ASI weighs legal options in grazing case

Sheep graze in a pasture at the U.S. Sheep Experiment Station near Dubious, ID.

The slaughter lamb market has suffered from the same COVID-19 shocks as endured by fed cattle and hogs—declining demand by restaurants and reductions in processing capacity. The U.S. and the world crashed into economic recession.

Additionally, early in the COVID-19 situation, bankruptcy was filed by the largest lamb packing plant in Colorado (Mountain States Rosen). Fortunately, after a short period of great uncertainty, the court approved a reorganization approach and financing was secured.

That is a major plant that has both harvest and fabrication capacity. Potentially needing to replace the capacity and capabilities of that plant is an ominous dark cloud overhanging the industry. A new slaughter-only plant in Colorado has had a series of delays in becoming fully operational.

Importantly, the potential huge negative impact of U.S. lamb being highly dependent on restaurants was somewhat mitigated by the grocery stores using lamb to replace depleted meat cases, due to the dramatic reductions in beef and pork. Also, lamb throughput in plants bounced back relatively quickly. For example, for the week ending May 23, federally-inspected lamb and sheep slaughter was up 5 percent year over year, while cattle harvest declined 11.6 percent.

This year started out with strong lamb prices. For the first quarter of this year, the national (formula) carcass lamb price received by producers was $295.96 per cwt. That was up 11.3 percent compared to a year ago. That increase was driven by a 4.9 percent year-over-year drop in U.S. commercial production.

Projections at mid-June put the slaughter lamb price down about 22 percent compared to a year ago, and about 12 percent below that of 2020’s first quarter. For the balance of this year, the Livestock Marketing Information Center (LMIC) forecasts slaughter lamb prices will be below a year ago; for the year, averaging 10 percent to 16 percent below 2019’s prices.

Lighter weight (i.e., 60- to 90-pound live lamb) prices were higher than 2019’s in the first quarter (up 14 percent to 15 percent in most major auction markets). Prices fell in the second quarter, but percentage wise, not as much as slaughter lambs.

Compared to a year ago, the projected drop will be 4 percent to 5 percent. Lighter weight lamb prices have been buffered by lower feedstuff costs (corn, hay, etc.). For the year, LMIC forecasts that the 2020 average price in the range of 1 percent to 4 percent below 2019’s. — James Robb, LMIC senior economist

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