Heavy lambs are demanding top dollar
September 23, 2013
While those involved in the sheep industry agree that feed prices have improved in recent months, the cost of gain on a lamb remains high enough that heavier lambs are a premium product at the moment.
"Usually there is a little bit bigger spread between price of the lighter lambs and the heavier ones but the cost of feed is still so high that there isn't a lot of difference in the dollars per pound right now," commented St. Onge Livestock's sheepyards – located in Newell, S.D. – manager Barney Barnes. Lambs weighing 113 pounds brought $1.13 per hundredweight, compared to several runs of approximately 85-pound lambs that fetched between $1.15 and $1.20 per hundredweight, at their last sale, Barnes said.
He expects the feeder lamb market to stay steady "unless the fat lamb market gets higher." Barnes said some producers are keeping their lambs a little longer than usual in order to add a few more pounds before hauling them to town. "They've got the grass and the water this year so they can just keep them out on pasture a little longer."
Bowman Auction Market owner and manager Harry Kerr reported that about 600 head of lambs went through his barn on Monday, Sept. 9, and the market was a little stronger than in previous weeks, which is unusual for September. "The market is always lower this time of year when some of the big sheep outfits are moving lambs off of their summer allotments. The lambs are moving so fast, they flood the market," Kerr explained. "The buyers are liking the heavier lambs, and you hear people talking that the market will get better after the first of the year," he said. As usual, a lot of farmer feeders from Colorado, Iowa and South Dakota are buying the lambs that go through the Bowman, N.D., barn, Kerr said.
"The 90-100 pound lambs are the valuable ones right now because of feed costs," Kerr said, explaining that not only are the heavier lambs already closer to slaughter weight, but they tend to be "better doers" as a general rule. Kerr reported he hasn't seen a premium for ewe lambs and most of them are going to the feedlot rather than into production herds to be developed for replacements. "When the market gets even stronger, then we'll see the replacement ewe buyers back in town," he said.
"The market is a bit depressed right now but I hate to see people get out. We've been through this before, it will come back. If sheep fit your operation, stick with it," Kerr advised.
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Bob Harlan a sheep producer and feeder from Kaycee, Wyo., is also optimistic. "It's going to get better. The price of fat lambs is going to get higher than the cost of gain and then the feeder lambs will be worth more," he explained. "Right now we aren't really seeing a profit margin because feed costs are still so high," he said. "Yes, the futures for corn are down but the cash market is still high. When that changes, the feeder lamb market will change for the better," Harlan said.
While he is in the midst of a drought, Harlan continues to buy 70 to 90-pound feeder lambs to put on feed. He would be adding females to his herd too if his pastures had seen more rain this summer. "I think it's a good time to save replacements. I'm in a drought so I have no extra feed or I would be building my herd right now. I am a buy low, sell high kind of a guy."
The lambs Harlan feeds to slaughter weight – 145 to 165 pounds – are put through the Mountain States Lamb Cooperative, a value-based program. "We are paid for pelt and meat, and the processing cost is taken out," he explained.
Harlan also commented that for those folks outside of the drought areas, who are looking to buy livestock to eat excess feed, perhaps the woolly species is less risky than their larger, "beefier" counterparts. "You are looking at spending just $65 for a ewe compared to $1,500 for a cow," he commented.
Sheep and cattle producer Larry Nelson, Buffalo, S.D., is a little less optimistic. He believes the volatility in the lamb market in recent years, coupled with ever-increasing predator problems could cause sheep producers, even lifetime believers like himself, to exit the industry. He is confident that packer concentration is wreaking havoc on the market and causing smaller feeders to bend to price manipulation pressures.
"If I had my way, I'd sell all my cattle and just run sheep but I don't think it's possible. We can't feed all this wildlife, and endure the bottom dropping out of the market again and again, plus deal with skyrocketing supplement and hay prices. The other thing is, you can't get any good help anymore," Nelson said, commenting that he's been fortunate to keep a good hand working for him for years, just because that individual enjoys ranching, but oilfield jobs offer more than twice what he and most ranchers can pay.
Dwight Kitzan, who, along with several family members, operates Kitzan Sheep, near Nisland, S.D., said he believes the sheep market is sitting in a favorable position. "I think we've got the best fat lamb market we've ever had. I don't think we've ever had $1.22 per pound fat lambs in the fall – that is phenomenal. We are at a realistic point in the market where feeders can buy lambs and make some money, as long as this slaughter market holds out," Kitzan, who sells South African Meat Merino and Suffolk bucks, explained. "The market has been very stable, to me that's kind of a highlight. I think it's held steady for a couple of months, which is very unusual."
Agreeing with others, Kitzan said there is often a lull in the market this time of year, when the early spring lambs and the lambs coming "off the mountain" are added to the mix of feeder lambs available for sale.
"If you've got a place to put the lambs and can put 20 pounds on them, this is the year to do it," he said. While producers often shoot for an 80-pound feeder lamb, they might want to try to sell a 100-pound lamb this year, if possible, he suggested.
Kitzan added that imported lamb might be down, possibly contributing to an improved domestic market. "In August, Australia shipped the most mutton – 40 million metric tons – they've ever sent out of the country, and it all went to China," he added. Fewer ewes means Australian lamb production will likely be decreased in the coming months. In addition, the lamb crop is down 20-30 percent this year as the result of poor conception due to drought conditions, he said.
"The Australian dollar is really going to dictate what will happen in the next six months," Kitzan, who visited Australia last December, said. "The Australian dollar has been devalued, and that hasn't worked in our favor in the last month," he said, adding that Australia, not New Zealand is really the "big player" when it comes to the sheep industry, reporting about 70 million head of sheep in the last year, compared to 4.1 million in the U.S. and approximately 30 million in New Zealand. Numbers in all three countries continue to decline, however, according to government statistics.
In addition to imports, Kitzan believes the lamb market is highly subject to the buying power of the large processing plants. Kitzan is looking forward to the results of the U.S. Grain Inspection, Packers and Stockyards Act (GIPSA) investigation regarding the cause of the wild swings the sheep industry has endured the past few years as well as the continued decline in U.S. sheep numbers.