Several factors have indicated a softening in feeder and slaughter lamb prices in the past several months.
Tyler Cozzens, agricultural economist for the Livestock Marketing Information Center, believes that the decrease in prices and demand could be attributed to several macroeconomic factors, including inflation causing a higher cost of living and limiting consumer buying power.
“We’re starting to see that sort of pullback and demand trickle its way down through not only the lamb market, but also just the economy in general,” Cozzens told WLJ.
“Which items do they want? Which ones should they pull back on? I think lamb is one of those. When you look in the meatcase, it’s a little bit more expensive. And so consumers are making these decisions, and it doesn’t take much, and you sort of have this trickle effect start to work its way through.”
The American Lamb Board (ALB) confirms the slowdown in the August Lamb Market Summary, which found inflation has resulted in a decline in incomes and impacted what consumers are willing to pay for lamb.
According to ALB, the Midan Marketing U.S. Quarterly Lamb Retail Sales Report for the second quarter shows retail lamb prices have increased, while volume sales have trended downward. Compared to the same 52-week period last year, dollar sales of lamb increased 5.9% due to higher prices, but volume sales decreased 3.6%. The report noted consumers are purchasing more value cuts and grinds from the meatcase in response to higher prices.
“As a result, the demand for live lambs has declined, resulting in a slowdown in feedlot marketings, heavier lamb weights, a rise in over-finished lambs and high feed costs, which has reinforced declining live lamb prices,” ALB said in a statement.
Live and nontraditional prices
ALB stated in the summary that feeder lamb prices (an average of Colorado, South Dakota and Texas) were over $200/cwt by July. Prices declined to $150/cwt but increased some in August, averaging in the mid-$160s. The national negotiated live slaughter lamb price averaged in the mid-$130s in August, about 50% lower than a year ago.
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Prices for the nontraditional lamb market have not been affected the same as those for feeder lambs.
Reid Redden, Ph.D., associate professor and sheep and goat specialist at Texas A&M AgriLife Extension, told WLJprices were very high in winter and early spring, and the market has experienced a slowdown in summer.
“The reports I get suggest that supply was higher this spring due to drought,” Redden said. “Ranchers were out of grass and decided to sell lambs early at lighter weights and conditions. It is also suggested the nontraditional demand was lower this past summer compared to the last two years. Maybe this was due to economic concerns, a reduction in demand due to high prices earlier in the year or this summer was the first opportunity for the nontraditional consumer to travel internationally since the pandemic began.”
Cutout values, slaughter
Cozzens noted the cutout value of lamb moved lower, but it is still well above levels seen over the past five years. The rack and the loin have been supporting cutout values, and Cozzens sees demand for those cuts holding strong since consumers grew familiar with preparing them during the pandemic.
According to USDA, the national lamb carcass cutout value for Sept. 9 was $503.14. Cozzens said that in 2021, the cutout value averaged $625, but values are still well above the period of 2016-20, when the average was $350. Cozzens said the value of the loin is about $8/pound, when it is typically $5.50-6/lb. this time of year, and the rack is about $12/lb. compared to $8/lb. Cozzens attributes the fall in cutout value to leg prices, which have fallen to $4/lb. in the last few weeks.
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Cozzens noted cold storage levels are well below previous levels despite increasing last month, and from a supply standpoint, the lack of buildup in cold storage is a good indicator that demand is still there. In July, lamb and mutton stocks increased 4.7 million lbs. from last year to 25.8 million lbs., but they were still below the five-year average of about 40 million lbs.
This year, slaughter numbers have declined. ALB noted while August slaughter numbers are expected to be higher, year-to-date lamb and yearling slaughter is down 9%.
“Now we’re starting to see that start to slow down, and that push-pull between supply and demand is starting to play out now,” Cozzens said. “So, the market is now starting to try and work through and balance supply and demand factors. That’s why we’re starting to see a little bit of a backlog of lambs in the supply chain. Prices start to move a little bit lower. The market is trying to work through a lot of these changes that are happening, and it’s going to take some time to sort of work through these changes.”
ALB noted the record numbers on feed in Colorado have resulted in heavier dressed weights and a backlog of slaughter-ready lambs—which is slowly declining—but seasonally, placements increase in the fall. ALB said the longer it takes for the industry to become current, the greater the impact.
Marketing
Cozzens stated producers could change their marketing plan based on resource availability and whether they want to background their lambs longer, put on some weight and then put them into the feedlot so they are not on feed as long. This, perhaps, would allow producers to get into a window where they would get better prices for their lambs.
“I think from a production standpoint, you have to step back and evaluate specifically your costs of production,” Cozzens said. “That’s the thing as a producer you can manage—prices you can’t necessarily manage. I think it is very wise to take a step back and reevaluate those things and evaluate where you stand from a cost standpoint and just a resource standpoint.”
Looking ahead
ALB said the large supply of lambs on feed in Colorado, high feeding costs and reduced forage production will continue to impact live lamb prices.
Redden projected the nontraditional market will improve in the first quarter of 2023 due to the low supply of light lambs for this market, and it’s difficult to determine when the nontraditional market will rebound.
As the economy moves through the current macroeconomic factors and into a possible recessionary phase, Cozzens forecasts that through the last quarter of 2022, slaughter volume will be down by 3%, and dressed weights will be higher. Prices will continue to move lower by 30% in the last quarter of 2022 compared to the record prices of 2021.
For 2023, Cozzens predicts the available supply of lambs will push production down another 1-2% and lamb prices down about 10-15%.
“A lot of this is still comparing to some very strong prices that we saw at the beginning of 2022,” Cozzens said. “So in general, I think the market is moving back towards pre-pandemic levels. And I would argue that these prices will be slightly better than what we were seeing in 2019. But I think we’re moving back towards more of a pre-pandemic level.” —Charles Wallace, WLJ editor
