Sheep Industry Exports Support Jobs
JULIE STEPANEK SHIFLETT, PH.D.
Juniper Economic Consulting
Agricultural exports spur domestic economic growth. In 2017, $14.2 million in American lamb and mutton was exported primarily to Mexico and Caribbean nations. American wool exports – primarily to China – were valued at $31.8 million. United States pelts and leather contribute an estimated additional $15.4 million. Although exports leave the country, the domestic benefit is still significant.
According to the U.S. Department of Agriculture, in 2016 United States agricultural exports supported more than 1 million jobs, of which about three-quarters of the million were in non-farm activities, (3/4/2015). In the same year, $134.7 billion in exports supported an additional $306.8 billion in total economic activity. Using USDA multipliers, sheep industry exports provide a total $140 million in domestic economic activity and more than double the current number of sheep operator jobs.
U.S. Export Promotion Down
A recent study revealed that the United States lags behind foreign competitors’ increasing investment in export market development (Coalition to Promote U.S. Agricultural Exports, et al., 2-17-18). United States public funding for the two largest agricultural export promotion programs has declined in real value after adjusting for inflation by 12 percent since 2011. In 2016, private funding from industry members comprised 70 percent of the USDA Foreign Agricultural Service’s export promotion programs. The remaining 30 percent from government funding has been stagnant since 2002. Tom Sleight, CEO of the U.S. Grains Council – a member of the Agribusiness Coalition for Foreign Market Development – reported that this “cuts into the ability of American family farmers, livestock and dairy producers, fishermen and small agri-food businesses to compete in growing export markets.”
Feeder lamb prices at the San Angelo (Texas) auction averaged $216 per cwt. in February, up 4 percent monthly and up 7 percent year-on-year. Prices at Fort Collins (Colo.) and Sioux Falls (S.D.) markets were not available.
Nearly 3,000 lambs sold as feeders out of Montana and Wyoming in February at an average weight of 112.5 lbs. for an average $175 per cwt. The number of feeders that moved in direct trade in February was far below the 8,000 head five-year average for the month.
Slaughter Lamb Prices Mixed
Auction slaughter lamb prices moved higher than averages in direct trade, an indicator of heightened demand for lighter weight lambs as formula and live, negotiated lambs moved closer to 170 lbs. live weight at harvest.
Live, slaughter lamb prices at auction averaged $150.20 per cwt. in February, up 10 percent monthly and up 6 percent year-on-year. Prices across auctions differ by volumes and corresponding live weights. Prices averaged $133 per cwt. in San Angelo; $141 per cwt. in Kalona (Iowa); $153 per cwt. in Sioux Falls; and an average high of $173 per cwt. in Fort Collins. Equity Electronic Auction averaged $148 per cwt. in February.
At the New Holland (Penn.) auction, 70-80 lb. lambs received $239 per cwt. in February, up 11 percent monthly and 6 percent higher year-on-year; and 90-110 lbs. averaged $212 per cwt., up 15 percent monthly and 3 percent higher year-on-year. Heavier lambs, 130-160 lbs., received $153 per cwt., down 5 percent monthly and down 9 percent year-on-year.
Slaughter lamb prices on a formula/grid basis averaged $259.11 per cwt., down 1 percent monthly. On a live weight basis, prices averaged $131 per cwt. for 168 lbs.
In the first two months of the year, slaughter lamb prices on formula were trending lower than a year ago. If the market maintains last year’s trend, prices are expected to inch up toward the summer. Last summer, formula lambs on a live-weight basis topped $160 per cwt., hitting $172 per cwt. in July 2017.
In the live, negotiated market, prices averaged $135.74 per cwt., up 3 percent monthly and down 4 percent from a year ago. Weights gained 3 percent monthly in February to 163.25 lbs. – 4 percent higher year-on-year.
Prices for unshorn supreme pieces averaged $2.50-$11.06 per pelt, up nearly 1 percent monthly and 12-percent higher at the high end from a year ago. The highest quality supreme pelts are the largest (9 square feet and larger), with no discolored fiber, predominately manure and seed free, have a wool staple length of 1 to 3 inches, and fall into the 22 to 26 micron range.
The Livestock Market Information Center forecasted in February that slaughter and feeder lamb prices could move lower than a year ago in the second quarter. National slaughter lamb prices on a carcass basis were estimated at $304-$310 per cwt. in the second quarter, down 3 percent from a year ago. Feeder lambs were expected to average $208-$215 per cwt., down
5 percent year-on-year.
Meat Market Remained Strong
The net carcass value – after processing and packaging is deducted – hit $325.62 per cwt. in February, up one-half percent, and up 11 percent year-on-year. Primals were mixed in February trading: the rack and loin lost value while the shoulder and leg gained.
The leg, trotter-off, averaged $356.36 per cwt., up 3 percent for the month and up 7 percent year-on-year. The shoulder, square-cut, gained a marginal 0.3 percent and was down 0.6 percent year-on-year at $277.40 per cwt.
The loin, trimmed 4×4, averaged $541.42 per cwt. in February, down 3 percent monthly and up 4 percent year-on-year.
The rack, 8-rib, medium averaged $830.05 per cwt. in February, down 1 percent monthly and 19 percent higher year-on-year. Further processing adds value. In early March, the rack, roast-ready, frenched, special (cap-off) averaged $2,105.21 per cwt.
Production and Trade
In the first two months of the year, estimated lamb production was about even year-on-year at 19.4 million lbs. Harvested lamb was down 1 percent in January and February to 273,451 head. Harvest weights were up by a couple of pounds between periods, helping to boost production.
Recently released year-end import figures revealed a 9-percent increase in lamb imports in 2017 to 205.2 million lbs. Total lamb and mutton imports were up 16 percent year-on-year with a 66-percent jump in mutton imports. Australian lamb imports were up 6 percent in 2017 to 149.4 million lbs.; New Zealand lamb imports were up 14 percent to 53.4 million lbs.
While lamb and mutton imports gained 16 percent in 2017 to 251.7 million lbs., domestic production dropped by 3 percent to 145.9 million lbs. In 2017, lamb and mutton imports accounted for 63 percent of all domestically available product.
Estimated average value of Australian lamb imports was $2.41 per lb. in 2017, up from $2.23 per lb. in 2016. The unit value of New Zealand lamb imports was $2.08 per lb., up from $1.90 per lb.
In general, American lamb commands a price premium to imported Australian lamb. Sometimes it is difficult to assess the price premium of domestic lamb compared to imported product on a regular basis because retail data is held privately and publicly available customs data at the wholesale level doesn’t always provide an apples-to-apples comparison. In general, the United States and Australian shoulder and leg are, on average, price comparable at the wholesale level. However, the loin commands a distinct premium. No comparison can be made for the rack.
In the past couple of years, the American leg, trotter-off has received a premium of a few cents per pound. The American lamb shoulder, square-cut, held a 64-cent premium per lb. in 2016, which slipped to 39 cents in 2017. The domestic loin, trimmed 4×4, premium has held at 81 to 87 cents per pound for more than two years
Wool Is Cool Again
“Wool is cool again, and prices are shear madness,” read a recent Wall Street Journal headline, (2/23/18). Brands from Adidas to Under Armour are advertising wool’s softness and odor-resisting characteristics. Adidas reportedly cut its total number of products, but increased its wool products fivefold in five years (Wall Street Journal, 2/23/18).
Wool’s strong demand and internationally tight supply has encouraged an increasing number of manufacturers to lock in multi-year production contracts (Wall Street Journal, 2/23/18). In coming months and even years, if international demand continues to outpace a slow supply response, grower wool prices will stay strong. Reportedly, many wool manufacturers have absorbed the increasing cost of raw wool, but are feeling the squeeze. It is uncertain whether today’s wool consumers will tolerate higher prices at retail.
In February, Australian wool prices averaged 1,797 Australian cents per kg clean (about U.S. $6.50 per lb.), up one-half percent from January and up 25 percent year-on-year. By early March, Australian wool averaged $8.30 per lb. clean and in U.S. dollars, $6.42 per lb.
On average, U.S. clean wool prices in February gained 16 percent from last March’s reports (no February reports were available). In February, 118,000 lbs. of clean wool and another 70,000 lbs. of greasy wool traded in the Territory States. No sales were reported from Texas and New Mexico, or the Fleece States (the Midwest).
In February, 21 micron averaged $5.13 per lb. clean, up 19 percent from last March; 22 micron averaged $4.96 per lb., up 19 percent; 23 micron averaged $4.97 per lb., up 29 percent; 24 micron saw $4.12 per lb., up 17 percent; and 25 micron hit $3.15 per lb., up nearly 1 percent.
Wool sold on a raw, greasy basis yields about half the clean-based value.
As the wool season approaches for many American producers, attention to wool market preparation can maximize returns. In the Sheep Care Guide, ASI and partners recommend that – at a minimum – the shearing facility should be clean and dry; sheep should be kept off feed six to 12 hours prior to shearing; and only dry sheep should be shorn.