March 6, 2003

 

Market Advisor: Drought Conditions Negatively Impact Sheep Numbers

By Tim Petry, Livestock Economist
NDSU Extension Service

The inventory of sheep and lambs in the United States on Jan. 1 totaled 6.35 million head, according to the USDA National Agricultural Statistics Service’s Sheep and Goats report released on Jan. 31. Numbers of sheep and lambs were down five percent from 2002 and nine percent from 2001.

Sheep numbers have generally been declining since 1942 when numbers peaked at 56.2 million head, but last year’s decline was fueled by severe drought conditions in many Western sheep-producing states. A higher-than-normal liquidation of breeding ewes and earlier movement of feeder lambs to market occurred during the summer and into the fall of 2002 in those states.

The number of ewes one year and older was 5 percent lower than 2002, compared to a 2.7 percent decline the previous year. Ewe numbers declined 25,000 head in Wyoming, 19,000 in Montana, 15,000 in Colorado, and 8,000 head in North Dakota because those states experienced some of the worst drought conditions. Interestingly, South Dakota also experienced very dry weather, but ewe numbers remained the same as the previous year.

The USDA Economic Research Service is projecting 2003 commercial lamb and mutton production to be 208 million pounds, down 11 million pounds or 5 percent from last year. Imports are projected to increase nine million pounds, so two million fewer pounds of lamb and mutton may be available to consumers. Lower supplies would be supportive to lamb prices as long as an unforeseen factor does not adversely affect demand.

A key factor affecting the ultimate accuracy of these projections is weather, both in the United States and Australia. If severe drought conditions continue in the Western U.S. sheep-producing area, continued forced liquidation will occur and production would increase. A return to more normal weather conditions would likely create interest in retaining ewe lambs for breeding purposes. Other factors favoring retention of ewe lambs are current favorable market prices and because this is the last year for sheep producers to utilize the USDA ewe lamb retention program.

Australia, the supplier of about 60 percent of U.S. lamb imports, has also been suffering extreme drought conditions in major lamb-producing regions. Flocks have been liquidated and poor pasture conditions have caused lambs to be marketed at lighter weights. Lamb imports from Australia in 2002 were essentially unchanged from the previous year, while favorable U.S. prices would normally have caused trade volumes to increase. Much of the increase in U.S. lamb imports last year came from New Zealand. New Zealand redirected exports that typically would have went to European countries to the U.S. because of stronger demand here.

Lamb prices should follow normal seasonal price patterns in 2003. Peak demand for lamb usually occurs during the religious holidays in April. USDA is predicting prices for slaughter lambs to remain near current levels until the holidays, and then average in the low to mid $80 per hundredweight for the next several months. A strong export market for pelts has been supportive to lamb prices and that will need to continue for lamb prices to maintain strength.

The demand for feeder lambs should remain good, but will be affected by Corn Belt weather and resulting corn prices. Parts of the Corn Belt are experiencing dry conditions, so spring rainfall will be important for a good corn crop to occur.

The market for lamb has developed into a specialty market compared to the higher volume beef, pork and chicken meat commodities. Lamb producers should keep in mind that relatively small changes in either supply or demand cause much larger changes in prices. The Middle East is a major destination for lamb exports from Australia and New Zealand. Turkey is the most important export market for U.S. pelts. If a prolonged military action in that region were to occur, lamb and pelt exports would likely be disrupted which could adversely impact lamb prices.

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Source: Tim Petry, (701) 231-7469, tpetry@ndsuext.nodak.edu
Editor: Tom Jirik, (701) 231-9629, tjirik@ndsuext.nodak.edu