Markets -- Where Does the Lamb We Eat Come From?

Where Does the Lamb We Eat Come From?

Most of us already know that 36 percent of the lamb Americans consume is imported (Associated Press 7/14/2003). What you may not know is whether the lamb you buy at the grocery store or are served at a restaurant is American. The origin of lamb sold in many grocery stores is often labeled, but not always.

The recent debates on Capitol Hill regarding funding for country-of-origin labeling (COOL) have brought to light the fact that many people think that knowing the origin of American lamb is an important factor in promoting American lamb. However, there are other concerns as well: imported lamb is often frozen, not fresh; may be smaller in size; and often is cheaper per pound at wholesale.

A quick survey revealed that the largest U.S. grocers vary in the origin of lamb carried: Wal-Mart and Sam?s Club carry New Zealand lamb exclusively; Albertson?s U.S. lamb exclusively; Costco both domestic and Australian lamb; Kroger (King Soopers, City Market and others) domestic lamb; and Safeway both domestic and New Zealand lamb.

A number of U.S. lamb companies at processing and distribution handle domestic and a line of imported lamb, so a recognizable brand does not have to mean ?American? lamb. USDA grade choice does not necessarily mean American-born, -raised and ?slaughtered.

SYSCO reports that although restaurants on the East and West Coasts buy both domestic and imported lamb, there is a growing trend toward the purchasing of imported lamb because it is cheaper. Cost is more important than size in choosing a supplier. Reportedly, the larger U.S. lamb cuts do yield greater plate coverage, but two to three imported chops can be placed on a plate, providing equal plate coverage.

SYSCO also reports that increasingly imported lamb is fresh. Since 1998 both Australia and New Zealand have increased the portion of fresh and chilled lamb that is imported from an average of 32 percent to 42 percent. Between January and May 2003, 51 percent of Australia?s imports were fresh and chilled compared to 39 percent the previous January through May 2002. This represents a 26-percent year-to-year increase in the share of fresh and chilled lamb.

In an effort to determine and compare retail prices between U.S. and New Zealand product, I called two grocers that sell each product exclusively: Albertson?s and Wal-Mart/Sam?s Club. I found that the types of products sold were so varied that a strict comparison was difficult. For example, Sam?s Club sells a New Zealand rack out of a hotel rack, but Albertson?s does not. Albertson?s sells a rib chop out of the hotel rack. In the Los Angeles area, the rack was $8.87/lb. and the rib chop was $8.99/lb.

During the last week of July, the prices of New Zealand lamb at Sam?s Club in Chicago and Los Angeles were as follows: rack $8.87/lb., boneless leg $3.48/lb. and lamb chop $5.87/lb. The prices of American lamb from Albertson?s in Chicago and Los Angeles were loin chop $8.99/lb., assorted chop (mix arm/blade) $2.99/lb.-$3.49/lb. and blade chop $3.49/lb.-$3.99/lb.

U.S. lamb producers still do not have a good idea of what import prices are or what retail prices are for imported as well as domestic lamb. A very rough calculation reveals that the price difference between boxed prices and retail (domestic and imported) prices is $2.50/lb. for the rack, $4.30/lb. for loins and $1.50/lb. for the leg. We really don?t know the additional cost and mark-up for retail lamb.

Between June and July average boxed lamb prices softened. Eight-rib rack (medium) fell from $6.52/lb. to $6.30/lb., loins fell from $4.83/lb. to $4.71/lb. and leg (trotter off) fell from $2.25/lb. to $1.99/lb. Between June and July the average cutout value fell from $2.16/lb. to $2.09/lb. and the carcass value fell from $2.46/lb. to $2.39/lb.

The carcass-to-cutout spread was $44.90/lb. in January through mid-July 2003 compared to $32.30/lb. in 2002 and $36.20/lb. in 2001. The live-to-carcass spread was $18.10/lb. in January through mid-July 2003 compared to $18.51/lb. in 2002 and an average $25.25/lb. in 2001. It is difficult to discern the level of retail cuts from the USDA average retail prices, but they are a good indicator of trends. Retail lamb prices soften somewhat between March and April. Domestic lamb fell from $4.44/lb. to $3.98/lb. and imported lamb fell from $4.46/lb. to $3.78/lb.

The volume index for domestic lamb jumped from 85 to 148 between March and April. The percentage sold under featuring for domestic lamb increased from 13 percent to 40 percent. The volume index for imported lamb jumped from 107 to 172 between March and April and the percentage sold under featuring increased from 33 percent to 49 percent.

Feeder- and slaughter-lamb prices began to soften seasonally in July. Average feeder lamb prices, San Angelo, weakened from $106.60/cwt. in June to $98.17/cwt. in July. Average slaughter-lamb prices, San Angelo, also weakened from $97.50/cwt. in June to $88.38/cwt. in July. Feeder- and slaughter-lamb prices are still higher than prices of a year ago (July 2002) -- $97.50/cwt. and $79.88/cwt., respectively.

In the first half of 2003, 95.6 million pounds of lamb was produced, down from 107.3 million pounds in the first half of 2002. Dressed weights in the first half of 2003 were 68.2 pounds compared to 69.3 pounds. Lamb and sheep slaughter may remain flat until the seasonal increase toward the end of the year.

The average U.S./Australian Exchange Rate in June was 66 cents per Australian Dollar; it held steady at 66 cents per Australian Dollar in July. In the beginning of July the rate reached 68 cents but then weakened to 66 by the end of July. As the U.S. Dollar weakens, it is relatively more expensive for U.S. importers to import Australian lamb. The rising Australian Dollar is causing ?export jitters? in Australia (Australian Broadcasting Corp. 7/3/03).

Despite the strong Australian Dollar, export demand for Australian lamb remained stable. Consequently the prices of the limited heavy export lambs increased. Year-to-year prices of heavy export lambs increased 16 percent in July. The average price of the eastern states trade lamb indicator (ESTLI) in 2002/03 was 14 percent higher than a year earlier (Meat & Livestock Australia 7/22/03). ?In the week ending 25 July, 86,500 head were processed across the eastern states, which is 39% and 40% below the corresponding weeks in 2002 and 2001 respectively,? (Meat & Livestock Australia 8/1/03).

Editor?s Note: Julie is open to comments and questions and can be reached by e-mail at juniper_economists@tds.net or by phone: 303-619-9975.

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