JULIE STEPANEK SHIFLETT, PH.D.
Juniper Economic Consulting
Typically a commercial feeder lamb market, Billings, Mont., saw an uptick in demand at its late July sale from ethnic buyers in preparation of the Muslim observance of Eid-al-Adha – one of the holiest Muslim celebrations.
The name translates to ‘festival of the sacrifice,’ and marks the end of the Hajj – the annual pilgrimage to Mecca. The festival is used to honor the Prophet Ibrahim who was willing to sacrifice his son for Allah, but his son was replaced with a lamb in his stead. This reminder of Muslims’ commitment to God takes place from Aug. 11 to Aug. 15.
Eid-al-Adha also involves the slaughter of an animal, similar to Eid al-Fitr – which follows Ramadan – but with no fasting taking place.
The U.S. Department of Agriculture Agricultural Marketing Service reported that ethnic buyers in Billings had very specific demands, bidding on 70 to 95 lbs. lambs. Furthermore, “buck lambs, or lambs with long tails sold with no discount.” Commercial feeder buyers were also present, bidding up ethnic buyers. The sale average for 60 to 90 lbs. lambs was $166 to $176 per cwt.
Ethnic trades occur across the United States, and throughout the year, but are punctuated by livestock auction sales, and Muslim celebrations. More than 4,000 lambs sold at the San Angelo, Texas, auction in late July, and close to 3,000 head at the New Holland, Penn., auction.
Slaughter Lambs Up
Slaughter lamb prices on formula averaged $298.23 per cwt. in July, up 1 percent monthly, and up 6 percent year-on-year. The live-equivalent price was $150.18 per cwt.
The harvest weight of formula lambs averaged 165 lbs. in July, down 3 percent monthly and down 5 percent year-on-year. Lower harvest weights is a sign that lambs going to harvest in July were more current, and not overly fat.
Live, negotiated slaughter lamb prices averaged $161.76 per cwt., up 1 percent monthly and up 3 percent year-on-year. Packers likely filled orders with spot-market lamb purchases when there were insufficient lambs contracted under formula pricing.
Feeder Lambs Gained
Feeders saw some good gains this summer as commercial supplies tightened. Sixty- to 90-lb. feeders averaged $174.63 per cwt. in San Angelo in July, up 6 percent monthly and 17 percent higher year-on-year.
In Fort Collins, Colo., feeders averaged $157.09 per cwt., up 4 percent monthly and 13-percent higher year-on-year.
The Livestock Marketing Information Center forecasted tight domestic and imported supplies in the third quarter that can support higher live prices.
LMIC estimated that third-quarter 60 to 90 lb. feeders could be $170 to $176 per cwt., 20 percent higher year-on-year. Last summer, feeder lambs were relatively lower – in the $140s per cwt. – in part, because imports were 42 percent higher in July compared to its five-year average for the month.
Slaughter lambs on a carcass basis could see $297 to $301 per cwt., 6 percent higher from a year ago.
Meat Market Strengthened
The wholesale composite has maintained a steady strengthening since early 2018, yet individual cuts are mixed, some higher, some lower. The wholesale composite averaged $397.03 per cwt., up 1 percent monthly and 4 percent higher year-on-year.
The shoulder, square-cut, averaged $309.61 per cwt., up 2 percent monthly. The rack, 8-rib, medium, averaged $883.29 per cwt. in July, up one-half percent. The loin, trimmed 4×4, averaged $528.24 per cwt., unchanged monthly. The leg, trotter-off, gained 1 percent in July to $387.62 per cwt.
Most primals were higher year-on-year in July. The shoulder jumped 9 percent in July. The leg was also higher year-on-year – 5 percent higher – and the rack gained 1 percent. The loin weakened by 4 percent year-on-year.
Retail Prices Mixed
The shoulder blade chops and loin chops continued to dominate retail lamb feature activity into July, yet both cuts saw lower prices year-on-year. Loin chops averaged $8.13 per lb. in July, down 9 percent year-on-year. Shoulder blade chops saw $5.74 per lb., down 4 percent. By comparison, convenience products, such as ground lamb and lamb stew meat, saw 23 percent and 32 percent price gains, respectively.
Domestic Supplies Tighten
This summer, lamb supplies have been particularly tight in dropping to a three-year low. Federally-inspected harvest was an estimated 139,318 head in July, 7 percent lower monthly and down 2 percent year-on-year.
While lambs are coming out of Midwest feedlots, total volume is unknown. What we do know is estimates of lambs on feed in Colorado feedlots – the largest feeding state. At the beginning of August, 59,025 head were reported in Colorado feedlots – 64 percent of last August’s count and 83 percent of August’s five-year average.
Freezers catch excess inventory of both domestic and imported lamb. Lamb and mutton in cold storage averaged 40,007 head at the beginning of August, up 4 percent monthly and 24 percent higher year-on-year.
Total lamb imports January to June were 128.1 million lbs., up 19 percent year-on-year. Australia’s imports totaled 94.0 million lbs., up 19 percent and New Zealand’s imports totaled 33.0 million lbs., up 16 percent.
Only once – 2012 – in the past 10 years have annual lamb imports fallen year-on-year. Lamb demand in the United States continues to be strong, maintaining its attractiveness among competing global markets.
Estimated lamb harvest was 1.1 million head in January to July 2019, up 2 percent year-on-year. Estimated lamb harvest was 75 million lbs., down 2 percent year-on-year. Lighter harvest weights this summer can explain the shortfall in tonnage produced.
Average Yield Grades Higher
In the past five-plus years, the average percent of yield grades 4 and 5 in harvest tonnage has increased. In 2014, 20 percent of pounds harvested averaged 4 or 5, and in 2018 that average jumped to 29 percent. In the first six months of 2019, 30 percent of harvest was YG 4 or 5.
According to the USDA AMS, yield grade 4 is characterized as follows: “There usually is a very thick covering of fat over the back and a slightly thick covering over the shoulders and legs. There usually are large deposits of fat in the flanks and cod or udder.”
The additional fat deposits in a yield grade 4 or 5 lamb compared to a yield grade 2 means fewer retail cuts can be processed from the carcass. For example, 76 percent of a carcass will yield retail cuts from an YG 2 lamb. By comparison, a YG 4 or 5 lamb will yield 68 percent in retail cuts, 8 percent less. This 8 percent loss of lamb is a financial loss to the packer/processor. Not only is the slaughter lamb price offer lower, processing costs are higher – to remove excess fat – and the amount of salable product is reduced.
Trade War Affects Wool Exports
On Aug. 6, a Wall Street Journal headline read, “China Deals ‘Body Blow’ to Struggling U.S. Farm Belt.” China retaliated swiftly to President Donald J. Trump’s Aug. 1 proposal of adding 10 percent tariffs on another $300 billion in Chinese imports beginning Sept. 1. The Chinese government reported that it will suspend purchases of United States agricultural goods.
In 2017, Chinese buyers imported $19.5 billion in American farm goods, and $9.1 billion in 2018. In the first-half of 2019, the value of exports was down by an additional 20 percent year-on-year (The Wall Street Journal, 8/6/19).
United States-China tariffs affected raw wool exports to China, as well. In January to June, greasy raw wool exports (on a clean basis) to China dropped 47 percent in volume and 55 percent by value year-on-year. In January through June, raw wool exports – to all countries – were down 34 percent in kgs and down 14 percent by value. Some of China’s American wool imports were picked up by Egypt.
American Wool Season Slowed
The American wool season began this spring very good – with prices even higher than last year – but then by May slowed considerably. A “train wreck” was what one wool market participant called it.
Due to the 25-percent tariff imposed by China on raw wool exports, fewer Chinese buyers were interested in American wool, and price offers were sharply lower. Other buyers followed suit.
Prospective buyers from India were present, but also made discount offers, and U.S. buyers followed. By early August, there was still a significant volume of American wool left unsold. In general, wool growers would rather sell their wool than store it. The global wool market is already sensitive to global growth factors including the Chinese slowdown and European growth stagnation. Adding a trade war exacerbates marketing.
However, not all news is bad news. This year, American wools looked better than ever, a testament to growers’ increasing attention to preparation. Contamination from vegetable matter or hair is minimal.
There remains a segment of growers, however, that could add value by preparing wool beyond the bellies out step. Bellies out untied refers to a wool quality preparation option whereby belly wool is shorn and separated, but it can still contain other undesirable pieces of wool including sweat and dung locks.