Lamb markets take expected dip in 2016Written by Saige Albert
On Jan. 12, Mountain States Lamb Cooperative Lamb Procurement Manager Brad Anderson noted that the live and carcass markets have slipped recently, but strong pelt prices have offset some of the discounts.
The live lamb market has steadily dropped over the past month.
“It is currently from $1.20 to $1.25,” Anderson says. “The reason the market dropped is because there is more supply than there is demand. Lower prices in other proteins have also affected our demand.”
The decline of the lamb market, however, was anticipated by the sheep industry. “With that said, generally, we see a market correction that helps us buy back demand,” Anderson says, noting that, as prices decline, more price-sensitive consumers will rejoin the marketplace.
However, atypical from a traditional market, the strong U.S. dollar provides an additional hurdle.
“Our strong dollar makes the U.S. an attractive place to send imports for Australia and New Zealand because of the exchange rate,” he adds. “It is really beneficial for them to bring product into the U.S.”
The resulting imported product may be as low as half the price of U.S. lamb, which creates additional challenges for sheep producers.
The carcass market has also slipped in recent weeks, though not as dramatically.
“The carcass market has been sliding a few pennies every week, but it hasn’t made the correction like the live market has,” Anderson explains. “Part of that is due to the small number of carcasses that are traded on the market.”
Many lamb carcasses are handled in-house, including MSLC’s.
“We’ll process 7,000 head this week, but none of those are reported to USDA, because they are all MSLC lambs. They can’t affect the markets,” he adds.
“There are very few trades on the carcass side to move the market,” Anderson continues. “That is why we haven’t seen a correction there as much as in the live market.”
“No matter what we do,” Anderson comments, “The next few months are going to be really tough for our industry.”
To solve the challenges seen currently, he notes that the industry must try to keep supply as current as possible.
“It is going to be a daunting task,” he says, “but really, our goal is for our supply to not get so far out of reach that we can’t bring it back in six months in terms of weight and quality.”
The industry is hoping to see a market correction to move more product early and facilitate sales during the Easter season.
“We only have 10 weeks until Easter,” Anderson says. “We are four weeks from where we really max out our production and labor. We need to start making a correction, getting product features out and stimulating demand.”
Decreasing price stimulates additional demand.
“As an industry, even though we are going to get less for live lambs, carcass and supply, if we move product through and minimize the risk of overweight, poor quality lambs, the better off we will be,” Anderson adds.
At this point, Anderson also notes that the feeder market is fairly non-existent.
“We won’t see many of the feeders start until March when we see some of the California springs and the Imperial Valley lambs,” he says. “All the feeder lambs are currently in place and have a home right now.”
However, when feeders begin to trade, Anderson notes that he expects tremendous pressure on the market because a large supply will already be on feed.
As one point of positive news, Anderson mentions that the pelt market has increased dramatically over the last few weeks.
“Pelt markets certainly affect the price of lambs, and we’ve seen some strength in the last six months,” he says. “Unshorn pelts have increased five-fold. They went from one to two dollars to $10 now.”
The pelt markets adds stability to otherwise volatile lamb markets, Anderson says, as the increase in the market has helped to offset decreases elsewhere in the markets.
At the same time, the U.S. is at a strong advantage in terms of quality in the unshorn pelt market.
“This time of year, the United States has extremely good quality in terms of square footage and quality of wool attached to those pelts,” he comments. “The high-end, unshorn pelts come at a premium for us right now, and we have a very good product that no one else can produce.”
While much of the news for sheep producers seems woeful, Anderson says, “We are trying to be upbeat about the market. The biggest thing is producers need to have good communication with the packers and whoever does their marketing to get lambs to market to keep supply consistent.”