A Look at the 2016 U.S. Lamb Market

The average person in the United States consumes less than one pound of lamb per year. I, for one, am doing my part to increase the average. I am certain that I consumed more than one pound of lamb in January alone. Let’s take a look at the overall market outlook for lamb this year. We will look at supply, demand and trade in projecting the market outlook.

In 1990 there were 7.6 million breeding ewes in the U.S. As of the Jan. 1, 2016, USDA numbers would indicate we are at 3.1 million breeding ewes. That represents a decline of 4.5 million ewes since 1990. 

Recently the American Sheep Industry started a “Let’s Grow” initiative to try and stem the tide of decline of sheep numbers.  Over the last two years it seems to be helping. While the overall U.S. number has not increased yet, it has leveled off the last two years without further contraction. 

Here in Wyoming we are doing our part as we increased the number of breeding ewes by 2.4 percent in 2016. It will be interesting to see if the Let’s Grow initiative is able to turn the corner and create some growth in the overall industry.

Another important factor when looking at the supply side of the sheep equation is to determine if lambs in the feedlot are current. When supply starts to outstrip demand in the sheep industry, lamb feedlots tend to feed lambs to heavier weights as they have no place to go with the finished product. In looking at the current slaughter data, 2015 trended below the five-year average for slaughter weight, which is a good sign for the industry.

Demand for lamb can be captured by looking at both consumption and consumers willingness to pay.  U.S. consumption per capita continues to decline.  In 1992 per capita consumption was 1.34 pounds.  Consumption for 2015 was at 0.99 pounds and is projected to decline to 0.94 pounds per capita in 2016. 

On the price side, retail lamb prices were slightly higher in 2015 than the five-year average and are starting slightly higher than the average in 2016. Given that consumers are eating slightly less lamb per person but paying slightly more for the lamb they consume, it would appear demand is currently relatively stable for lamb.

Looking at the trade situation, we primarily focus on Australia and New Zealand. These countries are responsible for the bulk of the U.S. imports of lamb.  One of the major factors in this trade relationship is the relative strength of the U.S. dollar. As U.S. dollars become stronger, we are able to buy more Australian and New Zealand lamb for the same amount of money. 

Currently the U.S. dollar is relatively strong compared to the Australian dollar and is continuing to strengthen. This will be a challenge for the sheep industry. The only bright side is that Australia is currently recovering from a drought, which has restricted the amount of lamb available for them to export.

One additional area for concern for sheep producers to be aware of and monitor into 2016 is the amount of lamb in cold storage. Increasing amounts of lamb in cold storage may be an indicator of softening demand. Currently, the trend is that lamb in cold storage is significantly above the five-year average. The average December inventory of cold storage is 18.4 million pounds.  December 2015 inventory of cold storage was at 41.4 million pounds.

Based on the factors listed above lamb prices are expected to decline slightly from 2015 prices.  It is expected that we will see a five percent decline in price this fall as compared to the fall of 2015.

Bridger Feuz can be reached at bmfeuz@uwyo.edu.