Covid hits sheep industry hard

Like the cattle and hog industries, the sheep industry suffered from the effects of COVID-19 on the US food industry. Although dwarfed in numbers by their protein producing counterparts, sheep ranchers and feeders alike took a market hit unlike anything they have ever experienced.

“I’ve been in the sheep feedlot and packing business for over forty years,” said Spencer Rule, who feeds lambs near Brush, Colorado. “I’ve never seen anything like it.”

Lamb prices dropped from around $1.60 per pound in early March to the eighty cent range in three weeks’ time.

“Some of the drop in price was due to the loss of quality,” Rule said.

Lambs that should have been slaughtered thirty days previously were no longer at their prime, but most of the price drop was simply because there was no one buying the meat.

COVID-19 couldn’t have come at a worse time.

“March and April, when people are celebrating Passover and Easter, are our biggest marketing season of the year for lamb,” Rule said. “Feedlots are at peak capacity to have lambs ready for that market.”

The lambs were nearly ready for slaughter when COVID-19 hit and restaurants were closed, packing plants began operating at reduced capacity, and suddenly there was nowhere for them to go. To make matters worse, the second largest lamb slaughter facility in the US, Mountain States Rosen Company, filed for bankruptcy on March 19 and drastically cut back the numbers of lambs processed there.

“The sheep industry is much smaller than the hog industry, so we don’t usually get blindsided by numbers,” Rule said. “We usually have a pretty good idea from week to week about how many lambs are on feed and where they are going to end up.”

This all changed thanks to COVID-19.

“On March 16 we were a month away from Passover and Easter,” said Peter Orwick, Executive Director of the American Sheep Industry Association (ASI). All of our feedlots were at capacity, with tens of thousands of lambs on feed. We were ready for the single largest month of lamb consumption in the year. Customers started calling the packing plants telling them not to load the trucks. Some trucks were even turned back. Fifty percent of the demand for lamb was gone in a week.”

Orwick said that Mountain States Rosen cut down from slaughtering five to six thousand lambs per day to around two thousand lambs and Wolverine Packing Company in Michigan closed temporarily. This put a severe bottleneck on the feeders.

Fortunately, lambs rate of gain can be slowed by changing their diet.

“As an industry, I think we’ve done a good job of keeping weights manageable,” Rule said. “Some of the lambs that should have been slaughtered before Easter are still in feedlots. Some are in freezers, waiting for the restaurant trade to pick up again. We did pick up some retail business, because with the food service industry shut down more people were eating at home, but it didn’t make up the difference.”

Changing directions with the lamb meat wasn’t purely a matter of shipping it elsewhere. Meat destined for restaurants is packaged differently than meat destined for retail. Processing plants are not necessarily set up for both.

While feeders and packers were struggling to figure out what to do with lambs that couldn’t be sold or processed, ranchers were fighting to get the help they needed.

“The biggest impact COVID-19 had on range operations is that we couldn’t get the guest workers we depend on because it shut down travel from other countries,” said Steve Raftopoulos, Craig, Colorado. “We were fortunate to have enough help to get by, but we had two men stuck in Peru who had their paperwork in order but couldn’t leave due to COVID.”

Again, the timing couldn’t have been much worse; many sheep are lambing in March, April and May and help is at a premium during this busy season.

The upside to the sheep business is that they produce two products: lamb and wool. The downside at the present is that the wool market was already in a slump in 2019 and COVID-19 took it down even further.

“We were already in a very slow market due to the China trade war,” Orwick said. “We have several million pounds of 2019 wool still unsold. The clothing and textile industry was brought to a standstill by COVID just like the food industry was; wool prices have already dropped by 28% in 2020.”

Mr. Orwick said that members of ASI conferred with economists and universities to put together a picture of the damages done by COVID-19 to the sheep industry as a whole. This was presented to the USDA and payment assistance is now in place for both lambs and wool through the Farm Service Agency.

“By late March we estimated over $300 million in lost sales of lamb and wool,” Orwick said. “$125 million of this figure was at the farm gate. I know of some individual feedlots that a million dollars wouldn’t stop their damages; they lost sixty to seventy-five dollars per head, and that was IF they could get a bid and move the lambs. Some of the lambs simply stayed on feed and the financial losses continue with the increased input costs.”

Orwick said that even though financial assistance doesn’t entirely fix the problems he is pleased with the USDA’s response to the COVID disaster.

“At least it is an acknowledgement of these feeders that had thousands of lambs on the line,” he said. “It doesn’t make anything right but it can help out with cash flow and keep bankers talking to people who are struggling.”

Besides assistance available through the Coronavirus Aid, Relief and Economic Stimulus (CARES) program, Orwick said that there are two other programs previously in place through the Farm Service Agency: a market loan program for wool and a lamb price insurance program. He said that the USDA also set aside the largest amount of money on record to purchase lamb for food banks to try to get some movement in the market; $2.6 million was spent on lamb meat just this spring.

Where will the sheep industry go from here? Hopefully on to brighter days. Restaurant trade is beginning to open, although Orwick said recent riots and protests have shut down businesses that were newly reopened in some areas. Lambs on feed numbers in Colorado are indicating that most of the 2019 lambs have been slaughtered now, and while much of that meat is in cold storage at least they are no longer consuming expensive feed. Steve Raftopoulus, Spencer Rule and Mike Harper are planning to open a new lamb slaughtering plant in Brush, Colorado this August with the capacity to process 1800-2000 lambs per day. Two and a half years ago when the plans were laid they could not have imagined the challenges that COVID brought to the sheep industry, but they are hopeful that things will level out.

“We need to keep on top of the labor problems the ranchers are facing,” Rule said. “If we can get our restaurant trade back, stop this rioting and looting, that will help. We need to remember we can market our way out of this. Ewes are very resilient, and the sheep industry has lots of promise. Nothing in ag is easy, but, damn, it’s fun.”