TWIN FALLS • The last six months have not been kind to sheep producers.
“It’s a classic situation,” explained Erica Rosa-Sanko, an agricultural economist with the Livestock Marketing Information Center in Denver, Colo. High feed costs and the shortage of forage because of the widespread drought aren’t helping producers, but the real problem is too many overweight lambs.
It may be comforting for producers to blame high imports for the oversupply, but Rosa-Sanko said domestic production is to blame. According to data from the U.S. Department of Agriculture released Oct. 12, total lamb imports, year-to-date (January to August) are down 94 percent from a year ago. And the 2011 figures were down from 2010.
Unlike cattle that can wait in the feedlot until prices improve, lambs need to slaughtered when they have reached market weight. Unfortunately, many slaughter lambs were allowed to remain in feedlots longer than they should have thanks largely to much lower slaughter lamb and wholesale lamb prices.
At the same time, last winter’s mild conditions allowed fed lambs to gain well. As a result, the U.S. lamb industry is struggling with record heavy slaughter lamb and yearling weights, which is putting even more pressure on prices.
“The backup of slaughter-ready lambs to buildup and its just going to continue to get worse,” Rosa-Sanko said.
As of late May, federally inspected dressed weights for slaughter lambs and yearlings averaged 77 pounds, 4 lbs. heavier than last year and well above the 2006-2010 average of 72 lbs. Seasonally, lamb dressed weights peak in the spring, Rosa-Sanko said, and then decline through the year. That has held this year, with lamb weights down to about 75 lbs. in early September, 6 lbs. lighter than the peak of 81 lbs. set in early May.
The national lamb carcass price peaked in September 2011 at $377.27 with an average weight of 66 lbs. In comparison, the national lamb carcass price was $253.76 last September when lamb weights were 9 lbs. heavier.
LMIC also calculates a feeder lamb price based on three markets. That price was $102.13 last month, down from $217.26 last September.
Although the last six months have been grim, Rosa-Sanko said there is good news on the horizon. Even though it can take a long time to work a backlog of heavy lambs through the system, once those lambs are slaughtered, weights should return to more normal range.
Although slaughter weights are up, slaughter is down 3 percent from 2011. Even though lamb production was up 1 percent this year, it is still 8 percent less than 2010.
Fewer lambs and more normal weights will improve quality and dressing percentage, allowing packers to pay more for feeder lambs. LMIC is forecasting feeder lamb prices to return to the $140 to $160 range in 2013.
And while the general market has struggled lately, some niche markets in the Pacific Northwest and East Coast that market directly to consumers are doing quite well.
The ground lamb market has been holding up well and providing a demand base that the industry can build from. Rosa-Sanko also expects legs and racks to do well this holiday season, as prices will be competitive with roasts and other prime beef cuts.
“There is good news,” Rosa-Sanko said, “but the industry has to work through this backlog of overfinished lambs.”