Dakota State University -- NDSU Agriculture
7 Morrill Hall, Fargo ND, 58105-5655, Tel: 701-231-7881, Fax: 701-231-7044
Market Advisor: Lamb Prices Rebound From Last Year
By Tim Petry, Livestock Economist
Slaughter lamb prices in the Northern Plains were significantly higher in
mid-October, 2002, than in 2001.
USDA choice, wooled slaughter lambs were averaging $76 to $80 per
hundredweight compared to $46 to $50 last year -- a $30 per hundredweight
increase. Medium and large
frame No. 1 and No. 2, 70 to 90 pound, feeder lambs were about $78 to $83
per hundredweight this year compared to $58 to $63 last year -- a $20 per
Two obvious questions arise from these prices.
First, why are lamb prices sharply higher than last year?
Second, why have feeder lamb prices not increased as much relative to
slaughter lamb prices?
Slaughter lamb prices are not high by historic standards.
In fact, prices now are close to the previous five-year average.
Itís just that slaughter lamb prices were abnormally low in the
fall of 2001, due to several factors that affected agricultural commodity
prices in general and lamb prices specifically.
In May, 2001, the World Trade Organizationís (WTO) Appellate Body
overturned a 1999 decision by the U.S. International Trade Commission (ITC)
that imposed a tariff-rate quota on lamb shipped to the United States from
Australia and New Zealand. The
ruling eliminating tariffs that caused the imported product to be less
expensive compared to domestic lamb. By
midyear, a slowdown in the U.S. economy was evident. Since lamb is the highest-priced meat compared to beef, pork,
and chicken; it is the most impacted by poor economic times.
Consumers tend to substitute lower priced goods for higher priced goods
during recessions so lamb demand apparently suffered.
Everyone is still keenly aware of the terrorist acts of Sept. 11, 2001.
Lamb is typically served in the higher-priced , white table cloth
restaurants that depend on customers who are celebrating important events,
entertaining friends or relatives, and/or traveling.
The high-class restaurant business was severely impacted after Sept.
11. Furthermore, the U.S. East
Coast is a primary lamb-consuming area.
Each of these factors caused decreased demand for domestic lamb and
declining prices. Lamb prices
declined from the mid $80s per hundredweight in May to the mid $40s by
Whenever agricultural commodity prices fall dramatically, there is a
tendency by producers to hold market-ready commodities for higher prices.
This happened with cattle feedlots after Sept. 11, 2001, and the
higher carcass weights for fed steers and heifers have plagued the industry
ever since. The same thing occurred in the lamb feeding sector, but the
problem of over-finished (excessively fat) and record heavy slaughter lambs
began well before Sept. 11. In
fact, slaughter-ready lambs that should have been sold in the spring of 2001
were still in feedlots during the summer months, bolstering tonnage and
lowering carcass quality characteristics.
By October, lamb carcass weights were still averaging five pounds heavier
than in previous years. In November, about 18 percent of lambs were yield
grade 4 and 5 compared to an average of about 10 percent.
The extra lamb meat production due to excessive carcass weight
adversely impacted prices.
Unlike the beef industry, the lamb industry reduced slaughter weights
dramatically in 2002 to near the previous five-year average.
Two factors have reduced weights. First,
slaughter-ready lambs have not been backed-up. Second, drought has caused
producers in some regions to sell lambs early.
Live weights of slaughter lambs in mid-October, 2002, were averaging 131
pounds compared to 139 pounds the same time one year ago.
So, even when lamb slaughter has been above a year ago, lamb meat
production has been down. It also appears that the white tablecloth
restaurant business has returned to more normal conditions and slaughter
lamb prices are back to historic levels. Imports of lamb and mutton began to post much smaller
year-to-year increases beginning this past summer. Finally, the year-to-year increase in slaughter lamb prices
has been supported by stronger pelt values.
There are several reasons why feeder lamb prices are lagging behind the
slaughter lamb price recovery. Lamb
feeders suffered huge losses last year so they are reluctant to pay higher
prices for feeder lambs. Severe
drought in much of the western lamb producing area has caused high hay
prices and earlier-than-normal movement of lambs from pastures.
In addition, abnormally dry weather in much of the Corn Belt this
summer led to higher corn prices. Corn
prices in some of the Western lamb feeding areas are reported to be 75 cents
to $1 per bushel higher than last year.
So higher hay and feed grain prices are affecting what lamb feeders
are willing to pay for feeder
Looking to the future, slaughter lambs usually reach a seasonal low in
the fall when many lambs are sold. The seasonal price pattern then increases into March, suffers
a slight setback in April, and increases again and reaches a peak in the
summer months before declining into fall.
Barring unforeseen circumstances like those that occurred in 2001,
prices will likely follow normal seasonal patterns and range from the mid
$70s to the mid $80s per hundredweight in the next few months.
Imports from Australia and New Zealand and keeping carcass weights under
control will be keys to slaughter lamb prices in 2003.
Feeder lamb prices will likely strengthen in 2003 if the slaughter
lamb market remains strong and if corn prices do not surge.