|Feeder-Lamb Prices Forecasted at Five-Year Low
(July 1, 2007) Feeder-lamb prices have been pushed and pulled from generally three sources. The demand for slaughter lambs can change the price offered for feeder lambs. In addition, the effect of feed costs and feeder-lamb supplies can mean a lower or higher price for them for the same offered quantity.
Lamb demand at retail has been relatively strong, yet it appears that higher feed costs have put a downward pressure on feeder-lamb prices, perhaps, at times, outweighing the price-increasing effect of tight supplies.
In early June, the Livestock Market Information Center (LMIC) estimated that 60-lb. to 90-lb. Texas feeder-lamb prices could range between $101/cwt. and $104/cwt. in the third quarter and between $100/cwt. and $104/cwt. in the fourth quarter (6/5/07). Recent prices in these quarters have been higher. LMIC reported prices in 2003 averaged $108/cwt., $120/cwt. in 2004, $130/cwt. in 2005 and $105/cwt. in 2006. Feed costs may be putting pressure on prices.
Feeder-lamb prices have generally trended upward since 1990, but with some periods of downturns. The downturns in feeder-lamb prices from March 1997 to March 1999, for example, corresponded with relatively high corn and hay prices, with some lag.
In May, despite relatively tight supplies, which would put an upward pressure on prices, feeder-lamb prices were likely feeling the brunt of higher feed costs and perhaps insufficient support from the fed lamb and meat market.
Corn prices jumped up to $3.48/bu. in May – the highest level seen since the 1995/1996 season. Alfalfa was up to $144/ton and other types of hay was up to $116/ton — also record highs (LMIC, 6/6/07).
In the first five months of 2007, 29-percent fewer feeder lambs were traded than a year ago – 108,609 head – and prices were up 7 percent annually to $101.41/cwt. It appears tighter supplies are having some affect on prices. By comparison, prices between January and May averaged $99.94/cwt. in 2003, $104.84/cwt. in 2004 and $117.40/cwt. in 2005.
The number of feeder lambs in direct trade increased 18 percent between April and May to 34,600 head, weights fell 4 percent to 95.15 lbs. and prices jumped 4.4 percent to $104.46/cwt. By comparison, last May, 70,700 head traded at $92.44/cwt.
By mid-June, the old crop of lambs will have been slaughtered, but as Ron Cole, of the Agricultural Marketing Service, explained, there is “nothing behind them,” (6/6/07). Supplies in Colorado feedlots are very low. However, in early June, feeder-lamb prices began to rise in California due to supply pressures.
It is puzzling, but during the week of June 1, one-third of the carcasses sold were 85 lbs. and heavier. Due to high feed costs, I would think that feeders would want to sell slaughter lambs at relatively lighter weights; however, if weights were getting heavier, it might mean purchases of slaughter lambs were down. Cold storage levels jumped one million lbs. in May to more than 17 million lbs. – the highest level recorded for May since 1971.
In the Markets
Slaughter-lamb prices at auction fell from $97.52/cwt. in April to $96.68/cwt. in May. Prices were mixed with some strengthening and some weakening across the country. The highlight was a 6-percent gain in the Midwest computer auction to $96.31/cwt. However, this level was still lower than prices observed in Iowa, $106.81/cwt., even after an 8-percent monthly drop.
Slaughter-lamb prices on formula gained 3 percent in May to $188.78/cwt. The lighter-weight lamb, 55-lb. and lighter, gained more than 7 percent to $200.67/cwt. while the carcasses weighing 85-lb. and heavier gained 1.5 percent to $179.54/cwt.
In early June, LMIC estimated that Western Direct slaughter-lamb prices by carcass weight in the third quarter could range between $187/cwt. and $191/cwt., 2.5-percent lower than a year ago (6/5/07).
Pelt prices held steady in May with the exception of Imperial fall clips, which were 25 cents higher at $8.50. A few spring pelts traded at $8. Pelt trade consisted of 26 percent wooled pelts, 70 percent No. 1 pelts and the remainder No. 2’s, 3’s and 4’s.
Slaughter ewes at San Angelo fell from $47.56/cwt in April to $39.30 in May. In May 2006, slaughter ewes averaged $40.90.
The gross carcass value gained 0.25 percent to $245.66/cwt. in May. Gains in loins and shoulder offset the weaker leg. The 7-percent drop in the leg, trotter-off, after Easter to $254.08/cwt. and the 0.5 percent drop in the eight-rib, medium, rack to $540.59/cwt. tempered wholesale gains. However, the trimmed, 4x4, loins jumped 12 percent in May to $4,446.63/cwt., and the shoulder, square cut, gained 3 percent to $164.22/cwt.
At 182,769 head, May slaughter was running 6-percent below a year ago and production was 5-percent below last year. Lamb and mutton production held steady between April and May at 13.7 million lbs., lower than the 14.4 million lbs. produced last May. However, live weights climbed to 146 lbs. in May, compared to 144.8 lbs. a year ago. Dressed weights were 73 lbs., compared to 72.4 lbs. a year earlier.
Third quarter total supplies were thought to be higher than a year ago. Production is likely to be down, but higher levels of imports could compensate for the drop. In early June, LMIC estimated that third-quarter slaughter could be 1.5-percent lower than a year ago and production would be nearly 4-percent lower (6/5/07). In early June, LMIC forecasted that commercial production in the third quarter would drop 1.6 million lbs. year-on-year to 40.5 million lbs. Dressed weights were estimated at 63.4 lbs., 2.3-percent lower than a year ago (6/5/07).
LMIC forecasted that third-quarter lamb imports would total 45 million lbs., up 9 percent from 41.2 million lbs. a year ago. Thus, total supply in the third quarter was estimated to reach 2.3-percent higher than a year earlier (LMIC, 6/4/07).
If total supply does increase annually in the third quarter, cold storage levels will likely remain high and slaughter and meat prices might remain steady. As it becomes apparent that pastures have improved over the last few years in certain areas of the country and supplies are down, the price of ewe lambs, as well as feeders, may be bid up.
Imports May Slow
At 40.3 million lbs., first-quarter lamb imports were up 5.6 percent compared to last year. Australia’s imports were up 4 percent and New Zealand’s were up 9 percent. Mutton imports were up 3 percent in the first quarter, year-on-year. Australia accounted for 95 percent of the 15.3 million lbs. of mutton imported in the first quarter, up 3 percent from a year ago. The U.S. dollar continued to show signs of weakness, but held mostly steady against the Australian dollar.
We may see a slow down in imports by early fall (late winter in Australia) due to tight supplies in Australia. “Given the severity of the drought and earlier slaughter over the 2006-2007 season, lamb supplies are likely to be considerably tighter this winter than in the last two winters,” (Meat and Livestock Australia 6/1/07).
In early June, LMIC forecasted that lamb and mutton imports might reach 52 million lbs. in the fourth quarter, down 0.4 million lbs. from a year ago (LMIC, 6/4/07).
Live Exports Up
Adult sheep exports to Mexico totaled 9,676 head in April, down from 11,811 head in March and compared to 6,771 head in April of 2006. The Department of Commerce tracked the sale of 10,450 head of lambs and ewes to Canada during the first quarter of the year, compared to 751 head during the first quarter of 2006.
Lamb and mutton exports totaled 1.2 million lbs. in March compared to 2.2 million lbs. in March of 2006.
Three head of sheep were imported in March, none were imported in April.
Editor’s Note: Julie is open to comments and questions and can be reached by e-mail at email@example.com or by phone: 303-619-9975.