Industry Gears Up for Easter
JULIE STEPANEK-SHIFLETT, PH.D.
Juniper Economic Consulting
Easter is the lamb industry’s most important holiday. Leg sales averaged about $1 million weekly last year and spiked to $12 million during Easter – 21 percent of total annual leg sales. About 150,000 lbs. of legs sold weekly and climbed to 2.2 million lbs. during Easter.
The industry is in good shape for Easter, but there is some concern post-Easter.
Meat prices softened in February; however, slaughter lamb prices held as weekly harvest numbers remained low and steady. The number of head sent to market has been restrained by demand at wholesale and retail. This means that weights of market-ready lambs creep up in commercial feedlots, creating a potential quality problem post-Easter.
Feeder Lamb Prices Up
Feeder lamb prices at auction for 60- to 90-lb. lambs have been volatile, but have seen strong recent gains. Last October, the three-market average (San Angelo, Texas, Fort Collins, Colo., and Sioux Falls, S.D.) hit a low of $148.50 per cwt., but has since rebounded 47 percent to more than $200 per cwt. Last October’s average was low, but not nearly as low as the low $100s per cwt. witnessed in mid-2013.
In February, the three-market feeder price averaged $218.50 per cwt., up 6 percent monthly and up 7 percent year-on-year. In San Angelo, prices averaged $202 per cwt. in February, up 7 percent monthly and up 6 percent year-on-year. In Sioux Falls, prices average $235 per cwt., 5 percent higher monthly and one-half percent higher from a year ago. Prices were not reported in Fort Collins.
The U.S. Department of Agriculture has not reported any direct-trade feeder prices in 2017 apart for one, this February. Nine hundred head weighing 115 to 125 lbs. brought $145 per cwt. in Wyoming.
There are typically not a lot of feeder lambs traded during the first quarter of the year because trade occurs primarily in August and September; however, some trade does occur. Western lambs have most likely already been placed in feedlots, but in the early part of the year lambs come off California’s pastures into feedlots, such as those in Colorado, for finishing.
Slaughter Lamb Prices
Slaughter lamb prices are scarce. Sioux Falls slaughter lamb prices at auction for 90 to 115 lb. lambs averaged $143.63 per cwt., up 2 percent monthly and up 8 percent year-on-year.
In live, negotiated trade, prices averaged $141.01 per cwt., up 1 percent monthly and 4 percent higher year-on-year. Live harvest weights crept up to 158 lbs., 3 percent higher monthly and up 11 percent from a year ago.
Carcass-based slaughter lamb prices on a formula/grid were not reported.
Unshorn premium pelts brought an average $8.38 per piece in February, down 6 percent for the month and 13 percent lower year-on-year. The second-highest quality category – superior pelts – averaged $1.19 per piece, down 24 percent monthly and down 68 percent in a year. Many pelts of lower quality received no value, and packers asked feeders and producers to pay for disposal.
Reduced Lamb Market Information
In early March, live, negotiated slaughter-lamb trade was not reported. This means that there were insufficient trades to report prices and volume without compromising USDA guidelines regarding packer/processor confidentiality. Slaughter lamb prices on formula/grid have not been reported for more than a year, but this is the first time since the inception of USDA mandatory price reporting that the live, negotiated series wasn’t reported (except for October 2013 when the government shut down).
Reduced price reporting in the lamb industry is a concern. It compromises the industry’s ability to offer price insurance and puts into question industry efficiency and fair trade practices. The 1921 Packers and Stockyards Act promotes “fair business practices and competitive environments to market livestock, meat and poultry,” (USDA website, accessed 3/8/17). It also “guards against deceptive and fraudulent trade practices that affect the movement and price of meat animals and their products.”
In January and February, half of the market slaughter lambs were traded without price reports. Packer-owned slaughter compromised 21 percent of the market; purchases on formula averaged 29 percent; live, negotiated trades were 10 percent; and auction sales made up the remaining 40 percent.
ASI and the USDA Agricultural Marketing Service are working closely to improve price reporting in the lamb industry.
Wholesale Lamb Market Weakened
The net carcass value (less processing and packaging) averaged $293.92 per cwt. in February, down 4 percent monthly and down 7 percent year-on-year. For the first time since late 2013, the net carcass value slipped below $300 per cwt. Among primals, the rack held steady in February, but the shoulder, leg and loin were all lower.
The 8-rib rack, medium, averaged $698.63 per cwt., steady with January and 1 percent lower year-on-year. The shoulder, square-cut, averaged $279.04 per cwt., down 3 percent monthly and down 3 percent year-on-year. The loin, trimmed 4×4, averaged $520.20 per cwt., down 4 percent monthly and down 1 percent from a year ago. The leg, trotter-off, averaged $333.92 per cwt., down 4 percent monthly and 3 percent lower year-on-year.
Limited carcass lamb prices continued to be reported. Sixty-five to 75-lb. carcasses brought $287.20 per cwt. in February, down 4 percent monthly and 4 percent lower year-on-year. Seventy-five to 85-lb. carcasses averaged $276.33 per cwt., down 5 percent monthly and 4 percent lower from a year ago.
Production, Imports and Forecasts
In the first eight weeks of the year, lamb harvest was an estimated 279,254 head, up 1.5 percent year-on-year. Estimated lamb production was up 2.2 percent at 19.5 million lbs.
Lamb and mutton in cold storage was 20.3 million lbs. in February, down 22 percent monthly and down 57 percent year-on-year.
In 2016, lamb imports increased by 5 percent to 188,054 million lbs. Australian lamb imports were up 9 percent and New Zealand’s, 3 percent lower.
In early March, the Livestock Market Information Center forecasted a sharp contraction in lamb and mutton supplies for the U.S. in 2017. According to LMIC, both U.S. lamb and mutton production and imports could be down this year by 4 percent and 5 percent, respectively. Total available supplies could be down 15 percent to 439.20 million lbs. LMIC reported that per capita consumption could fall from 1.05 lbs. per person to 0.97 lbs.
The sharp contraction in available lamb and mutton supplies can put upward pressure on prices. For the year, LMIC forecasted slaughter lamb prices on a carcass basis could see $281 to $287 per cwt., up 0.9 percent from 2016. Feeder lamb prices could average $182 to $190 per cwt., steady with 2016.
In early March, the Australian Bureau of Agricultural and Resource Economics and Sciences forecasted that Australian lamb prices could rise by 10 percent by July and another 3 percent in its 2017-18 season, beginning in July. Good seasonal conditions and increased inventory rebuilding are thought to support stronger prices. Expanded export demand to the U.S. and Middle East and relatively weak Australian dollar are also expected to support Australian prices.
Wool Market Very Strong
Australian wool market prices have posted strong price gains this year, which promises to improve U.S. wool grower returns this season. Australian Wool Innovation, Ltd. explained in February that the Eastern Market Indicator topped 1,437 Australian cents clean per kg, the highest week-ending EMI level since the commencement of AWEX market reporting in 1994. When expressed in U.S. dollars, the value of the EMI rose to 1,096 U.S. cents per kg clean (U.S. $4.97 per lb. clean).
AWI explained further that “the value gap between wool and other fibers is continuing to expand, showing how the world is willing to pay a premium for wool as a superior natural fiber,” (3/2017). WoolNews.net explained that wool prices in general have gained consistently since 2012, while production has stabilized. This means higher wool prices are not due to reduced supplies, but more likely due to stronger demand. Furthermore, it is not just select wool types that have gained, the “whole clip is sought after,” (3/2017).
AWI reported that “no doubt that demand is largely driving this improved market and has been for about six years.” AWI credits stronger prices to the spotlight wool received on the fashion scene. Fashion shows exhibit wool, setting the stage for the upcoming 12 months for designers from high-end fashion lines to mainstream retailers to add wool to their design palettes.
Given the historically high forward markets for wool, the short to medium term future for wool appears optimistic for woolgrowers, (AWI, 3/2017).
AWI explained that we could see further gains in Australian wool prices in 2017, especially in U.S. dollar terms. This is significant, for U.S. wool prices move in tandem with Australian wool prices in U.S. dollars. As the 2017 U.S. wool clip comes to market, we will hopefully see prices noticeably higher than a year ago.