Sheep Industry News December 2023

Market Report TYLER COZZENS, PH.D.

Livestock Marketing Information Center

Estimated Feeding Returns & Price Trends

A majority of lamb feeding in the United States oc curs in the state of Colorado. Typically, the number of lambs on feed will seasonally climb to the high est levels of the year during the fourth quarter. ASI funded the development of a modeling framework to determine estimated lamb feeding returns for a hypotheti cal lamb feeding operation in Colorado. The estimated lamb feeding returns data will be maintained and updated by the Livestock Marketing Information Center. The modeling framework assumes the operation places lambs that weigh 70 pounds and will be fed to a finish weight of 140 pounds. The estimated returns model as sumes a ration that consists primarily of corn and alfalfa hay. The purchase price for feeder lambs is based off the three-market average feeder lamb price (60 to 90 pounds) for Colorado, Texas and South Dakota. The slaughter lamb price used is the national negotiated live price. Both prices are reported by the U.S. Department of Agriculture’s Agri cultural Marketing Service. In March 2022, estimated lamb feeding returns turned negative and remained there for 15 consecutive months until June 2023, when returns were once again positive.

Rising feed costs were one of the factors that limited returns during the period of negative returns. Corn prices reached well into the $7 per bushel range with a few months over $8 per bushel. During that period, alfalfa hay prices started to climb from about $200 per ton and reached $280 per ton in May and June of this year. Prices for both corn and alfalfa hay have since moved lower with corn in the $5 per bushel range and alfalfa hay around $250 per ton in recent months. Prices for both corn and alfalfa hay moving lower in re cent months has provided relief on feed costs. On average, monthly feed costs were tracking around $0.65 per pound of gain in late 2022. In 2023, the average cost per pound of gain has trended lower with recent months around $0.50 – a nearly 23 percent decline from a year ago. The estimated returns modeling framework assumes that the lamb feeding operation purchases the 70-pound feeder lamb, which is another variable cost that must be accounted for in calculating estimated returns. In 2023, feeder lamb prices have tracked between $150 to $200 per cwt., which is similar to the five-year average price level. Seasonally, feeder lamb prices climb higher during the fourth quarter of the year. Fortunately, feed costs are expected to continue

trending lower, which should par tially offset the higher feeder lamb purchase price. Slaughter lamb prices continue to hold strong with recent weeks re maining counter seasonally higher around $200 per cwt. The typical seasonal pattern would see prices trend lower through the second half of the year. The strength in slaughter lamb prices is linked to a rising lamb cutout value, which has been around $460 to $470 per cwt. in late-October and into November. Typically, the five-year average indicates that the lamb cutout value holds steady during the second half of the year, around $400 per cwt. Values for the shoulder and leg have been trending higher

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