USDA Releases Slaughter Lamb Formula Prices

Juniper Economic Consulting

After more than a year of suspending the price report for slaughter lambs on formula, the U.S. Department of Agriculture’s Agricultural Marketing Service reinstated the series. The move by AMS is an important step toward improved price information and market efficiency. It is also hopefully a step toward getting LRP-Lamb, the lamb price insurance program, back on track.

AMS reinstated formula prices, but withdrew reporting of the total volume of lambs sold on formula. This was an important piece of market information – utilized to assess available supplies and forecast prices.

AMS added a new report it calls “Comprehensive Information.” This report is a combination of slaughter lambs sold on a live, negotiated basis in addition to formula transactions. Live, negotiated prices are converted to a carcass basis and the result is a carcass-based report. AMS provides an example:  The live price of $131.30 per cwt. divided by the packer-provided dressing percentage of 50.51 percent equals a $259.95 per cwt. carcass price.

Harvest Lamb Prices Strengthened

On April 7, slaughter lambs on formula were reported at $283.56 per cwt. (about $141.78 per cwt. live weight) for an 83.9-lb. carcass weight. The carcass weight translates to about 168 lbs. live weight.  This is relatively heavy for an industry that averages about 140 lbs. in federally inspected harvest, and might require additional trimming at harvest. 

The Comprehensive Information prices for live, negotiated and formula lambs was $290.61 per cwt. for an 81.71-lb. carcass ($145.31 per cwt. live).

In March, the live, negotiated slaughter lamb price averaged $146.25 per cwt., a 4 percent gain monthly and 8 percent higher annually. In 2014 and 2015, slaughter lamb prices on a live, negotiated basis softened in the second quarter, so this uptick is an anomaly.

Slaughter lamb prices at auction also saw a surprise gain in March. Prices averaged $148.36 across San Angelo (Texas), Fort Collins (Colo.), Sioux Falls (S.D.) and Kalona (Iowa) markets. The average was up 4 percent for the month and 11 percent higher year-on-year.

Higher prices for both feeder and slaughter lambs in March might be due to lower inventory numbers translating into lower available market supplies and competition from the non-traditional market.

An estimated 40 percent of harvested lambs in early April weighed up to 170 lbs., which is perhaps an indicator that there is a shortage of lighter-weight lambs – prompting a price premium.

Feeder Lambs Higher

Feeder prices at auction for a three-market average were $218.92 per cwt. for 60 to 90-lb. lambs in March, 5 percent higher monthly and 13 percent higher year-on-year (Livestock Market Information Center, ASI). San Angelo saw a $217.50 per cwt. average, Fort Collins was $179.25 per cwt., and Sioux Falls was $260 per cwt.

After a few months of slow trade in the direct feeder lamb market, there was a bustle of activity in March. Feeders traded at an average of $170.67 per cwt., 17 percent higher monthly and 20 percent higher than a year ago. Perhaps limited supplies helped to bid up prices.

Non-traditional Market

Lamb supplies in the commercial market are likely tight, due to lower inventory numbers, but also perhaps because more lambs are siphoned off the commercial market and directed to non-traditional markets.

AMS reports that the New Holland Sales Stables livestock auction in New Holland, Penn., is a non-traditional market. According to AMS, “traditional markets refer to lambs that are subjected to USDA carcass grading and marketed through mainstream outlets. Non-traditional markets refer to lambs destined for slaughter outside of what would be termed as traditional markets.” Some non-traditional lambs are processed by state inspected plants and even some federally inspected plants. The non-traditional market is mainly comprised of lambs sold direct to consumers.

In 2016, it was estimated that for every three lambs that were harvested in the commercial market, one lamb was sold in the non-traditional market.

The largest non-traditional markets are the livestock auctions at New Holland and San Angelo, but nontraditional markets exist across most auctions. The non-traditional market is often characterized by a lighter-weight lamb, around 100 lbs., but very variable depending upon customer. In New Holland in March, Choice and Prime 2-3 lambs weighing 90-110 lbs. averaged $229.70 per cwt., 11 percent higher monthly and 7 percent above a year ago.

Wholesale Market

The cutout value – less processing and packaging costs – averaged $288.12 per cwt. in March, down 2 percent monthly and down 8 percent year-on-year. This was the first drop in value below $300 per cwt. since late 2013.

Among lamb primals, the rack and loin saw gains in March, but the leg and shoulder were lower.

The rack, 8-rib medium, averaged $704.41 per cwt., up 1 percent in March and 3 percent higher year-on-year. The loin, trimmed 4×4, averaged $522.48 per cwt., up 0.4 percent monthly and 1 percent higher year-on-year.

The leg, trotter-off, averaged $321.68 per cwt., down 4 percent monthly and 8 percent lower year-on-year. The shoulder was also lower monthly with a 2 percent drop to $272.13 per cwt., 3 percent lower year-on-year.

Carcass prices were not reported in March due to AMS confidentiality concerns.

Production and Trade

In the year through mid-April, lamb harvest was down 1.4 percent to 464,032 head and estimated lamb production was 32.8 million lbs., also down 1.4 percent. Live weights at harvest were largely unchanged at 141 lbs. in federally inspected harvest.

Freezer inventories have come down sharply in the last year. At the beginning of March, lamb and mutton in cold storage was up 26 percent monthly to 25.7 million lbs., but down 36 percent year-on-year.

Total lamb and mutton imports were up 14 percent year-on-year in January (last available data). Lamb imports were up 22 percent year-on-year to 19.7 million lbs. with Australian imports up 30 percent to 16.5 million lbs. and New Zealand supplies contracting by 7 percent.


LMIC forecasted that on a carcass basis, slaughter lambs could see $277-$281 per cwt. in the second quarter, up 8 percent from a year ago. Sixty- to 90-lb. feeders could average $186-$192 per cwt., down 2 percent year-on-year.

LMIC forecasted smaller lamb and mutton supplies this year. U.S. production could be down 4 percent, imports could increase 1 percent, and total supply could see a 12 percent contraction to 456.7 million lbs. Total disappearance – after subtracting exports and drawing down freezer inventory – could lead to a 3 percent contraction in consumption. LMIC forecasted that cold storage stocks could be drawn down by 39 percent this year to about
17 million lbs. to satisfy lamb consumption. 

Due in part to higher lamb prices, Australia’s lamb production in January was up 2 percent to 1.9 million head year-on-year and 8 percent higher than its five-year average, (Sheep Central, 3/15/17). Harvest weights were also higher, which contributed to higher production levels.

Pelt Market

In April, there were some slight increases across lamb skin indicators, underpinned by tighter supplies (MLA, 4/7/17). However, U.S. pelt prices weakened in March. Unshorn supreme pelts brought $6.65 to $9.65 per piece in March, down about 3 percent monthly. Premium pelts brought -$1.25 at the low end to $3.50 per piece, down about 5 percent for the month.

The majority of the pelts processed commercially in in the U.S. receive a positive pelt credit although there are some pelts that have little value. In general, sheep and lambskins with ½-inch wool receive a premium, more if the wool is 1” or longer. If a sheep or lamb is sheared within the past one to two months, then it might not be sufficiently wooled and receive a sharp discount or disposal fee at harvest. There are a small share of pelts received by the tanneries with insufficient wool cover to be processed into shearling. These pelts have little value because the market is very competitive for this kind of leather due to competition with cow hides in a flooded market.

The processor incurs a handling and disposal cost and passes this cost onto producers for undesirable pelts. By passing this cost onto producers, the tannery is able to offer quality pelts higher prices. If the processor didn’t charge a disposal fee for undesirable pelts, those receiving positive pelt credits would receive less.

Sheep producers face a management decision whether and when to sell wool or leave the wool on, recognizing that both wool and the wooled pelt have value.
More Dorper sheep are being processed in with wool breed pelts. The Dorper pelts do not have a wool cover, but the grain of the leather is such that it can command a premium. However, there is an insufficient quantity of quality Dorper skins to compete internationally.

In general, Mike Wheeler, president of Nugget International, feels confident that the U.S. lambskin market has done well in a relatively soft market. The strong U.S. dollar has challenged its business, making it tougher on overseas buyers of U.S. pelts.

2017 Wool Season Stronger Year-on-year

The U.S. 2017 wool season started off with a bang, with clean wool prices roughly 12 percent higher than a year ago March in the Territory States (mostly western wools). The finest wool reported, 18 micron, saw $6.10 per lb. clean, 35 percent higher year-on-year. Twenty-one micron averaged $4.33 per lb. clean, 14 percent higher; 22 micron was $4.18 per lb., 10 percent higher; 23 micron was $3.92 per lb., 9 percent higher, 24 micron was 4 percent higher at $3.53 per lb., 25 micron jumped 3 percent to $3.13 per lb.; and 26 micron was up 10 percent to $2.96 per lb.

In March, 23 and 25 micron U.S. wools received 78 percent of Australian imported wools. Other microns – 21, 22 and 26 microns – received 82 to 83 percent of Australian wools. It is expected that U.S. wools receive from 75 to 85 percent of Australian wools due to differences in preparation.

As of this writing, nearly 300,000 lbs. of clean wool had traded, only the beginning of the wool season.

After eight consecutive weeks of gains, the Australian market weakened in early April by 15 cents U.S. per kg to $5.22 per kg clean (AWEX, 3/30/17). Reportedly, buyers had hit their limit, but some price softening was likely fueled by the high prices attracting increased wool supplies to Australian auctions.

“This push of quantity onto the market was not over the top by any means, but is indicative of the fragile nature of the demand versus price relationship, relative to the immediate wool availability. This extra volume assisted in easing purchase pressure on sale room operators and in a shorter time frame than originally forecast,” (AWI Australian Wool Market Review, 3/31/17).

Wool prices are volatile, but underlying fundamentals of supply and demand help support prices this season.

Skip to content