2.4 percent increase year over year at retail.”
He added those figures reflected near normal rates of increase, with all fresh meat values increasing 3.1 percent during the same time period.
“The first signs of weakness started to show in August 2010, with sales down 5.4 percent on the quarter, but things were extremely current,” he continued. “When I fast-forwarded to November 2011, after one full year of high prices, there was only 41.3 million pounds of lamb at retail.”
The decrease in protein sold at retail was seen in many proteins, commented Evanston, with beef down eight percent.
“Fifteen months prior, everything was up,” Evanston said, “but by 2011, we were down 16.7 percent for the year and 17 percent for the quarter. Now we are seeing some consistent year over year declines.”
At the same time, he also noted a drop to only 41.5 million pounds of lamb across retail counters.
“In 2010, $285 million went across the retail counter, and $280 million in 2011,” Evanston continued. “We know prices went through the roof, and in an industry that sells this much lamb, the retailers got $5 million less across their counters. That has pretty significant impacts.”
Of the breakdown of categories, he noted that shoulder, legs, loins and ribs all saw decreases of 17 percent, while ground lamb seemed to hold somewhat steady.
“When we look at the most recent reports from August 2012, the carcass market stabilized, so maybe we have some signs of life,” he mentioned. “Lamb is down nine percent – nearly the same as beef, which was down 8.5 percent – and not that much off from all the proteins, which were down five percent.”
“Lamb is more along the same lines as the rest of the proteins,” Evanston added.
However, the amount of lamb going across the retail counter is still at just less than 40 million pounds, which is still significantly lower than several years ago.
Impact of imports
Australian imports of lamb also have an effect on domestic markets, according to Evanston, who noted that in 2011, Australia grew their exports by 17 percent. Imports of Australian lamb to the U.S. only grew by six percent.
“They are increasing their market share,” commented Evanston. “The average price of lamb was $4.26 a kilo in 2012, so the average price in Australian dollars has been about $2.13 a pound.”
He explained that if their numbers drop to closer to $3.50 a kilo, or about $1.75 per pound, import prices beat domestic break-evens of $2.11.
“They are still cheaper than domestic product,” he commented. “This is partly what we are up against.”
With lamb volumes decrease and kill numbers down, Evanston noted that it represents fewer lamb consumers, saying, “Lamb consumption in total is on the decline.”
Kevin Quam, head of JBS USA’s Lamb Division, commented on consumer demands, noting that the number of loads of live lambs they slaughter has also decreased.
“A year ago, we needed between 22 and 24 live loads of fat lambs each week,” Quam said of demand. “Since late May or early June, we are only killing between 10 and 12 loads. I’ve not seen any improvement in demand on the carcass side.”
In addition, the excessive number of heavy lambs resulted in large quantities of product landing in the freezer.
“Some of it is starting to move to retail shelves, but it will take a while to sell that product,” commented Quam.
Saige Albert is managing editor of the Wyoming Livestock Roundup and can be reached at email@example.com.