Market Report

Rack of Lamb Tops $22 per pound

JULIE STEPANEK-SHIFLETT, PH.D.
Juniper Economic Consulting

Reaching a high of $22 per lb., the rack of lamb set a record in June. At wholesale, the rack, roast-ready, frenched special (cap-off) averaged $21.73 per lb., 17 percent higher monthly and 25 percent higher year-on-year.

While it might be hard to believe, consumers paid even more for the rack at fine dining. Only twice before has the rack topped $20 per lb. – in October and again in December 2014.

This new record reminds us that lamb is a premium product, bringing top dollar. Lamb can be likened to lobster. It is a fancy protein, one to show off at holidays and on the grill this summer. 

The sharp uptick in the rack is welcome news. Lamb at wholesale has been very sluggish and even declined through 2014, 2015 and 2016. It was not until March of this year that lamb at wholesale seemed to wake up and take off. A combination of tight live supplies catching up with tight inventory at retail and stronger first-quarter incomes likely was at play.

The wholesale composite (net carcass value) averaged $365.23 per cwt. in June, 3 percent monthly higher and 19 percent higher year-on-year. All primals were 2 to 4 percent higher in June. The rack, 8-rib, medium saw the greatest year-to-year gain, up 30 percent to $870.94 per cwt. The shoulder averaged $346.55 per cwt., up 26 percent from a year ago. The leg, trotter-off, was $399.98 per cwt., up 17 percent year-on-year. The loin, trimmed 4×4, saw $593.94 per cwt., up 13 percent year-on-year.

Consumers See Value in American Lamb

A recent American Lamb Board study found that for the major retail cut categories, American lamb tended to be priced higher than Australian and New Zealand lamb, indicating that consumers perceived value differences between domestic and imported lamb meat (Marsh and Shiflett, 4/2017). Higher valuation might be due to flavor, product quality, size, and/or an appreciation for a local, home-grown protein. Results indicate that country-of-origin is important to American lamb consumers, which means that country-of-origin labeling is both a valid and a valuable marketing tool for the U.S. lamb meat industry (Marsh and Shiflett, 4/2017).

The American market share at retail is lower than that of Australian lamb (food service was not studied), but its price per lb. was higher, on average. ALB revealed that in five years (2011-2015) American lamb accounted for about 34 percent of the retail grocery market, Australian lamb was 54 percent and New Zealand lamb stood at 12 percent.

It is believed that the market share of American lamb at food service is higher than its retail share. 

Across cuts and countries of origin, the demand for Australian lamb was the most elastic (most price sensitive), followed by American lamb, with New Zealand lamb being the least elastic. This means that when lamb prices are featured (go on sale) then the consumer response will be highest for Australian lamb, followed by American and New Zealand lamb. Elasticity measures varied for different holidays and non-holiday periods.

June’s Feeders Hit Record

In another record-setting milestone, feeder lambs in direct trade posted a 30-percent jump monthly to $224.75 per cwt., 61 percent higher than its five-year average for June. In 2011, feeders reached more than $2 per lb. and briefly in early 2014, but not since. Only 2,700 head established June’s trade, but it is an important basis to price the influx of lambs entering feedlots in the next few months.

Sixty- to 90-lb. feeders at auction averaged $216.81 per cwt. in June, down 7 percent for the month and up 13 percent year-on-year. San Angelo (Texas) averaged $214 per cwt. and Sioux Falls (S.D.) averaged $219.62 per cwt.

Commercial Slaughter Lamb Prices Mixed

Live, auction prices reported by the U.S. Department of Agriculture’s Agricultural Marketing Service saw mixed trends in June with all markets likely seeing an uptick in non-traditional, or ethnic, holiday demand. The Muslim holiday Eid al-Fitr – Festival of Fast Breaking – occurred on June 26-28, ending Ramadan, the month of fasting.

On average, price levels at auction remained relatively high, 20 percent higher than a year ago and 31 percent higher than June’s five-year average. At auction, live slaughter lambs at San Angelo gained 12 percent to $164.20 per cwt.; South Dakota was down 7 percent to $208.17 per cwt.; Fort Collins (Colo.) averaged $199.38 per cwt., up 3 percent; and Kalona (Iowa) saw $181.75 per cwt., down 11 percent.

Slaughter lambs in direct sales gained 8 to 15 percent in June.

Live, negotiated prices averaged $186.32 per cwt. in June, up 15 percent year-on-year. Weights averaged 155.7 lbs. Live, negotiated prices were up 11 percent in the first-half of the year to $155 per cwt. Volume was down 15 percent to 84,100 head in the first half of the year, while weights were heavier, up 10 lbs. to 160 lbs.

Lambs on formula brought $339.35 per cwt. on an 84.64-lb. carcass basis. The live weight equivalent is about $169.70 per cwt.

Live, negotiated and formula lambs averaged $344.47 per cwt., 8 percent higher monthly ($172.82 per cwt. live weight) and weighed 83.47 lbs. (166 lbs. live weight), up 6 percent monthly.

Lambskins saw mixed trends in June as the highest quality pelts slipped marginally and good quality pelts gained considerably. Supreme pelts averaged $8.95 per piece (or per lambskin), down 1 percent monthly and premium pelts brought $2.75 per piece, up 31 percent in June. The primary difference between the two quality specifications is the square footage, or size of the lambskin, and that premium pelts might have some discolored fiber.

Eid Boosts Non-traditional Lamb Demand

Demand saw an uptick at the advent of Ramadan in May, but then was challenged by heavier supplies at auction that ultimately depressed prices by 8 percent in June. At auction in New Holland (Penn.), 90-110 lb. lambs received $241.50 per cwt. in May and $232.92 per cwt. in June. Weekly receipts reached nearly 2,500 head in May and topped 10,000 head in June. About half of lambs sold were hair sheep.

By some accounts, a Muslim holiday that produces greater demand than Eid al-Fitr is Eid al-Adha – the Festival of Sacrifice – which occurs Sept. 1-4.

Lamb Production Down 5 Percent

Estimated lamb production was down 5 percent to 63.5 million lbs. through June. Live weights were down 1 percent this year to 139 lbs. Estimated commercial lamb harvest totaled 910,891 head this year through June, down 4 percent year-on-year, or down nearly 40,000 head, or down 1,600 per week.

Where are all the sheep? Sheep numbers are lower overall, but we might also be seeing more lambs channeled into non-traditional markets where they are not necessarily counted in official data. Breeding ewe numbers were down 2.3 percent annually in January, or 70,000 head. Reportedly, hair ewe numbers are growing – a breed that is often found in non-traditional markets.

Forecasts

The Livestock Market Information Center reported that both supply and demand have influenced recent price trends (June 2017). Strong demand and tight supplies will push prices higher. According to LMIC, we will likely see a continuation of these dynamics in 2018. LMIC forecasted that feeder, slaughter lamb and boxed lamb prices could move even higher as imports slow and domestic production tightens further.

In late June, LMIC forecasted that third-quarter slaughter lamb prices on a carcass basis could range from $306 to $310 per cwt., up 2 percent year-on-year. Sixty- to 90-lb. feeders were forecasted at $210 to $215 per cwt., up 19 percent year-on-year.

2017 Wool Quality Very Good

Many thought 2016 was a good wool year, but to the surprise of many, 2017 was even better. This year saw very high quality wools trade. Overall, color was very good and wool was longer than in 2016. Wool was well prepared with only some remaining management-driven contamination issues.

The USDA/AMS reported neither clean nor greasy wool prices in June, although wool trades occur weekly, even daily. In early July, commercial wool sales were reported by AMS for the Territory States wool with 21 micron averaging $4.20 per lb. clean, 22 micron bringing $3.88 per lb., 23 micron averaging $3.75 per lb., 24 micron at $3.62 per lb., 25 micron at $3.19 per lb., and 27 micron averaging $2.38 per lb. Price trends were mixed: Depending upon micron, wools were 5 percent lower to 6 percent higher than a year ago.

In the absence of domestically-reported wool price reports, the USDA/AMS report of Australian imported wool serves as a good proxy of what American wools can bring. AMS reports that 75 to 85 percent of Australian prices can be used as a proxy for clean domestic prices. Actual grower prices received depend upon “current market conditions, yield, strength, length, colored fiber content, poly contamination, and other quality factors,” (USDA/AMS, 6/30/17).

The USDA/AMS National Wool Review with imported Australian wool prices – and the calculated 75 to 85 percent – can be found on the ASI market news app or at ams.usda.gov/mnreports/gl_ls850.txt.

Imported Australian lamb (landed in South Carolina) averaged $6.52 per lb. clean in June for 19 micron, down 2 percent for the month, yet 28 percent higher year-on-year. Twenty-three micron saw $5.00 per lb. clean, up 5 percent monthly and 5 percent year-on-year. Twenty-eight micron averaged $2.76 per lb. clean, 2 percent higher monthly and 2 percent lower than a year ago.

The first week of July saw the first wool sale of Australia’s 2017-18 wool season. Sales volume was highest since Easter and prices held very well (AWEX, Weekly Wool Market Report, 7/6/17). The second week of July is the last sale in the new season before its annual mid-year, three-week recess.

On July 7, the Australian Eastern market Indicator averaged Australian $6.91 per lb. clean and U.S. $5.25 per lb. Nineteen micron in Australia averaged U.S. $6.32 per lb., 22 micron averaged U.S. $5.04 per lb. and 25 micron averaged U.S. $4.04 per lb. Early July prices were up 16 percent in Australian dollars and up 17 percent U.S. year-on-year.

In recent news, China plans on increasing use of broader wool microns in its uniforms, (WoolNews.net, 7/2017). China imports a significant share of its 27 and 29 micron wools from Australia; however, the rise in blending techniques means that increasingly Chinese traders and top makers are using “wide micron ranges to create the final product,” (WoolNews.net, 7/2017).

Wool blending increases the market opportunities – and price prospects – for each bale of American wool.

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