Sheep Industry News April 2022

Market Report BRIDGER FEUZ University of Wyoming

Record Prices Could Lead to Changes In Cull/Slaughter Ewe Marketing

O ften, producers don't think of cull or slaughter ewes as a marketing opportunity. Record high cull ewe prices this past year might have some producers thinking differently. There are numerous reasons that producers cull ewes from their flocks. Producers tend to get rid of ewes if they are open/dry, lame, bad bags, bad eyes, bad mothers or just too old. It is no wonder that when these ewes are ready to go down the road, producers are eager just to get rid of them. Producers are almost always culling ewes because of a problem. However, since these cull ewes make up, on average, between 15 and 25 percent of a flock each year, they can be a sizeable income source to an operation. Another important factor to consider relative to cull ewes is that often producers are making culling decisions at relatively the same time in the production cycle every year. This means that these cull ewes get marketed as slaughter ewes in higher volumes shortly after these production cycle times. In the Intermountain West, that generally translates to September and October. The timing will be different in other regions, but it is likely that the bulk of the slaughter ewes will be marketed in a two to three month time period for each region. Not surprising, the market price for slaughter ewes is often lowest during these same periods. It’s not a conspiracy, its simply that the supply of ewes during those periods drives the price down. While I had a sense that the cull/slaughter ewe market might be quite cyclical based on these and other factors, I had not delved further into the market until recently. Last fall, I worked with the Livestock Marketing Information Center to develop a seasonal price index for slaughter ewes at the Colorado auction. A seasonal price index looks at prices during a set time period – in this case 10 years – and essentially adjusts the average annual price to a value of 1.00. The seasonal price index then compares the monthly adjusted prices to the average annual price of 1.00. As I mentioned above, September and October are the highest volume months in the Intermountain West. The seasonal price index for slaughter ewes in Colorado in September is 0.91 and in October the index is 0.85. That means that September ewe prices are almost 10 percent below the annual average and October ewe prices are 15 percent below the annual average. Conversely, January, February and March are the highest months for the seasonal price index at 1.16, 1.15 and 1.07, respectively. So, while October is 15 percent below

the annual average, January is 16 percent above the annual average. Which means that the January price is generally 31 percent higher than the October price. You can see each month of the Colorado region on the seasonal price index chart (at right). Does that mean that all the producers in the Colorado region that market their cull ewes in September and October are making a bad marketing decision? The answer is not necessarily. Holding cull ewes after October in the Colorado region would require additional feed, labor and other resources. Additionally, keeping ewes around from October to January could increase the chance for death loss. However, if you could manage cull ewes on your operation efficiently, it might be something to consider. Keep in mind if everyone decided to shoot for the January average high, it would just shift the seasonal price index making January the new low month. While this seasonal price index is calculated for the Colorado region, other regions might also see similar highs and lows in the annual cycle. It is important to understand the cyclical nature of the market in your area, but many areas could take advantage of market ing cull ewes off the peak in the volume cycle. How do you know if it makes sense on your operation to hold/ feed ewes to try and take advantage of this seasonal price cycle? Let’s walk through a scenario where you decide to move your traditional cull ewe marketing date from Oct. 15 to Jan. 15, and your ewes weigh 180 lbs. • Assume the average price for slaughter ewes on Oct. 15 was $0.95 per pound. • Cull ewe value in October would be 180 lbs x $0.95 = $171 per head. • Assume conservatively we will see a 25 percent increase in the price on Jan. 15. • Assume we just maintain the weight of the ewes. • The new market price based on the conservative 25 percent increase would be $1.18. • Cull ewe value in January would then be 180 lbs. x $1.18 = $212.40 per head. • The value difference between January and October is $41.40 per head. The gross feeding/operating margin is $41.40 per head. That means if you can feed the ewes a maintenance diet with feeding,

6 • Sheep Industry News • sheepusa.org

Made with FlippingBook - Online Brochure Maker