Falling lamb prices overshadow industry
In the American Sheep Industry Association (ASI) September 2022 Sheep Industry News Volume 26, Issue 9, Texas A&M AgriLife Extension Service David Anderson, PhD discusses price shifts in lamb industry.
“Sharply declining lamb prices have overshadowed most everything else during the last couple of months,” he notes. “We might say we’ve been here before, but the root cause starting this decline is a little different than in the past.”
Declining real incomes
Anderson notes there’s plenty of evidence lamb demand was boosted during the pandemic. Consumers were often at home and tried a lot of new food items, including recipes with lamb.
Lamb sales also benefitted from high prices for competing meats. This boost in lamb demand led to high prices.
A surge in inflation has led to declining real incomes in recent months. Combined with high lamb prices relative to other meats, falling real incomes have led to a pullback in consumer purchases of lamb.
The difficulty in moving lamb through consumer channels at the previous high prices has started a chain of events including less demand for live lambs, sharply falling prices, a backlog of lambs, increasing dressed weights and over-finished lambs, which reinforce falling prices.
Live lamb and meat prices
Live lamb prices have declined dramatically since May. Heavyweight lambs at Sioux Falls, S.D., have fallen from $255 per hundredweight (cwt) in May to $102 per cwt in the first week of August. The U.S. Department of Agriculture’s (USDA) Agricultural Marketing Service (AMS) reported heavyweight lambs sold on video auction for $80.25 per cwt in the second week of August. Lightweight feeder lambs have fallen to below the five-year average, he mentions.
Prices are declining due to lack of demand as events at retail back up into the live market. It appears some markets have had instances of no bids at all for lambs at times.
The nontraditional market will likely not be immune to lower prices. Lambs will likely be sold for slaughter at lighter weights this fall, rather than to feedlots. More lightweight lamb supplies will force lower prices in the lightweight slaughter lamb market.
Anderson continues, noting meat prices have also begun to decline. For example, boxed shoulders have declined to $376 per cwt, down from $450 per cwt two months ago.
They were $609 per cwt last year at this time. Legs have declined about $100 per cwt from a year ago, to $469 per cwt. The cutout is also down about $100 per cwt compared to a year ago.
Lamb and yearling slaughter is 5.2 percent below a year ago during the last eight weeks. For the year, it’s down 10.4 percent. Slaughter is smaller than what might be indicated from the USDA Sheep Inventory Report. This implies more lambs being “stored” alive, meaning they have not come to slaughter yet.
“The supplies of live lambs will keep a lid on the market in the coming months,” shares Anderson in his report.
As lambs have backed up in the system, dressed weights have increased compared to last year. In early August, lamb and yearling dressed weights averaged 68 pounds compared to 58 pounds last year.
However, the five-year average is 68 pounds.
It does suggest last year was the aberration as high prices pulled lambs into slaughter earlier. The heavier weights do likely suggest a growing risk of over-finished lambs with more fat.
The slowdown in lamb demand has not translated to higher cold storage levels yet. About 23 million pounds were reported in storage in June, compared to 21.5 million pounds in June 2021 and a five-year average storage of 38.2 million pounds.
This suggests more lamb is being stored live rather than in a box in storage. Cold storage data might also be lacking as there might be facilities not included in the monthly survey. But, cold storage stocks might increase as more lambs move to market.
Imports totaled 23.8 million pounds in June, below last year’s 29.4 million pounds. June was the first month this year with imports below a year ago. Lower imports from Australia accounted for all of the year-over-year’s decline. Imports from New Zealand totaled 6.9 million pounds and were equal to a year ago.
Imports typically decline through September, so seasonally declining imports might help the supply situation. Mutton imports increased dramatically at the end of last year, but were 57 percent below June of last year.
The report continues to state, most industry participants have seen this type of market in the past – one where lambs are backed up, getting heavier and prices are declining sharply. What makes this time different is the event that started it: declining demand due to macroeconomic conditions.
A couple of things should help boost purchases in coming months. Falling wholesale lamb prices should translate to lower retail prices, boosting the quantity demanded.
Falling fuel prices and moderating inflation in other areas should boost consumers’ purchasing power. A little more featuring and specials might also help. USDA AMS reported more features and specials on lamb in their latest weekly retail report, he concludes.
This article is courtesy of the American Sheep Industry News, Texas A&M Agrilife Extension Service David Anderson, PhD. Send comments on this article to firstname.lastname@example.org.