Marketing lambs: Markets continue to climb
Across the nation and around the world, lamb markets have seen a rollercoaster of prices in the last several years, according to several sheep industry experts, but the market situation is beginning to look positive moving forward.
“Over the last year, the lamb markets have been interesting,” says UW Extension Livestock Marketing Specialist Bridger Feuz. “In Wyoming, we saw a one percent increase in the size of the sheep herd last year, and we are the fourth largest state in terms of sheep and lamb numbers in the U.S.”
Mountain State Lamb Cooperative Procurement Director Brad Anderson comments, “Today, we are still trying to clean up some of the heavy lambs out of our supply, but we figure they will be out of the system by the end of next week. Once we get the heavy weight lambs under control, I assume we will start to see a little bit of strength.”
Despite positive trends, the industry is still struggling in Wyoming and across the U.S.
Wyoming Wool Growers Association President Peter John Camino says, “Right now, the market is killing us. The lamb market isn’t very good right now.”
Feuz notes, “A year and a half ago, when prices started to rise, people were really bullish on the lamb market and thought that demand had been built up enough.”
However, Feuz explains that the price of lamb increased enough that consumers backed off and consumption dropped, again creating a backlog of heavy lambs.
“In Wyoming, we had the same issues. It was hard to market lambs, and the lambs that were marketed stayed in feedlots for too long,” he continues. “As a result, prices dropped from those high levels.”
By rebuilding consumer demand and bringing prices to a consumer-friendly level, the market should react positively, he notes.
“The good news is, from recent slaughter data, we are about through the oversupply,” Feuz adds. “We aren’t marketing over-finished lambs. We are producing a good product like we are supposed to right now.”
Through the summer, Anderson notes that the market stayed consistent and steady, with a focus on trying to decrease supply and eliminate heavy animals.
He comments, “In terms of our value marketing grid for our membership, lamb is bringing $1.20 to $1.25, and there are a lot of sale barns and buying stations bringing $1.12 to $1.14.”
While Camino notes that the market situation has neither improved nor declined significantly, the status of the markets is difficult for producers to cope with when it is coupled with other factors challenging the industry.
On top of unfavorable market prices, Camino notes that inputs are also negatively impacting the ability for producers to secure a profit.
“The three major factors affecting the lamb markets today are the price of fuel, the price of grain and the cost of gain,” Camino comments. “If the prices of fuel and corn come down, the lamb market will start to improve.”
Anderson, however, notes that cheaper corn won’t impact markets until later this year.
“Cheaper corn markets aren’t helping us much right now because the basis is still reacting,” he explains. “Until Oct. 1, we won’t see cheaper corn available in Colorado or Wyoming. Then, we will start to see a lower cost of gain.”
Drought, Camino adds, continues to provide a serious challenge.
“We are starting to have to sell down flocks,” he explains. “There is no feed here, and we can’t afford to feed them, so lambs are going someplace else.”
Another challenge marked by Feuz is the competition from foreign markets.
“U.S. lamb always has the challenge that there is another product out there from Australia and New Zealand,” he explains. “Having a consistent, high quality product that consumer will choose over the imported product is a challenge for Wyoming and the U.S.”
U.S. producers, he continues, must be able to deliver a product at a price point to encourage consumers to choose domestic product over foreign competitors.
Decreased imports from Australia and New Zealand also helps producers to see higher profits.
“Right now, we are only getting about 21 percent of Australia’s supply,” Anderson notes. “It helps that they are not flooding our markets.”
As the sheep industry moves into fall, Feuz says, “The good news is, we are marketing lambs now that are current and ready to be marketed.”
He also noted that feed costs are trending down, but it remains to be seen what feed costs will do following corn harvests.
“If costs come out as projected, feed costs will be lower and that will help us, as well,” Feuz mentions.
For lamb markets, Feuz expects a slight upward trend.
“In general, this time of year the markets drift down, because most lambs are marketed in the fall,” he explains. “As supply hits the markets, we tend to see prices drift down.”
“Given the fact that feed costs are likely to be lower, we should be able to build back demand, and I wouldn’t be surprised to see prices at least hold, or even increase slightly,” Feuz summarizes. “We certainly will not go back to the record levels we saw a year and a half ago.”
To facilitate improvements in the lamb market situation, Anderson recognizes that a high quality affordable product will be necessary.
“We have to have excellent quality, and we must rebuild consumer demand,” he explains. “To accomplish that, we have to keep lamb at a reasonable end price, and we have to keep the quality.”
“I do think we will see some strength in the market,” Anderson adds. “To what end-point? I can’t project that number, but we will see some strength.”