Drought in Western U.S. creating poor conditions for range and pasture, affecting sheep production

Much of the Western U.S. has been plagued by drought conditions for almost three years. According to data released by the U.S. Department of Agriculture’s National Agricultural Statistics Service on range and pasture conditions, more than 30 percent of the Western region has been rated as poor and very poor conditions in recent weeks.

Compared to a year ago, conditions have improved from the 60 percent rating of pastures at poor and very poor. For the Great Plains region, pasture conditions have steadily improved from 60 percent rated poor and very poor to recent weeks rated just less than 30 percent. 

In the Southern Plains, range and pasture conditions rated as poor and very poor remain elevated at around 50 percent. Last year, conditions were below 20 percent.

Persistent drought and marginal pasture conditions are proving to be a challenge for producers.

Sheep and lamb market 

Since the start of the year, Colorado lambs on feed have been tracking well above the prior year. Each month this year has seen lambs on feed at levels that have not occurred in nearly four years. 

On July 1, the number of lambs on feed in Colorado was 103,032 head – a 74 percent or about 44,000 head increase from a year ago – and well above the five-year average of about 77,000 head. 

The last time lambs on feed were higher for the month of July was 2018, which was 107,311 head. The higher lambs on feed is likely due to drought related issues and poor pasture conditions pushing more lambs on feed. 

Additionally, producers are likely seeking to put a little more weight on the lambs to maximize profits from the elevated lamb prices. This can be seen in recent weekly slaughter and dressed weights data.

Weekly sheep and lamb slaughter started the year below typical levels for the first quarter. In early April, weekly slaughter levels followed the typical seasonal pattern with increased slaughter rates to fill demand for the Easter holiday. 

This was evident by the peak weekly slaughter level so far this year of 41,921 head the first week of April. During the month of April, weekly slaughter averaged about 40,000 head with total slaughter for the month at 197,800 head. As expected, weekly slaughter in May and June fell from the April highs with weekly averages at about 32,000 head.

During the peak slaughter levels in April, lamb and yearling dressed weights steadily declined from about 70 pounds down to about 60 pounds during the course of four to six weeks. The decline in dressed weights follows the typical seasonal pattern occurring during the Easter holiday as producers market more lambs to meet rising demand.

Typically, dressed weights trend lower through the third quarter before rising in the fourth quarter.

Since early May, weekly lamb and yearling dressed weights have been averaging about 70 pounds, a counter seasonal move and higher than the 63-pound average during the same period last year. In June, higher weekly dressed weights have partially offset the lower weekly slaughter levels to keep lamb production at or slightly higher than levels a year ago.

The three-market (Colorado, South Dakota and Texas) feeder lamb prices have been on a seasonal decline with prices in June averaging at or more than $200 per hundredweight (cwt). The softening of feeder lamb prices is likely a result of elevated lambs on feed in Colorado and high feed costs. Slaughter lamb prices – national negotiated live – have been trending lower for most of the year and fell below 2021 levels the last week of May.

In June, slaughter lamb prices averaged about $200 per cwt, which is still well above typical levels which are usually around $140 to $160 per cwt. The support for slaughter lamb prices comes from a lamb cutout value, which has ranged from $553 to $570 per cwt in June, well above the $340 per cwt five-year average price. 

Support for the lamb cutout comes from elevated prices in June for the shoulder, leg, loin and rack, which remain elevated with levels near the prior year and well above the five-year average.

Sheep and lamb outlook

The Livestock Marketing Information Center is forecasting 2022 sheep and lamb slaughter to decline nearly six percent – or 132,000 head – to 2.131 million head. The lower slaughter rate during the second half of the year is expected to be partially offset by higher dressed weights leading to about a four percent decrease in lamb production for the year. 

Elevated lamb prices are likely to encourage further imports from Australia and New Zealand with levels expected to be near or slightly below 2021, which should offset some of the low lamb production.

Feeder lamb prices during the first half of 2022 averaged just more than $290 per cwt – eight percent or $22 higher than the first half of 2021. For the second half of 2022, feeder lamb prices are forecast to be between $238 and $250 per cwt, putting the annual price range at $263 to $273 per cwt, which is slightly lower than the prior year.

Slaughter lamb prices finished the first half of the year up 15 percent or $29 per cwt from a year earlier to $218 per cwt for the second half of the year. Slaughter lamb prices are expected to ease lower ranging from $193 to $204 per cwt with an annual price forecast of $203 to $213 per cwt for a decline of about four percent from 2021.

Wool

With the conclusion of June came the closing of the 2021-22 wool selling season. Annually, the Australian Eastern Market Indicator (EMI) finished the season with an average price of about 1,385 Australian cents per kg clean – up 15 percent or about 184 cents from the 2020-21 season average price of 1,201 Australian cents per kg clean. 

For the month of June, the Australian EMI ranged from 1,438 to 1,474 Australian cents per kg clean with an average of 1,425 Australian cents per kg clean.

June’s EMI was a two percent increase from the average price in May. Compared to a year ago, the Australian EMI has improved 10 percent. During the month of June, the Australian EMI weekly prices trended higher for three consecutive weeks before finishing the last week of the season on a weaker tone.

Season average prices for the finer wools – between 17 and 21 micron – saw improvement over 2020-21 prices. In June, finer wool prices were generally better when compared to May with increases ranging from one to six percent higher. Compared to a year ago, June’s prices were even to slightly weaker with the 18-to 20-micron wools posting three- to six-percent declines.

June’s prices for the 22- to 32-micron wools were mixed compared to those in May but compared to a year ago, prices were generally weaker.

As the new wool season begins, uncertainty remains surrounding the global economic outlook and Australian exchange rates, which will continue to be concerns for global wool demand. Inflationary pressures are expected to remain an issue not only in the U.S., but also globally. This is starting to affect some consumers, raising concerns for wool demand in the near term.

This article is courtesy of Livestock Marketing Information Center Tyler Cozzens, PhD. This article was featured in the August issue of the Sheep Industry News. Send comments on this article to roundup@wylr.net.