Sheep Industry News January 2023

Market Report

CHARLEY MARTINEZ, PH.D. University of Tennessee

2023 BeginsWith Atypical Times

A s we close 2022 and enter 2023, producers and mar ket participants have sustained periods of drought in 2022 (some might still be in drought), varying prices in respective markets, interest rate hikes, increased input costs, increased inflation and other non-typical factors. In usual years, the first quarter opens up on the heels of in creased lamb production in the preceding fourth quarter. At the time of this writing, production has continued its non-increasing pattern since May. We typically lose a few slaughter days during December due to the holidays, thus production probably won’t increase and 2023 will begin with low, atypical production levels. Moving into 2023, all segments in the industry will begin the year in unusual circumstances. PRICES AND SLAUGHTER A key driver of slaughter and production is the wholesale market and, in particular, the lamb cutout value. The cutout val ue is the weighted average of all the primal cuts for a given lamb carcass. In 2022, the highest cutout value was $617.53 per cwt in the first quarter. But since then, the cutout value has steadily decreased to $479.73 per cwt., which is down approximately 29

percent from a year ago. While the cutout has decreased, it’s still approximately $127.30 per cwt. higher than the previous five year average. Lamb at the retail level is seeing a featuring rate at 11.3 percent, which is down from the 13.2-percent featuring rate a year ago. Rack prices were up $1.28 per lb. from a year ago, and shanks were up $4.00 per lb. from a year ago. But inflation is pressuring consumer demand and consumption at the meat case. The cutout is derived from retail prices and other avenues of demand. Through 2022 and entering 2023, retail prices have sustained inflation increases, while exports of American lamb have increased. These two factors will be crucial in the wholesale market from a demand standpoint. On the supply side of the wholesale market, lamb and yearling slaughter liveweights have a four-week average of 125.5 lbs. with dressed weights having a four-week average of 63.75 lbs. Dur ing that same four-week time span, lamb and mature slaughter has averaged 33,100 head per week and 2,000 head per week, respectively. It’s important to note that the holidays will bring down the average as 2022 closes and 2023 begins. If prices in the lamb cutout market were to ramp up, lamb slaughter levels might pick up. The latest U.S. Department of Agri

culture/Agricultural Marketing Service Colorado lambs on feed data indicates that there are 193,350 head in the feedlots. This puts the number on feed at approximately 26 percent lower than a year ago and 25,600 head lower than the previous five-year average. Fewer lambs on feed combined with falling dressed weights suggests tighter supplies to come on the supply side, which might spark some increased live lamb prices in the supply chain. IMPORTS AND COLD STORAGE Lamb meat imports have totaled 232.6 million pounds in 2022, through Octo ber. That is a 5-percent increase from last year during the same period. The increase

See MARKET REPORT on Page 8

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