(April 1, 2009)  The Islamic Profet Muhammad’s birthday marked the Islamic holiday Mawlid al-Nabi on March 6. Passover begins April 9, followed by the Western Roman Easter on April 12 and Eastern Orthodox Easter on April 19. Lambs of all weights will be in high demand for the holidays. Most lambs purchased for the holidays will be bought in large-scale commercial supermarkets and wholesale clubs, but many won’t. Often lambs consumed by ethnic groups are bought directly from livestock auctions or from small, mom and pop butchers.

This ethnic lamb market is a significant and growing component of the sheep industry that mostly falls outside the mainstream, commercial market yet it is not formally documented. An estimated 800,000 head of sheep and lambs were channeled through the ethnic market last year, or 32 percent of commercial slaughter. This estimate is about 200,000 head less than 2007. The commercial market, with its relatively high prices last year, was likely able to pull some lambs away from ethnic channels. 

Estimated ethnic lamb numbers are pulled from two sources: an estimated 10 percent of state slaughter and the portion of the lamb crop – less losses, replacements and exports – not captured by commercial slaughter numbers. 

In 2008, the value of the ethnic market rose $17 million annually to $89 million due to a $6/cwt. jump in price. The ethnic market contributes an extra 16 percent to the value of national lamb and mutton production. This sum goes directly into the pockets of producers.

Prices at two auctions, San Angelo, Texas, and New Holland, Pa., were used to value live lambs in the ethnic market. It is thought that these two markets channel much of the lamb into the ethnic market.

The growing ethnic market likely is changing the face of feeder-lamb marketing. Across the United States some auction markets are increasingly known as ethnic markets. Most lightweight lambs (what can be called feeders) going through Producers Livestock Auction in San Angelo will not be finished on corn, but go directly to slaughter.

According to Benny Cox, sheep and lamb manager at Producers Livestock Auction in San Angelo, lamb prices were already hitting the “Easter highs” in January in San Angelo. He commented that tighter supplies have met with strong ethnic demand.

Between January and February, feeder-lamb prices in San Angelo jumped from $115.50/cwt. to $120.33/cwt. Perhaps more surprising is that prices were nearly $1/cwt. stronger year-on-year. Forty-lb. to 60-lb. lambs were priced 4-percent higher year-on-year and 60-lb. to 90-lb. lambs were up 3 percent.

In one example, 70-lb. to 90-lb. lambs went for $125/cwt. to $130/cwt. It is thought that feeders will not put lambs on feed at these prices.  

The upward pressure on prices could be due to lower supplies in Texas coupled with strong demand from the ethnic market. Most lambs bought in Texas are shipped to the high-demand East Coast. One buyer in the San Angelo market ships to his plant in the Houston area as well as his New Jersey plant.

It is expected that the ethnic demand will remain strong through the Easter holidays and then drop off sharply. Given today’s weak economy, the strong ethnic demand might be because many lambs are purchased for the celebration of a particular holiday. Lamb purchased for holidays will be purchased and are not as price sensitive.

Commercial Feeder-Lamb Market Lower
In February, 18,600 head were reported in the direct feeder-lamb trade at an average $102.38/cwt. for 110 lbs. In late February, 3,000 lambs were shipped from California at weights ranging from 135 lbs. to 140 lbs. for $94/cwt. Feeders are likely trying to recover losses from the last two years and this particular sale might have passed some loss onto the producer. Overall, feeder-lamb prices were about $1/cwt. lower year-on-year in direct trade.

Corn softened 23 cents/bu. in February to $4.13/bu. – down from the 2007/2008 season average of $4.45/bu. Corn might come down further. The U.S. Department of Agriculture (USDA) forecast is for $3.65/bu. to $4.15/bu. for the 2008/2009 season through August (2/12/09).

USDA reported in mid-February that in the first quarter of 2008/2009, corn used for fuel ethanol was up 39 percent from the same quarter in 2007/2008, as new plants have come on line. Corn used for fuel represented 24 percent of total use in the quarter, up from 16 percent in the first quarter of 2007/2008.

USDA forecasted that higher corn prices would likely remain for a while (USDA. “Agricultural Projections to 2018,” 2/2009). The livestock industry will adjust, but adjustments will require lower production. The bright side is that producer returns – which were squeezed in 2008 – will see some relaxing in the next few years. Even more promising is that USDA forecasted that higher feed costs and consequent reduced production would push producer livestock prices upward toward 2020.

Commercial Market Slowing
In the commercial market, softer retail demand is likely why weekly slaughter levels dropped to historic lows and wholesale values were down to levels not seen since mid-2007. 

In the first two months of the year, slaughter numbers were down 11 percent year-on-year and production was down 10 percent. Slaughter weights were rising, but not unlike 2008 when average weekly kill weights of 145 lbs. were seen.

Lamb and mutton imports were down 10 percent last year with lamb imports alone down 13 percent to 139 million lbs. Australia’s lamb imports were down 17 percent annually and New Zealand’s imports were down 3 percent.

Lamb and mutton exports totaled 12.3 million lbs. in 2008, up 32 percent from 2007.
Slaughter ewe exports to Mexico totaled 12,693 in January and February, down from 20,905 a year ago. Slaughter ewe prices averaged $29.73/cwt. in the first two months of this year, down $10/cwt. year-on-year.

Slaughter-Lamb Prices Gain
Between January and February, slaughter-lamb prices at auction gained an average 4 percent to $96.75/cwt. – 0.5-percent higher year-on-year. Equity Electronic auction recorded the highest February value at $101.09/cwt. followed by the Intermountain Region at $100.13/cwt., Kalona, Iowa, averaged $98.63/cwt. and Sioux Falls, S.D., reported $94.81/cwt.

In February, formula slaughter-lamb prices on a carcass and live basis were higher than February 2008 and its five-year average although weaker than January. Formula live prices averaged $98.90/cwt., down from $103.10/cwt. in January.

February formula slaughter-lamb prices averaged $200.01/cwt. on a carcass basis, down from $207.50/cwt. in January. Formula slaughter-lamb prices for 55-lb. to 65-lb. carcasses dropped from $203.06/cwt. in January to $195.27/cwt. in February. Sixty-five lb. to 75-lb. carcasses dropped from $210.34/cwt. to $197.70/cwt.

Wholesale Market Softened
In February, packer margins were squeezed as wholesale prices and pelt prices weakened. Between January and February, wholesale values, including processing and packaging costs, dropped 3 percent to $216.35/cwt. – down 4 percent year-on-year.

The carcass-to-cutout (wholesale) price spread dropped $3/cwt. in February to $3.18/cwt. – down 81 percent from 2008. The live-to-carcass price spread was also down in February by $5/cwt to $33.34/cwt., but still 20-percent higher from last year. These numbers might be a sign that in February resistance at retail began to trickle back through packers. Wholesale prices continued to soften, but carcasses held up.
The eight-rib rack, medium, fell 3 percent monthly to $521.66/cwt. The trimmed loins, 4x4, also weakened by 4 percent to $340.46/cwt. The leg, trotter-off, also weakened by 4 percent in February to $262.38/cwt. The shoulder, square-cut, weakened by 0.5 percent to $207.54/cwt.

Fall clips dropped from $6.60 in January to $6 in February, down $1.13 from last February. No. 1 pelts dropped 30 cents in February to $5, down $1.19/cwt. year-on-year.

East Coast carcass prices softened by nearly 1 percent in February from $232.40/cwt. to $230.63/cwt.

Lamb Industry Poised  for Growth (Really!)
The sheep industry could very well enjoy steady expansion as the economy recovers due to a confluence of factors. First, consumers will increasingly watch their weight through choice of leaner meats (like lamb) and reduced portion sizes (like lamb, not like beef). Interestingly, I’ve read that investment in miniature cattle is on the rise.

Another factor is the rising number of single households. In 2006, roughly 27 percent of households were one-person: elderly, single professionals and recent divorcees. Martha Stewart publishes Everyday Food in which a regular feature is “Dinner for One.” She has never featured larger cuts of beef and is much more likely to feature a lamb loin chop.

Third, consumers will increasingly demand special attributes in their meat, which will command higher prices. Lowell Catlett, Ph.D., dean and chief administrative officer of the College of Agriculture at New Mexico State University commented that consumers increasingly live in “dream space” — where wishes need to be fulfilled to achieve self actualization (High Plains Journal, 2/16/09).

Whether overseas in Africa and just able to introduce meat into your diet or a middle class family in this country, consumers will always want more. Lamb offers more than just meat. Sheep are good land stewards and produce wool. In this difficult time, it is important that the lamb industry not lose sight of the seemingly little things that it does well — like produce a safe product. Between 2007 and 2008, the number of beef recalls doubled. This had the effect of reducing beef demand by 3 percent (Mintert, J. et al., 2008).

Admittedly, meat foodservice sales are down. Consumers are eating out, but at fast food chains and consumers are eating at home. It’s a good time to increase convenient lamb cuts and ready-to-eat meals at the grocery level. 

The CRF (large Australian lamb processor) general manager of demand, supply and marketing, Malcolm Harvey, commented, “The financial crisis has certainly hit the ‘white tablecloth’ restaurant trade in the United States, with one major lamb importer reducing his order in the last month from about 200 cartons of lamb a week to 80 for heavy racks,” (Stock and Land, Australia, 2/18/09).

Harvey reported that in response to the economic slowdown, some lamb is being marketed slightly differently into the United States, with a “$10 lamb pack” hopefully to entice those more cost-conscious consumers. “We are looking to reduce the total weight and therefore the price. The pack may include either two lamb shanks, a rack with four ribs instead of eight, half an easy calve leg or four loin chops,” he said (Stock and Land, Australia, 2/18/09). 

Editor’s Note: Julie is open to comments and questions and can be reached by e-mail at juniper@netecin.net or by phone: 970-487-3017.