Marketing economist urges producers to stay on top of volatile lamb market
With COVID-19 issues still impacting an already volatile U.S. lamb market, a senior agricultural economist with the Livestock Marketing Information Center tells producers they need to stay on top of changing marketing conditions.
Jim Robb tells producers during a recent Let’s Grow webinar sponsored by ASI that the sheep sector has done a good job keeping lamb and yearling dressed weights current, which has prevented a glut of over finished lambs and yearlings reducing quality and pulling prices down more. “The industry has done a good job keeping lamb weights very manageable, and because of that quality has stayed very good. It has given us more entry into the restaurant sector, and the retail sector and grocery stores, with a pretty good product. The industry has done a good job of managing the flow of lambs in a difficult economic environment and not backing up enormously,” he said.
Despite that, the market has been more volatile than usual since the COVID-19 crisis started earlier this year. Volatility is inherent in the sheep and lamb marketplace from the consumer-side to the restaurant and retail to the packer. “It is a hand to mouth market. People don’t buy ahead, so we get prices running up and prices running down on a short term basis rather quickly. The lamb industry has had similar disruptions in processing as the poultry, beef and pork industries thanks to COVID-19. Even in the auction market, we have seen buyers show up one week, but not the next. It has been more common than in recent years,” Robb said.
One high point Robb notesd was the opportunity for the lamb industry to show their stars and get more lamb in the retail case during the pork and beef supply disruptions in the retail grocery sector. “When beef and pork were not on the market, and the lamb supply was good, people were buying more lamb in the grocery store. The Lamb Board has done a tremendous job of promoting your product. During an economic recession, lamb and beef sectors get hit the hardest because we can’t produce a product as cheap as pork, chicken or turkey,” he said.
Added to the strain was the bankruptcy filing by Mountain States Rosin, which is considered the largest lamb packing plant in Colorado. The plant slaughters about 20-25 percent of the lambs in the U.S. A new state of the art lamb packing plant in Brush, Colo., hasn’t been finished yet after a series of delays. “This dynamic of getting lambs processed is very precarious. You have to watch these developments as we look ahead,” Robb said.
Referring to the most recent reports he has access to, Robb told producers that the Colorado Lamb on Feed report is similar to a year ago, despite the environment the industry has had to contend with. The low slaughter rate has kept numbers in check.
The lamb markets and price outlook are based on the market average at auction markets in Colorado, Texas and South Dakota. The feeder lamb prices in most markets are similar to a year ago, but below the five-year average, Robb said. The feeder lamb market has been buffered by the availability of lower cost feed stuff products and pretty good forage quality available in most of the U.S., he noted.
In the first quarter, prices for feeder and slaughter lambs were above a year ago. At that point, slaughter lamb prices were approaching levels that were the highest seen for several years. During the second quarter, slaughter lamb prices have come down 20 percent from a year ago, and it could possibly drop as much as another 20 percent from a year ago during the third quarter. Robb expects it could take until 2021 before the industry sees prices return to 2018-2019 levels. However, if everything stays on track, higher markets may be on the horizon by 2022, he said.
With Australia recovering from prolonged drought, the country’s producers are starting to rebuild their flocks. Lamb imports were down in April, but still above the five-year average, Robb said. “The drought in Australia seems to be over, so they stopped dumping all their product on our market.”
Nearly 70 percent of the lamb and mutton sold on the world market now comes from Australia and New Zealand. Mutton imports to the U.S. were up 255 percent in March year over year as a percentage increase. April was up 120 percent. Lamb imports were up 2 percent in March, and down 22 percent in April. Shipments from Australia to the U.S. fell 50 percent in April, but were up 50 percent to China. Robb said it could be a signal that the world is starting to return to normal, and that China is aggressively buying Australian lamb and mutton.
Robb said there has been some buildup in U.S. cold storage numbers, but it has maintained a reasonable level so far. “It is not the burden it has been in previous years. We are expecting to import less lamb from Australia over the next few years as they rebuild. The imports will be tied to an international dynamic and China emerging in the marketplace and their closeness with Australia and New Zealand,” he said. ❖
— Clark is a freelance livestock journalist from western Nebraska. She can be reached by email at email@example.com.
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