Posted: Thursday, January 03, 2013 12:00 PM
John O'Connell/Capital Press
Brothers Kevin and Joseph Andrus feed sheep at their ranch in Lava Hot Springs, Idaho. Lamb producers are coping with poor prices, which some analysts believe may soon begin to climb.
After cutting back, ranchers see positive signs in markets
By JOHN O'CONNELL
LAVA HOT SPRINGS, Idaho -- Poor sheep prices have forced rancher Ken Andrus to operate on a "bare-bones" budget.
Andrus, a Lava Hot Springs rancher, is hopeful that sheep industry experts are correct that signs now point toward recovery.
But it's been a long wait, with prices declining steadily throughout the past year, following a decade of stability. High feed costs have exacerbated the situation.
"The percentage decline from the previous year is by far the worst the industry has ever known," Andrus said. "You have to curtail your expenses. You can't expand your operation."
Peter Orwick, a South Dakota rancher who serves as executive director of the American Sheep Industry Association, said feeder lamb prices need to top a dollar per pound for producers to break even. About three months ago, feeder lambs -- those sold from ranches to feedlots for fattening -- were bringing in 85 cents per pound. He said December sales have improved to about $1.06 per pound.
Furthermore, Orwick has noticed stronger grocery store prices during the past three weeks, which he takes as a sign that holiday sales have gone well. He said national inventories of lamb meat in coolers have declined about 18 percent from this time last year, and direct lamb sales through on-farm auctions and farmers markets have picked up. At the association's request this summer, the USDA also agreed to buy $12 million in lamb meat.
From 2002 through 2011, the lamb market saw steady growth. Prices made especially dramatic gains beginning in 2010, when producers in New Zealand and Australia were short on supply. Prices climbed well above $2 per pound and were double 2009 levels when they peaked at $2.50 in 2011. Wool and sheepskin hide prices had also doubled.
"The markets were historically high, I mean record setting," Orwick said.
Orwick said lamb prices rose above what consumers were willing to spend, and inventories accumulated on feedlots. Feeders paid less for lambs in 2012, and supplies were backed up for the next 10 months. Compounding matters, drought in Texas forced ranchers, unable to feed their livestock, to sell lambs much too early to feedlots.
"Everybody knew paying $2 to $2.50 per pound wasn't going to be sustainable for lamb feeders or lamb packers," Orwick said.
Stan Boyd, executive director of the Idaho Wool Growers Association, predicts lamb prices will rebound in 2013 to $1.30-$1.40 per pound.
"I don't think it will get back to the prices we saw in 2010 and 2011, but I think it will be a fairly decent year coming up," Boyd said. "Prices are slowly creeping up on the live lambs."
Boyd said lambs born in late May or June 2011 should have been slaughtered by June 2012. Instead, processing continued through October. Boyd said inventories of 2012 animals are much higher than normal for this time of year.
Nonetheless, he "looks for the 2013 lamb crop to be harvested in an orderly manner. We're working our way out of this mess."