Opinion by Becky GitthensWritten by Becky Gitthens
By Becky Gitthens, CPA, Director of Finance and Operations, Mountain States Lamb Cooperative
With more than 2.3 million lambs marketed, total producer payments exceeding $375 million and 93 percent ownership of the largest domestic lamb company in the U.S., the members of Mountain States Lamb Cooperative (MSLC) had a lot to celebrate at our recent 10th Annual Meeting. Following a roller coaster 12-month period, which saw record high prices of lambs and a short supply in 2011, followed by an industry-wide surplus of lambs and falling prices in 2012, our members are thankful to be a part of this Wyoming-based, producer-driven success story. In fact, one of the primary reasons MSLC exists is to provide its producers market access during the exact conditions we have experienced in the lamb industry the last nine months.
The record high prices and short supplies of 2011 took a heavy toll on consumer demand. MSLC and our meat company, Mountain States Rosen, have had to deal with the consequences of this, right along with the rest of our industry. Many retailers reduced the limited shelf space allocated to American lamb even further or quit carrying lamb altogether. Restaurants often removed lamb from the menu or offered lower-priced cuts. In addition, drought conditions in key regions brought lambs into the feedlots earlier than normal last summer and fall. A mild winter in lamb feeding areas facilitated optimum feed conversion and accelerated marketing. The ethnic trade, which annually uses an estimated 1 million head of lighter weight lambs, pulled out of the market entirely due to price, thus increasing the supply of feeder lambs available over previous years. In addition, a weak global economy has contributed to increased pressure from imported product in the United States and a much weaker pelt market. The last nine months have been incredibly challenging for the entire lamb industry because of the inability to get lambs marketed in a timely manner.
Market access is one of the primary benefits of our organization. We utilize a harvest schedule based on solid communication with both our meat company and producers. As shareholders in the nation’s largest domestic lamb company, our producers know they have a home for their market ready lambs every year. Members communicate with the Co-op throughout their marketing cycle regarding the number of lambs they have to market and the projected harvest dates. This allows MSLC to forecast its supply and work to align it with the needs of the meat company.
We will be the first to admit there are a number of variables to work with, and much like the weather, some factors are always going to be difficult to predict or beyond our control. Perfect alignment of supply and demand will always be impossible, but because both our supply and meat company are producer-owned and controlled, we have proven that we are able to do so much better than our industry as a whole. As a cooperative and a vertically integrated organization, we have improved the communication between our producers and meat company tremendously over the last few years and diligently work at this each day. This communication and cooperation is key to our business model and gives us a competitive advantage over the rest of the industry.
Mountain States Lamb Cooperative is current with all of our member’s committed supply. Based on the weights and number of lambs on feed in Colorado, it does not appear as if the industry as a whole will be current until much later this fall. As non-member producers have struggled to market their finished lambs during 2012, inquiries and new MSLC memberships have increased significantly. Producers from around the country are contacting us because they want to align themselves with the long-term vision of our organization and eliminate the uncertainty of where they will market lambs next year. Producers also want the opportunity to earn premiums on quality lambs, be paid for actual carcass yield and pelt quality, and earn dividends based on the profitability of their own meat company.
We recognize that there are a number of serious challenges for the industry in the short term. Drought, rising production and feed costs, pressure from imported product and predator and environmental issues all plague an industry that currently has more product than demand. However, longer term the future is bright.
There is still a worldwide shortage of protein and not enough lambs being produced in the United States. Lamb is a wonderful, nutritious product and is a favorite of diners, chefs and families because of its tender, delicious taste profile and ease of preparation. Consumers want to know where their food comes from and the assurance that it is raised responsibly. The MSLC story and all-natural program addresses those concerns and features an antibiotic- and hormone-free product.
Lamb consumption in the U.S. still averages well less than one pound per person per year, so there are infinite marketing opportunities. Mountain States Rosen’s New York and Colorado case-ready programs are opening up new markets for our lamb. We are utilizing state of the art technology, which produces a high quality product, conveniently and attractively packaged with an extended shelf life, thereby increasing customer satisfaction, and enhancing the retailer’s product margin.
Mountain States Lamb Cooperative is optimistic about the opportunities for lamb, our organization and most importantly our members. After 10 years of marketing more than 2.3 million lambs, paying each producer on time and in full and acquiring the controlling interest in Mountain States Rosen, our state and industry realize MSLC organization is the real deal and here for the long haul.