Sheep Industry News July 2023

Market Report

CHARLES MARTINEZ, PH.D. UNIVERSITY OF TENNESSEE

Back on Averages…For the Most Part

A s we get into the middle of summer, prices along the supply chain have maintained expected seasonal trends. Addi tionally, prices have begun hovering around the previous five-year averages. While prices are below last year’s levels, there is positivity in that prices seem to have found stability. RETAIL & WHOLESALE PRICES The one price series that has really gone against averages – and even last year’s price levels – is the all-lamb retail feature price. The all-lamb retail feature price went up from $8.03/lb. in April to $10.29/lb. in May. Historical trend does suggest that a price increase would be expected, but the rate of change to the $10.29/lb. price range is atypical. Through the first week of June, activity is still strong in the retail space with the activity index up 23.7 percent compared to the previ ous week and up 33.9 percent from the same time last year. The activity index measures the frequency of featuring activity equal to the total number of stores for each advertised lamb and veal item. For example, if a retailer with 100 outlets features four lamb and veal items, then it would have an activity index of 400. This is a strong signal of retailers pushing lamb in the meat cases throughout the country. The two big features at the retail level are roasts and chops. At the wholesale level, the net cutout is still holding steady at $434.38/per cwt., which is down compared to the average of April and May ($442.97/per cwt.). As a refresher, the cutout is the total value of a lamb carcass ($/per cwt.) based on the prices being paid for individual lamb primal cuts (i.e., rack, loin). The cutout is below

last year’s price level ($565.69/per cwt.), but still $52.92/per cwt. higher than the previous five-year average. But the gap between this year and the previous five-year average is narrowing. Unless there is an uptick in the cutout value – which is possible – the cutout will begin to start settling in on the average value. A big factor that will impact both the retail and wholesale prices, is the total supply of lamb product in the supply chain. Thus far through 2023, there have been 817,185 head slaughtered, which is 40,200 head higher than last year at this time. But the total amount thus far this year is still 56,000 head lower than the previous five-year average at this time of the year. While we are slaughtering more, we are slaughtering at smaller dressed weights. This year, the weekly average slaughter dressed weight is 64.5 pounds, which is 4.3 percent lower than last year and 6.2 percent lower than the previous five-year average. Thus, we have produced approximately the same total product as last year – which influences the steady cutout value – and much lower in total product compared to the previous five-year average. If the retail sector continues to remain above prior year price levels, we could see an uptick in wholesale prices, which will incentivize increased slaughter numbers. Surprisingly, Saturday slaughter total through May is at 26,440 head, which is 40 percent lower than this time last year and 82 per cent lower than the previous five-year average at this time of the year. SLAUGHTER & FEEDER PRICES Weekly negotiated slaughter lamb prices have continued their upward and five-year average trend. Through the end of May, the negotiated slaughter lamb price was at $156/per cwt., which is approximately $9/per cwt. below the previous five-year average. Usually, negotiated prices continue to increase and peak in July. The market seems to be on trend for this to happen again. If the trend holds true, $180/per cwt. seems to be around where we will peak in July. In the three-market average of Colo rado, South Dakota and Texas, 60- to 90-pound slaughter lamb prices are also holding steady at $178/per cwt. The prices in these markets historically remain steady through the summer and early fall. Thus, prices could remain around the $178/per cwt. level if everything remains constant. In San Angelo, Texas, wooled and shorn (100- to 150-pound slaughter lamb), have risen above the previous five-year average ($149.14/per cwt.) to $179/per cwt. In July of last year, prices in the San Angelo market were in the

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