Posted: Wednesday, February 13, 2013 9:14 AM
Lambs are monitored at the U.S. meat Animal Research Center, Clay Center, Neb., in this file photo by the Agricultural Research Service. A short world supply of sheep meat drove lamb prices sky high in the latter part of 2011, killing demand and cutting producer prices by half in 2012.
Sheep and lamb numbers at the start of the year were down only 0.6 percent from Jan. 1, 2012, surprising many in the sheep industry given last year's widespread drought, high feed costs and collapsing lamb prices.
Analysts at the Livestock Marketing Information Center were also a little surprised, pleasantly, that liquidation of the breeding stock was not as high as anticipated, said Jim Robb, LMIC director.
Market lamb numbers, essentially the same as a year ago, were also not as low as anticipated, he said.
Last year was brutal for producers. The Jan. 1 inventory illustrates the creativity, good planning and hard work on producers' part to get through the hardship Mother Nature dished out, he said.
Producers culled ewes aggressively but held onto ewe lambs, showing optimism even with the uncertainties of what this year's weather might bring, he said.
In 2012, only California, the Pacific Northwest, New England and the mid-Atlantic states escaped the drought, and producers everywhere suffered the failed demand that stripped prices and backed up supplies, leading to over-finished lambs, he said.
It was a classic backlog of market lambs, and the ensuing weight problems put the industry in a downward spiral, he said.
Lamb prices started out too high in 2012 in response to a shortage of lamb meat globally and pulled the rug out from under demand. Nationally, slaughter lambs in the first quarter of 2012 were bringing $329 per hundredweight on a dressed basis, and feeder lambs were bringing $211.60 per hundredweight.
Feeder lamb prices were essentially cut in half by mid-year due to collapsing slaughter lamb prices, which lost $100 per hundredweight, and surging feedstuffs cost, he said.
The industry has worked through the overweight market lambs and is not on a path to repeat the problems of a year ago, Robb said.
The industry is in the mode of rebuilding demand, but it's going to be a struggle, given the lingering apprehension in the marketplace. But December and January slaughter levels came in higher than expected, and the industry is in the early stages of price recovery, he said.
Prices in the first quarter of 2013 are projected at about $230 per hundredweight on slaughter lambs and $135 to $140 on feeder lambs. As lamb production tightens into the summer quarter, LMIC is forecasting prices ratcheting up, with slaughter lambs peaking in the $280 to $290 range.
The year's national price on slaughter lambs could average in the $260 to $270 per hundredweight range, about 3 percent below 2012. Feeder lamb prices will be driven by feedstuffs cost, improving from recent levels with a good U.S. corn crop. LMIC's feeder price range is currently $139 to $149 for the year, essentially unchanged from 2012's annual average.
If the industry can rebuild demand, lamb markets should benefit from overall tight livestock supplies and record-high beef prices, he said.
The outlook for 2014 is for continued rebounding of prices, but there's a lot of uncertainties, especially when it comes to Mother Nature, he said. There's a lot of caution and uncertainty over corn prices and pasture conditions. The big unknowns are on the costs side and how producers are going to respond, he said.