Lamb levels drop: Sheep markets see dramatic lows

After seeing record highs across the board last summer, lamb markets have taken a turn for the worse this summer, and the industry is being hit hard by the impacts.
    Mountain States Lamb Cooperative Procurement Manager Brad Anderson says, “We are seeing a big slide in market lamb prices, as well as feeder lamb prices. Everything that went right in the marketplace last year to give us record-high live lamb prices flipped on us to push prices down this year.”
    “Prices are at about 40 percent of last year or less,” comments Mountain State Lamb Cooperative Vice Chairman Brad Boner. “The industry is reeling. We have killed demand, and the corn market has turned the industry upside down.”
Consumer demand
    With record-high live lamb prices in 2011, Anderson remarks that demand decreased because of the cost of the product.
    “We priced ourselves out of the markets,” adds Wyoming Wool Growers Executive Vice President Bryce Reece. “Retailers and wholesalers went to cheaper protein and turned away from lamb.”
    As a result, large quantities of lamb were left in the coolers, rather than on grocery store shelves.
    “The only thing that affected demand was price,” says Reece. “We have seen an upsurge in demand based on consumer preference. They like it, and they want it, but demand was taken away by how high-priced the meat got.”
    With decreased demand, Boner also mentions that there is frequently a lag seen before demand regains strength.
    “Demand will pick up at some point, but there is always a lag,” he says.
Backed up markets
    As retailers turned away from high-priced lamb, harvest numbers decreased, as did demand.
    “Lamb meat got too high, the market pulled back, and we had lambs in the feedlot with no place to go,” continues Reece. “They got heavier and heavier.”
    Rather than slaughtering lambs at their appropriate weights, animals were left in feedlots, creating a backlog.
    “It will take awhile for this whole backlog to work through the system,” says Reece.
    In harvesting heavier lambs, quality of the product was also affected.
     “We do know that the objectionable flavor in lamb comes from the fat,” he further explains. “When lambs get fat, it doesn’t help with the consumer.”
    However, the bigger factor according to Reece is the cost increase that results when carcasses must be trimmed.
Corn prices
    Uncertainty with corn markets has also caused additional worry, largely because feeders are unable to lock in corn prices.
    “This is the time of year when feeders are contracting lambs for fall delivery,” explains Reece. “I am told that some feedlots can’t get a lock in price on corn, and they don’t know what corn will cost.”
    Rather than contracting lambs, feeders are waiting to see what corn prices will do, which has resulted in a decrease of buyers in the corn market, Reece says.
    “When you take buyers out of the market, price goes down,” he adds.
    Boner also mentions that the slaughter lamb market prices are below the cost of gain, causing additional trouble. Producers buying feeder lambs can’t feed them and sell them for a profit right now.
    “Traditionally, the cost of gain is below what lambs bring, but right now we are upside down,” he explains. “Every pound costs a bunch of money.”
Added struggle
    To compound pricing trouble, drought conditions across Wyoming have exacerbated the effects of low prices.
    “The drought means that people have less flexibility,” Boner explains. “In a market like this, producers like to have options. It makes this harder to deal with.”
    In a typical year with low prices, he notes that producers would hold onto lambs to wait for prices to increase.
    “The drought situation means some people are having to sell for whatever they can get because they don’t have feed,” says Reece.
What’s next?
    With feeders and producers waiting on corn markets and demand at low levels, the outlook for lamb markets is questionable through the rest of the year.
    “Through Christmas, we will wait and see how low prices get to in order to stimulate demand and how strong the demand comes back,” Anderson remarks. “We can just try to be as cautious as possible and prepare for what is going on.”
    Not as optimistic, Boner says he don’t anticipate relief until next spring.
    “A lot is going to depend on what happens with the corn market,” Boner notes. “I anticipate it to get a little better through the fall, but I don’t think we are going to see real relief until next spring.”
    “There are some struggles we are dealing with,” says Anderson. “Right now we do not know where the bottom is – we don’t know how low prices have to go to stimulate demand again. That is the biggest question.”
    “It is a perfect storm,” comments Boner. “We are reeling from some of the ramifications of last year’s perfect storm.”
    Saige Albert is managing editor of the Wyoming Livestock Roundup and can be reached at saige@wylr.net.

Impact of imports on sheep markets
    Imports are a big factor in sheep markets according to Wyoming Wool Growers Association Executive Vice President Bryce Reece and Mountain States Lamb Cooperative Procurement Manager Brad Anderson.
    “Competitive pricing in imports from industry competitors in Australia and New Zealand pushed prices down,” says Anderson of the current market crisis.
    Reece, however, says that if higher levels of imports had been coming into the U.S., the industry could have been more stabilized.
    “Higher levels of imports might have tempered the market last year and not allowed lamb to get as high as it did,” he says. “It might have kept the carcass and live lamb prices down at a level where we were still making money, but not so high that the price was out of the marketplace.”