JULIE STEPANEK SHIFLETT, PH.D.
Juniper Economic Consulting
The American lamb industry is challenged to encourage consumers to enjoy lamb throughout the year, not just on special occasions, such as Easter. One successful in-road has been lamb promotion of summer grilling items. From lamb loin chops to gourmet burgers, lamb demand gets a summer boost.
In early June, the feature activity for lamb jumped 35 percent weekly. While loin chops are traditionally featured as a summer grill item, shoulder blade chops – a more affordable substitute – are receiving more ad space. In early June, the U.S. Department of Agriculture’s Agricultural Marketing Service reported that lamb breasts, shoulder blade chops and mutton stew meat were the most widely advertised items among the lamb features.
While the retail featured price of loin chops fell year-on-year to $9.78 per lb., the shoulder blade chops gained 9 percent year-on-year in the first half of June to $5.89 per lb.
The loin is typically at its highest during the summer months, and this year looks to follow suit. In May, the loin, trimmed 4×4, gained 4 percent to $550.83 per cwt., yet was 4 percent lower than last May.
The wholesale composite (gross carcass value) averaged $377.43 per cwt. in May, up 1 percent monthly and down 6 percent year-on-year. This year, meat prices are coming down from a five-year high observed last summer as lamb availability eases. All primals gained monthly, yet all posted values lower than a year ago.
For May, the shoulder, square-cut, averaged $282.12 per cwt., up 3 percent monthly and down 15 percent year-on-year. The rack, 8-rib, medium, averaged $847.95 per cwt., up 1 percent monthly and down slightly year-on-year. The leg, trotter-off, averaged $371.33 per cwt., similar to April and down 5 percent year-on-year. Ground lamb averaged $565.77 per cwt. in May, up 1 percent monthly and up 7 percent year-on-year. Further fabrication of primal cuts adds value. By June 1, the rack, roast-ready, frenched, special (cap-off) averaged $21.32 per lb.
In the five months through May, lamb harvest was up an estimated 4 percent to 767,308 head year-on-year. Estimated lamb production totaled 50 million lbs., up 1 percent year-on-year. The number of head harvested is higher, but 2 percent heavier carcass weights at 72 lbs. also contributed to increased production.
The Livestock Marketing Information Center and AMS reported that lambs on feed in Colorado feedlots has been higher this year compared to last year. Reportedly, dry conditions in areas of the western United States and attractive returns to feeders led to higher feedlot numbers.
Freezer inventory of lamb and mutton in May was the highest it’s been in nearly two years. Lamb and mutton in cold storage has been increasing this year, to 34 million lbs. in early May, up 19 percent monthly and up 19 percent year-on-year.
In the first trimester, lamb imports were down 5 percent year-on-year to 70.0 million lbs. Australian imports were down 5 percent to 52.6 million lbs. and New Zealand imports were down 4 percent to 17.0 million lbs.
Lamb imports continued to outpace domestic supplies from January to April, accounting for an estimated 58 percent of total available lamb.
In May, close to 8,000 head of lambs were reported in the direct feeder lamb trade. Compared to an auction, direct trade is a private negotiation between buyer and seller. In California, 6,600 head traded at 100 lbs. for $190 to $195 per cwt. Another 1,000 traded out of Texas at $210 per cwt. for 70 lbs.
Sixty- to 90-lb. feeders at auction averaged $203.16 per cwt. in May, down 5 percent monthly and down 13 percent year-on-year.
Summer can be an unpredictable period for the lamb industry. As the American Lamb Board explained recently: The supply of market-ready lambs in the spring can exceed demand and thus lambs sit in feedlots, gaining weight (5/24/18). The resulting larger, “overly-fat carcasses are common in the months of April to July, which results in inconsistent product to the consumer.”
In April through July, up to 40 percent of lambs harvested can weigh more than 170 lbs. live (ALB, 5/24/18). ALB reported that the traditional market typically prefers lambs in the 120 to 160 lb. range.
Summer slaughter lamb prices are sensitive to the availability of supplies in a highly seasonal lamb industry. During the summer, supplies get tight. This year, slaughter lamb prices at auction exhibited seasonal gains through the spring, but in other years prices would have already begun their summer downward trend.
Slaughter lamb prices at auction averaged $160.21 per cwt. in May, up 5 percent monthly and down 14 percent year-on-year.
Slaughter lamb prices on formula were up 3 percent monthly and down 14 percent year-on-year. Heavier weights of formula lambs this year compared to last year likely put some downward pressure on prices, as have ample supplies of slaughter lambs and lower pelt values.
Slaughter lamb prices on formula averaged $275.50 per cwt. in May for an 88.28 lb. carcass (177 lbs. live). The live-equivalent price was $138.32 per cwt.
Live, negotiated slaughter lamb prices averaged $153.06 per cwt. in May, up 3 percent monthly, down 5 percent year-on-year. Weights averaged 163.88 lbs., down 3 percent for the month.
Unshorn supreme pelt prices have fallen by about 30 percent in a year. Last May the unshorn supreme pelts brought $7.50 to $10.50 per piece. This year, the low side fell sharply: $2.50 to $10.19 per piece.
Ramadan boosts sales at the non-traditional auction at New Holland Sales Stable in Lancaster, Pa. By many accounts, the Muslim holiday of Eid-al-Adha – the Festival of the Sacrifice in late August – incites higher price premiums, but Ramadan attracts a significant volume at auction.
Reportedly, about half of all lambs sold at New Holland are hair sheep. Wool breeds are generally preferred, but hair sheep are gaining in popularity. When hair sheep were first introduced at the auction, they sold at a price discount, but now bring equal money.
Slaughter lamb prices at the New Holland Sales Stable auction in May averaged $203.78 per cwt. for 90-110 lb. lambs, 13 percent lower year-on-year. Lambs weighing 110-130 lbs. brought an average $203 per cwt., also down 13 percent year-on-year. Prices were likely lower due to the concurrent lower trend in the traditional market.
According to LMIC, “sizeable year-over-year supply increases in the production system are impacting slaughter lamb prices compared to in 2017,” (5/2018). LMIC continued: Beginning in late April of last year, slaughter lamb prices had started a dramatic surge (rising more than 20 percent in about six weeks). LMIC explained that we will not likely see a repeat this year, but prices could still gain above 2012-16 average levels.
In mid-May, LMIC reported that weights of slaughter lambs remained normal this spring. There was not an abundant amount of over finished lamb sitting in feedlots waiting for harvest, as has occurred in past years.
LMIC estimated in mid-May that third-quarter slaughter lamb prices on a carcass basis could rise, to an average $310 to $316 per cwt., but down 4 percent year-on-year.
Overall, domestic supplies are ample this year, but a portion of lambs (formula lambs) are on the heavier side and imports are lower, helping to give lambs a summer lift.
In mid-May, LMIC estimated that 60-90 lb. feeders could average $185-$193 per cwt. in the third quarter, up 11 percent year-on-year. LMIC expects that the 2018 lamb crop will be lower than a year ago and therefore, a tighter supply could put upward pressure on lambs this summer and fall.
The AWI Wool Market Report described “an epic week at Australian wool auctions as the 2,000 Australian cent Eastern Market Indicator barrier provided next to no resistance to the extremely bullish market forces in motion,” (Australian Wool Exchange, 6/1/18).
On June 1, the AWEX EMI closed at 2,027 ac/clean kg, 2 percent higher weekly and 38 percent higher year-on-year. In U.S. dollars the EMI averaged 1,533 usc/kg.
This USD EMI figure defied exchange rate predictions and “underscores the fact that exponentially increasing demand is the key price determination factor in play at present and is the undisputable market driver,” (AWEX, 6/1/18).
Australian Council of Wool Exporters and Processors Executive Director Peter Morgan said the current boom – now into its third year – looks more sustainable this time around.
“In the past, a period of good prices rarely went beyond a couple of years, this looks a bit different,” he said (WoolNews.net, 6/2018). Dr. Morgan explained wool demand growth stems, in part, from expanded markets for sportswear and baby clothes. “Wool is an incredibly healthy product and there is growing demand for next-to-skin garments for babies with eczema.”
U.S. clean wool prices in May posted all-time highs, up 48 percent year-on-year. This unparraled gain is symptomatic of stable global supplies and strong demand, propelled by strengthening economies worldwide. The price gains have been widespread, across microns 26 and finer.
U.S. Fleece States wool (West Coast) brought $6.57 per lb. clean for 18 micron in May, 20 micron received $6.03 per lb., 22 micron averaged $5.68 per lb., and 24 micron brought $5.16 per lb.
Territory wool (western wools excluding Washington, Oregon, and California) averaged $6.57 per lb. clean for 19 micron, 21 micron saw $6.03 per lb., and 23 micron saw $5.52 per lb.
In Texas and New Mexico, 18 micron wools averaged $6.17 per lb. clean, 20 micron brought $6.13 per lb. clean.
Looking forward, typically high prices incite a supply response. However, inventory supply gains are limited by current dry conditions in Australia. In the United States, multiple constraints ranging from predator loss to variable returns can curb inventory growth.
That said, wool demand is historically strong (as are prices) and that could very well tilt the sales in wool growers’ favor in the near future.