Demand drives sheep market up
A strong fat lamb market offers producers hope after the Covid pandemic and the sale of a major lamb plant coupled with the bankruptcy of a marketing cooperative sent the market into turmoil in 2020.
As TSLN reported last summer, sheep producers and lamb market analysts alike were concerned about the future of the industry due to the Covid-induced shutdown of restaurants, cruise ships, casinos, hotels, catered events and other upscale food service establishments. It was agreed that a significant amount of lamb had traditionally been marketed through these high-end eateries.
With the reopening of a previously shuttered lamb slaughter plant in Texas and continued growing demand by Middle Eastern, eastern European immigrants and other populations who prefer lamb and goat meat, slaughter lamb prices reached record highs this summer.
“The first week of August negotiated slaughter lamb prices hit an all-time record high of $268.34 per cwt, a 74.2% ($114.34 pe cwt) increase from the start of the year,” said the Livestock Marketing Information Center.
Prices have fallen off a bit, down to about $2.48 per cwt for a finished lamb.
Feeder lamb prices hit a record high last February with $342.44 per cwt lambs being recorded, and prices averaging around $260 per cwt all summer, according to LMIC. Typically feeder lamb prices range from about $160-$210 per cwt.
The LMIC reports that a shortage of lambs is pushing up the prices.
The weekly sheep and lamb slaughter pace has been steadily declining since mid-May which has led to year-to-date slaughter levels nearly even with a year ago. Part of the slower pace in year-to-date sheep slaughter is due to lower levels of yearling sheep slaughter which are tracking nearly one percent (-0.7%) below the same period last year. The lower number of yearlings coming to market is being partially offset by a rising amount of mature sheep slaughter, said LMIC.
Jeff Hasbrouck, whose family will feed about 150,000 to 175,000 lambs this year at Double J Lamb Feeders near Ault, Colorado, said the market tanked to about $80 per cwt for a fat lamb (about 145 to 160 pounds) last summer amid the Covid shutdown.
“Today fat lambs are bringing about $240 to $260 per hundred weight,” saiod Hasbrouck, whose family also owns and operates Double J Lamb, Texas, a lamb slaughter plant in San Angelo, Texas.
“The market today is outstanding. We’ve had a shortage throughout the summer. We’re typically short in the summer, but not as short as we’ve seen this summer. That’s what has pushed our prices so high,” he said.
Hasbrouck said it is rare to see the fat lamb market breach $2 per cwt.
Along with the strong prices, or perhaps because of them, lambs are staying current, said Hasbrouck – meaning it’s rare to see an overfinished lamb headed to slaughter this year.
While the strong prices are favorable for the producer, feeders are feeling the risk of buying high-priced lambs, and they know they need the market to hold out until they can turn some pens.
“Some lambs were bought early at $2 at 100 pounds, then this thing jumped to $225, $250, some brought close to $300. Those breakevens will be pretty decent, maybe $210 to $220, maybe in some cases higher.
“We’re hoping to hold our money together. We took a big hit during Covid, we can’t afford another big hit,” he said.
“Talking to other feeders and packers, we’re over current. Our weights are light going to the plant and if we continue that way, we should stay fairly current and hopefully we can keep this market above $2,” he said. Feeders will need at least $2 per cwt to break even on the lambs they purchased this spring and summer, he said.
Because of the drought, many lambs from the Western United States were shipped earlier than usual and lighter than usual. This presented challenges for the feeders purchasing the lambs, who were then feeding them in hotter weather than they are accustomed to, and with more dust. A higher than normal death loss was the result, adding to the feeder’s stress.
In order to deal with the struggle of too many lambs being ready to slaughter at one time, some of these lighter, younger lambs are being sent to California to graze alfalfa fields, Wyoming to eat beet tops, or Idaho to graze hayfields, said Hasbrouck. Nationwide, sheep producers tend to ship their lambs in the August/September timeframe, so anything feeders can do to prevent all of these lambs from being ready to slaughter at once, the better off they are.
As a packer, business has been very good, said Hasbrouck. If lamb numbers had been higher, he’d probably have had the opportunity to take on even more customers, but as it was, he focused on supplying his regulars.
While his plant has been a slaughter facility only, shipping out whole and in the case of kosher kill, half carcasses, in October they will begin breaking down carcasses into primal cuts.
“When we well those carcasses to New York, Pennsylvania, New Jersey, those customers will further process those, or in some cases they are selling the whole carcass to another customer,” he said.
The ethnic populations are credited for upholding the market, and although the supply of live lambs is tight, this is not due to drought or lower sheep numbers, but rather because of strong demand which has kept lambs moving through the pipeline, and not getting backed up and overfinished, he believes.
Hasbrouck said finding employees to keep the packing plant and feedlot operating has been a challenge.
Utah sheep rancher Carson Jorgensen said he believes lower imports numbers have contributed to the strengthening of lamb prices. During the height of the Covid shutdown, some ships couldn’t be unloaded, which meant less of everything at U.S. ports, including lamb.
Will the market hold strong? It’s a guessing game, he said. “Because the shift was artificial (caused by Covid, then affected by government price supports), it’s anybody’s guess. This changed the whole dynamic of the entire market. There is no way to guess what this will do,” he said.
The Livestock Marketing Information Center forecasted second-quarter total production at 37.7 million lbs., 4 percent higher year-on-year. Imports could reach 68 million lbs. up 1 percent year-on-year, with total disappearance – or consumption – at 102 million lbs., 10 percent higher year-on-year, reported the American Sheep Industry.
“For the year, however, total disappearance – or available supply – is forecasted down 9 percent year-on-year to 396.4 million lbs. Domestic production is expected to increase 3 percent in 2021 to 141.6 million lbs., but imports could be 10 percent lower year-on-year to 272.0 million lbs,” said Julie Stepanek Shiflett, PH.D., Juniper Economic Consulting, on the American Sheep Industry website.
“Potentially lower imports in 2021 will support the live domestic lamb market, but again, higher prices are only one part of the growth equation. Sustained expansion in domestic production is also key. The opening of two new lamb processing plants is a good sign of optimism for the future,” said Stepanek Shiflett.
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