|Easter Market Surprisingly Good
(May 1, 2010) Business this Easter was very good. A U.S. Department of Agriculture Agricultural Market Service (USDA/AMS) reporter thought this year’s Easter was the best in four to six years. Slaughter numbers were up, prices were up and there was good market channel clearance. It is hypothesized, but unconfirmed, that lamb imports were lower this Easter — January’s imports were down sharply.
In the first twelve weeks of the year, slaughter numbers were up 4 percent year-on-year to 530,046 head, weights were down 1 percent to 141 lbs. and production was up 4 percent to 37.8 million lbs.
This is great news for the industry. Perhaps the commercial sector is attracting more lambs from the non-traditional market, perhaps national estimates on lamb crop and sheep numbers were underestimated.
With every spring comes an edge of undeniable optimism, but this spring is different. Sheep producers are in for a good year. Tight supplies will likely keep supporting prices, but increased demand at retail coupled with higher pelt prices could add stability to already high prices. Erica Rosa, agricultural economist for the Livestock Market Information Center (LMIC), reported, “economic conditions are expected to improve in the U.S. and globally in 2010, and profitability is expected to improve for beef, pork and poultry operations this year,” (AVMA, 4/5/10).
Commercial lamb and sheep demand will likely improve over the year as the food-service sector begins to rebound. The National Restaurant Association’s Restaurant Performance Index (RPI) rose to its highest level in 27 months in February (3/31/10). The index growth was propelled by optimistic sales growth in 2010 among restaurateurs.
“In addition, restaurant operators reported a positive outlook for staffing gains for the first time in more than two years,” says Hudson Riehle, senior vice president of the Research and Knowledge Group for the association. “This bodes well for replacing the more than 280,000 eating and drinking place jobs lost during the recession,” (National Restaurant Association, 3/31/10).
Meat Market Gains
Average lamb wholesale values (gross carcass value) were up 8 percent in March year-on-year and 8-percent higher than February. At $271.28/cwt., the gross carcass value was pushed higher in March by the sharply higher leg. The leg, trotter-off, averaged $320.04/cwt. in March, up 12 percent from February and 15-percent higher than a year ago.
The loins, trimmed 4x4, were also higher at $344.64/cwt., up 7-percent monthly and up 4-percent year-to-year. The rack, eight-rib medium, averaged $51.97/cwt. in March, up 5-percent monthly and nearly 1-percent year-on-year. At $226.56/cwt. the shoulder was up 6 percent from February and 9-percent year-on-year.
East Coast carcass prices gained in the first quarter from $222.80/cwt. in January, $225.28/cwt. in February to $244/cwt. in March, up from $225.92/cwt. a year ago. The carcass market reflects slaughter lambs not captured in USDA reports as well as wholesale demand by those processors that don’t kill lambs themselves.
Feeder-Lamb Prices Up
Feeder-lamb prices in direct trade climbed steadily in the first quarter from $107.25/cwt. in January and $117/cwt. in February to $125.40/cwt. in March. Prices are sharply higher than $109.04/cwt. in March 2009. Weights averaged 105.28 lbs. in February and dropped to 104.50 lbs. in March.
While corn production is at a record high, industrial use is also high, as is the rebounding feed and residual use, which puts upward pressure on prices. In recent months, corn exports have increased competition in the market and thus forced lower prices. Corn is forecasted to range from $3.45/bu. to $3.75/bu. in the 2009/2010 marketing year (USDA’s Economic Research Service (ERS), 3/12/10). In the September-to-November quarter, corn averaged $3.54/bu., sharply lower than the high of $5.33/bu. in June through August 2008.
USDA’s ERS reported that while corn prices have softened somewhat recently, prices received by many farmers are higher than current market rates because farmers locked in higher prices for their 2009 corn crop. Similarly, corn prices paid by feeders might be a function of when corn was purchased.
Slaughter-Lamb Prices High
The combination of tight supplies and seasonal Easter demand likely helped push slaughter-lamb prices to a high $120s/cwt. in March.
Live, slaughter-lamb auction prices jumped from $109.52/cwt. in February to $117.64/cwt. in March, up from $98.08/cwt. a year ago March. While the San Angelo market remained in the low $100s/cwt., the Intermountain region averaged $126.19/cwt. in March.
Slaughter-lamb prices at the Equity Electronic Auction jumped 6 percent in March to $118.96/cwt., up from $98.44/cwt. a year ago March for 1,228 head at an average 130 lbs.
Higher slaughter-lamb prices are likely due to a lower supply, perhaps lower imports as well as lower freezer inventories. At the beginning of March there were 13 million lbs. of lamb and mutton in cold storage. This was 27-percent lower than a year ago March and 11-percent higher than February’s average.
Lower Easter Imports?
It is theorized that part of the Easter boon for the domestic market is due to lower import competition. Australia and New Zealand are facing sharply lower supplies as well as a U.S. dollar that works against imports.
In January, lamb imports were down 19 percent to 10.4 million compared to last January. Australia’s lamb imports were 7.6 million lbs., down 17 percent and New Zealand’s lamb imports were down 22 percent to 2.8 million lbs.
Total mutton imports were up 21 percent to 5.6 million lbs., up 2 percent for Australia and up 64 percent for New Zealand.
In January, lamb and mutton exports totaled 1.8 million lbs. In the first quarter, live ewe exports to Mexico were up 25 percent year-on-year to 21,979 head. The weak U.S. dollar might be helping to boost exports.
LMIC forecasted in early April that second-quarter total lamb and mutton production could be down 4 percent from the first quarter. Domestic production could be up 2 percent, but imports are forecasted to be down a sharp 12 percent.
LMIC forecasted that western direct slaughter lambs on a carcass basis could stay strong in the second quarter and up 3 percent from a year ago. Feeder-lamb prices (60-lb. to 90-lb. Texas) are also likely to stay strong, up 2 percent from a year ago. It is likely that the post-Easter market will be dictated by tight supplies.
Strong ethnic demand continues to put additional pressure on commercial market supplies. Texas feedlots have sold load lots of unfinished lamb into the ethnic market. In one case, an odd assortment of lambs was purchased, from heavier intact males to lighter-weight lambs. Presumably the volume demanded was not found at the San Angelo auction. It is also the case that ethnic buyers will buy loads at the San Angelo auction at relatively low-priced periods and hold them at nearby feedlots.
It is hypothesized that the lower price point, lighter lambs and fresh product are key demand attributes of ethnic markets. It is difficult to discern if the lighter lambs are in demand because of the lower price point or because smaller carcasses are demanded, perhaps for cultural/religious reasons. The ethnic market actively pursues markets to meet its needs, seeking out sheep producers for direct sales. An average 27 percent of sheep producers reported that buyers approached the producer for the trade (American Sheep Industry Association, 2010).