LMIC: Lamb Prices Capped by Frozen Stocks
November 30, 2018

Frozen stock of lamb and mutton is approaching the record levels seen in 2015 and having a negative effect on lamb prices according to the Sheep and Lamb Outlook released this week by the Livestock Marketing Information Center.

"The July 2018 Cold Storage report indicated lamb and mutton frozen stock surpassed 42 million pounds, the highest tonnage of the year and similar to burdensome levels in 2015. The overhang has been boosted in part by higher slaughter numbers and heavier dressed weights in the domestic market, but imports also have likely played a role," according to the report. "The lamb cutout (wholesale meat carcass equivalent value) has remained above the lows of 2015, but has struggled in the summer quarter to reach above a year ago. Amidst established consumption patterns in the United States, it seems unlikely lamb stocks will work themselves down in a swift fashion, which will likely lead to capped prices in 2019. After that, slaughter lamb prices are expected to improve in the next year to year-and-a-half with 2020 averaging 1 percent above 2019.

"The latest frozen stocks data (October 2018) showed lamb and mutton 24 percent above 2017's level at 39 million pounds (product weight). That was 26 percent above the five-year average and the second highest month so far this year. Critically, that tonnage is equivalent to nearly 17 weeks' worth of domestic production and 10 percent of annual disappearance. In comparison to other red meat categories, currently, beef stocks also are considered high but represent less than one week of domestic production and 2 percent of projected 2018 annual disappearance. Pork in cold storage was below a year ago in October and represented just more than one week's domestic production and stands at 3 percent of 2018 projected disappearance.

"Increases in lamb consumption are typical in the fourth quarter. However, American consumption patterns are small relative to the overhang that a few months will do little to work down stock levels. At the end of this year, stocks are expected to be the second highest on record, surpassed only by 2015."

Read the full report in the January issue of the Sheep Industry News.

Source: LMIC