Sheep Industry News July 2022

Market Report BRIDGER FEUZ University of Wyoming

MarketingWith Inflated Cost of Production

H aving just completed a large 1000+ mile circle through Wyoming the same week I am writing this article, there were a few things that stood out. I saw a lot of green grass, which was a welcome sight after last year's brown/grey spring. I also saw several bands of sheep both out on the range and in farm pastures with a good crop of lambs. Finally, with all that driving time I heard a lot about the current state of the economy and the issues with inflation on the radio. All of this got me to think ing about how the sheep industry – from the producer’s per spective – will fair with the current challenges of inflation. The feeder lamb market has been consistently strong with the three-market average price for 60 to 90 lb. lambs re maining above $200 per cwt. for more than a year now. The three-market average price for the first week of June 2022 was $248.07 per cwt. However – despite these strong prices for lambs – cost of production has also been steadily climb ing during that same time period. While determining prices received is relatively easy for producers, it can often times be more difficult to have a handle on an accurate cost of pro duction. With this in mind, I thought it would be interesting to look at average costs of production in comparison to the current prices. The U.S. Baseline Lamb Cost of Production Analysis: 2018 Update is a publication that seeks to provide the American sheep industry with periodically updated estimates regard ing the on-farm/ranch cost of lamb production. This pub lication can be found at SheepUSA.org. In this publication, cost of production budgets were generated by interviewing producers in the four regions of Western, Northcentral, Southcentral and Eastern United States. A national cost of

production budget was also generated from the four regions. These budgets represent an average of the producers interviewed, while your own cost of production might be very different from those reported. These budgets should not be used to calculate individual profit projections, but can be useful in looking at national averages. In 2018, the total cost of production estimate for each region was as follows: Western – $160.50 per ewe; North central – $157.44 per ewe; Southcentral – $134.13 per ewe; and Eastern – $180.59 per ewe. The national average cost of production from those four regions was $157.07 per ewe. Returns were also estimated for each region using a singular set of pricing assumptions for lambs and wool. It is important to note that individual producer returns could be significantly different from these estimates given differences in market timing, weights, end points, etc. The assump tions were standardized to create consistency in the budget analysis. That said, the return projections on a per ewe basis were as follows: Western – a loss of $15.67; Northcentral – a gain of $16.47; Southcentral – a loss of $1.55; and Eastern – a loss of $22.77. The national return was estimated at a loss of $6.20. The prices used to calculate these returns were the three-market average feeder lamb price of $1.81 per pound and the greased wool price of $1.75 per pound. Using the estimated returns, I calculated a break-even price per pound for 75-pound feeder lambs in each region in the table below. Using the regional budgets, the average price needed to break-even in 2018 ranged from $1.61 per pound to $2.13 per pound. The price needed to break-even using the national average budget was $1.90 per pound.

6 • Sheep Industry News • sheepusa.org