|Increased Production Good Sign of Successful Easter Sales
(June 1, 2006) The sheep and lamb industry went into Easter with high levels of stocks and increased production. It is not known which portion of stocks were cleared out over Easter, but by all accounts, distributors will clear out frozen stock before fresh product and reportedly, a lot of featuring over Easter helped to move product.
Year-to-year lamb and mutton production increased in the month preceding Easter. An average 60,671 head/week were slaughtered in the four weeks leading up to Easter, compared to 60,391 head/week in the four pre-Easter weeks last year. This year, increased slaughter numbers and heavier dressed weights (one lb. heavier at 71 lbs.) meant greater pre-Easter production, 17.2 million lbs. In the first four months of 2006, lamb and mutton production rose nearly 2-percent annually, from 61.9 million lbs. in 2005 to 63 million lbs.
In the first four months of 2006, 44.5 million lbs. of lamb and mutton were in cold storage compared to 26.4 million lbs. during the same period in 2005. At the beginning of April, 10.9 million lbs. were in cold storage compared to 7.6 million lbs. last April.
In mid-April, the U.S. Department of Agriculture (USDA) announced plans to purchase up to $5 million of lamb roasts to be donated to federal food and nutrition programs. It is thought the program will help boost prices. Racks and loins will likely be promoted over Mother’s Day weekend and into the summer. Prices for these cuts have been soft lately so increased promotion attention to them should help boost overall carcass value.
Lamb Market Mixed in April
Feeder-lamb prices in direct trade gained 17 percent in April as new-crop lambs became available and averaged $94.92/cwt. Corn prices weakened in the first quarter of 2006 partially because a bumper crop is expected this year. Reportedly, Corn Belt farmers made excellent progress in planting this spring (AgJournal, 4/28/06). Corn prices jumped 5 cents/bu. in April. Corn prices averaged $2.02/bu. in February, $2.06/bu. in March and $2.11/bu. in April. By comparison, corn prices averaged $2.05/bu. during the 2004 to 2005 season and $2.50/bu. during the 2003 to 2004 season (Livestock Marketing Information Center).
Live slaughter-lamb prices lost 12 percent in San Angelo between March and April to land at $65.63/cwt. Prices fell almost 5-percent nationally, averaging $69.91/cwt. in April. National prices were 34-percent below last April’s average.
Formula lamb prices were mixed with the heaviest weights gaining, while the lighter-weight categories weakened. Formula lamb purchases by carcass weight for 55-lb. to 65-lb. carcasses fell 7 percent, ranging from $135.46/cwt. to $179.77/cwt. in April. Carcasses weighing 65 lbs. to 75 lbs. fell 4 percent, ranging from $149.28/cwt. to $155.10/cwt. The average price for 75-lb. to 85-lb. carcasses ranged from $154.18/cwt. to $165.67/cwt., falling 5 percent from March. Prices for 85-lb. to 100-lb. carcasses gained 2 percent, ranging from $126.13/cwt. to $149.50/cwt. in April.
In February 2006, total lamb imports fell 1.2 percent, year-to-year, to 10.6 million lbs. Australia’s imports were up 6 percent, year-to-year, to 7.2 million lbs. and New Zealand’s imports were down 14 percent to 3.3 million lbs. In April, Australian lamb exports to the United States were 2,432 tonnes (5.4 million lbs.) – 26-percent below April 2005 shipments (Meat and Livestock Australia (MLA), 5/3/06).
Total lamb availability (imports and domestic production) in the United States in January was up almost 21 percent, year-to-year, at 22.94 million lbs. (last data available). The year-to-year increase was due to both increased domestic lamb production and stronger imports.
U.S. mutton imports were 4.5 million lbs. in February, up 70 percent from last year. In April, mutton imports from Australia were 829 tonnes (1.8 million lbs.), 28-percent lower than last April (MLA, 5/3/06).
Lamb and mutton exports jumped 4 percent in volume (936 MT) and 78 percent ($3 million) by value in January and February compared to the first two months of 2005. In the first four months of 2006, live ewe exports to Mexico were up 45 percent to 36,785 head.
Leg Supported Meat Market in April
Carcass prices lost an average 1.4 percent in value in April. Fifty-five lb. to 65-lb. carcasses ranged from $183.26/cwt. to $195/cwt.; carcasses between 65 lbs. and 75 lbs. averaged $173.69/cwt. to $179.50/cwt.; 75-lb. to 85-lb. carcasses averaged from $165.87/cwt. to $173.75/cwt.; and carcasses 85 pounds and heavier averaged $138.67/cwt. to $155/cwt.
Although most wholesale cuts lost value in April, the leg made a substantial gain, which helped strengthen the gross carcass value. The gross carcass value gained 1.5 percent in April to land at $217.45/cwt. However, the gross carcass value has been generally trending downward for the past 13 months.
The leg gained nearly 8 percent in April to land at $230.97/cwt., but it was still almost 20-percent lower than last April. The trimmed loins lost almost 2 percent, averaging $320.74/cwt. in April. Shoulders lost nearly 4 percent in value to land at $145.67/cwt. and the medium, eight-rib rack lost nearly 3.11 percent to average $542.13/cwt.
As anticipated, the leg often loses value after Easter so packers and breakers try to push cuts such as the racks and loins to balance the carcass value. The rack is often popular during Mother’s Day, but it remains to be seen whether it will see a seasonal strengthening.
Pelt prices made some gains between March and April. Fall clips held steady at $6; however, No. 1 pelts rose from $5 to $5.13 in April, and No. 2 pelts gained $0.13 from $4 in March. No. 3 pelts held at $2.75 and No. 4 pelts remained steady at $2 in April.
Exchange Rates Volatile
The value of the U.S. dollar in relation to foreign currencies is crucial to the lamb and wool industry. A relatively weak U.S. dollar means imported lamb becomes relatively more expensive for U.S. importers. Conversely, a weak dollar means that it takes foreign wool buyers less foreign currency to buy U.S. wool – making U.S. wool more competitive in international markets.
For the last year, the U.S. dollar has strengthened relative to the Australian and New Zealand dollars. Through the end of March, the Australian dollar was down, year-to-year, by 7.5 percent to 72.6 cents USD/AUD and the New Zealand dollar was down almost 13.2 percent to 63.4 cents USD/NZD. However, since March, the U.S. dollar has been weakening. Between March and early May, the USD/AUD exchange rate gained by 5.5 percent and the USD/NZD rate gained by 1 percent. It is unknown whether this is a blimp or a new trend, but something to watch for as foreign wool buyers enter the market and domestic lamb continues to compete against imported product.
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.