Lamb price rebound sustainable, experts predict
Lamb prices are rebounding after a prolonged slump, but experts don’t expect the increase to lead to more market volatility.
Slaughter lamb prices were hovering in the range of $1.50 per pound or higher in late December 2013, compared to about $1.00 per pound or less at the same time in 2012, according to USDA market reports.
The strongest increase in both feeder and slaughter lamb prices has come since the late summer of 2013, according to data compiled by the Livestock Marketing Information Center.
Even so, the spike won’t likely destroy demand for lamb, leading to another price rollercoaster, experts say.
“I think they’ve increased to levels that are sustainable at the consumer level and through the producer chain,” said Tim Petry, an agricultural economist at North Dakota State University.
The price increase in recent months has shifted most U.S. lamb producers from barely breaking even to profitability, said Ron Cole, an industry consultant in Greeley, Colo.
“We’ve had better quality product and less supply,” Cole said.
Producers reduced the size of their herds as a glut in the lamb market and high feed costs forced them to operate at or below the cost of production, he said.
Those cuts have now paid off, resulting in a lamb inventory that’s in line with demand and profitability for lamb producers, feedlots and slaughter plants, Cole said.
Yet prices haven’t risen so sharply that they scared off consumers, which bodes well for the industry, he said. “I see stability.”
Record high prices in 2011 set the stage for the recent turbulence in the lamb market, causing consumers to balk and inventories to climb, Cole said.
“We had an excess supply of lamb that was very heavy,” he said. “They simply didn’t want to buy it at that price level and it backed up the market.”
As fewer lambs were slaughtered, living animals were also getting older and putting on weight — degrading quality and aggravating the problem, Cole said.
“We couldn’t move lambs through the system, and lambs kept getting heavier and heavier,” he said.
The market corrected itself at a great cost to producers, who also had to contend with scarce and expensive feed due to the 2012 drought, Cole said.
Weakening corn prices and better hay availability have since improved the outlook for all sectors of the sheep industry, he said.
Cheaper feed bodes well for feeder lamb prices, since the cost of fattening them up is reduced and thus demand increases, said Petry.
In recent years, part of the industry’s instability was cause by feed shortages in the U.S. and in Australia and New Zealand, but those conditions have since been alleviated, he said.
“I think we’re back at a plateau now that we can sustain,” Petry said.