Livestock Marketing Information Center offers sheep and lamb outlook

The annual sheep inventory report was released by the U.S. Department of Agriculture’s (USDA) National Agricultural Statistics Service (NASS), giving further insights into supplies of the American flock. 

On Jan. 1, all sheep and lambs totaled 5.020 million head, down 45,000 head, or less than one percent, continuing the marginal downward trend in supplies.

The breeding sheep and lambs reported a decline of 45,000 head, or 1.2 percent, to 3.665 million head. The decline in the breeding flock was slightly above historical trends, which have typically been just below a one-percent decline.

Looking further into the breeding flock, NASS reported ewes one year and older at 2.870 million head, down 1.4 percent or 40,000 head. Replacement lambs were 635,000 head, down 5,000 head or less than one percent. Ram inventories held steady at 160,000 head.

Market lambs

From a year earlier, market lambs increased slightly by 0.2 percent, 3,000 head, to 1.280 million head. 

Declines in the under 65 pounds and 65 to 85 pounds categories were more than offset by gains in the 85 to 105 pounds and over 105 pounds categories. Over 105 pound market lambs were 483,000 head, up by less than one percent, or 4,000 head. 

The 85 to 105 pounds category increased 13,000 head, or 4.9 percent, to 279,000 head from last year. Lower levels were seen in the under 65 pounds and 65 to 85 pounds categories, down 2.9 percent, 10,000 head, and 2.1 percent, 4,000 head, respectively, to 335,000 and 183,000 head.

A 3,000 head decrease in the number of market sheep to 75,000 head led to a total market sheep and lambs of 1.355 million head, which is even with the year prior.

Lamb crop and lambing percentage

The American lamb crop fell by 1.6 percent, 50,000 head, to 3.110 million head, with California reporting the largest decrease of 25,000 head, or 10.4 percent, to 215,000 head.

The Texas lamb crop fell 5,000 head, or 1.4 percent, to 345,000 head, while Wyoming decreased 10,000 head, or 4.2 percent, to 230,000 head. 

Colorado, Idaho and Montana all had declines in their lamb crop of 5,000 head.

South Dakota, Oregon and Utah held steady with a year ago, while Iowa, Kansas, Oklahoma, Missouri and Minnesota saw gains from 1,000 to 5,000 head. 

The national average lambing percentage tallied at 106.9 percent, which is in line with the historical average during the last 10 years and slightly better than last year’s 106.8 percentage.

Summary and market outlook

Taking a step back from the details of the report, the Livestock Marketing Information Center (LMIC) gleans supplies are still on a general decline, with all sheep and lambs down 0.9 percent and a breeding flock 1.2 percent lower. 

Productivity, based on the lambing percentage of 106.9 percent, has held steady near the 107 percent average mark during the last 10 years. Looking into 2023 and 2024, there are three main factors LMIC is expecting to influence the forecast for sheep and lamb inventory levels and prices. They are drought and feed, lamb demand and lamb imports.

Drought and feed

Drought is expected to persist into 2023 with much of the western U.S. continuing to grapple with drought effects on feed and forage supplies, especially hay. 

The Feb. 9 Drought Monitor map shows extreme and exceptional drought, D3 and D4, respectively, stretching through a large portion of Kansas and Oklahoma. Pockets of D3 and D4 drought are also seen in parts of northern Montana, Iowa, Nebraska, Texas, Wyoming and even over to Nevada, Utah and Oregon.

The continued drought only worsened the hay supply situation. 

Nationally, Dec. 1, 2022, hay supplies were down nine percent from last year and more than six percent below the previous record low. Alfalfa production decreased 2.6 percent due to a record low number of harvested acres.

A similar story can be said for other hay production, which declined 8.6 percent due to smaller yields and lower harvested acres. The lower hay production has led to record hay prices, which has limited available feed and forage. 

This is expected to increase feed costs and potentially limit profitability in 2023 and 2024.

Lamb demand

In 2022, per capita lamb consumption at the retail level was 1.28 pounds per person, which is the second highest since the early 1990s, behind 1.36 pounds per person in 2021. 

LMIC is expecting per capita lamb consumption to be about 1.27 pounds per person in 2023 and 1.23 pounds in 2024, largely based on stabilizing lamb demand, post-pandemic.

While per capita consumption levels are expected to remain above 1.2 pounds per person, the lamb cutout value has also tracked above typical levels, an indication of lamb demand strength.

At the start of 2022, the lamb cutout value was above typical levels at $618 per hundredweight (cwt), but gradually moved lower to about $475 at the end of the year. At the start of 2023, the lamb cutout value has been averaging $465 per cwt, more than $100 above typical levels.

Relative strength or weakness in the lamb cutout value moving through 2023 will be an indicator of lamb demand and a factor underlying slaughter and feeder lamb prices.

Lamb imports

 In 2022, total lamb imports were 278 million pounds, up 5.2 percent from last year. Australia accounted for three-quarters, or 74.8 percent, of total lamb imports in 2022 at 207.5 million pounds, an increase of 6.2 percent.

Imports from New Zealand increased by less than one percent to 64.9 million pounds, accounting for 23.4 percent of total imports last year.

As of this writing, Australia was projecting record lamb production of 567,000 tonnes, or 1.25 billion pounds, in 2023, which they expect to flow into higher export levels.

The U.S. market will likely be a destination of where Australia will be looking to send lamb in 2023. This is expected to keep lamb imports in 2023 at a level similar to the 278 million pounds imported in 2022.

Based on the points discussed above, LMIC is forecasting sheep and lamb slaughter levels to hold about even with 2022, just under 2.1 million head. Producers are likely to continue facing drought-related impacts, which will drive production decisions. 

In 2024, sheep and lamb slaughter are forecasted to decline less than one percent to just over two million head, which is based on the expectation the breeding flock will decrease about one percent, but the lambing percentage will hold steady around 107 percent yielding a lamb crop just below 3.1 million head on Jan. 1, 2024.

Feeder and slaughter lamb prices in 2023 and 2024 are expected to track closer to pre-pandemic levels. Feeder lamb prices, according to the three-market average in Colorado, South Dakota and Texas, are forecast to be $181 to $189 in 2023, with marginal improvements in 2024 to $181 to $193 per cwt.

Slaughter lamb prices –  national negotiated live – are forecast to range from $137 to $145 per cwt, depending on the quarter. Prices are expected to improve in 2024 with a range of $145 to $157 per cwt.

The American Sheep Industry Association originally published this article in the their March issue of  Sheep Industry News, which can be accessed at sheepusa.org.