Sheep Industry News May 2024

Market Report

DAVID ANDERSON, PH.D. Texas A&M AgriLife Extension Service

Demand Still Big Determinant For Market

N ow that we are past the Easter and other holiday mar kets, normal and seasonal price patterns usually suggest diverging market prices between heavier and lighter slaughter lambs. These seasonal price patterns are created by seasonal supplies and holiday needs. Demand is likely the most important factor going forward this year, followed by lamb sup plies. DEMAND IS KEY There are several factors worth considering when think ing about demand in the current market. Retail lamb price – or own-price in economist’s terms – indicates the amount people buy. When prices increase, consumers buy less, they reduce their quantity demanded. Growing (or shrinking) demand – often called a shift in demand by economists – is driven by several fac tors including: income, population, prices of competing meats, and changing consumer tastes and preferences. These demand shifters can be thought about in terms of today’s economy and its implications for lamb demand. It’s probably safe to say there are mixed signals in the economy. On the good side, gross domestic product – representing the size of the economy – is growing at better than 3 percent per year. Unemployment is historically low. Real wages adjusted for inflation are increasing. Historically, a growing economy and low unemployment boost demand. High and rising beef, pork and chicken prices likely help lamb from a competing meat standpoint. On the bad side, inflation and higher interest rates have taken a chunk out of people’s budgets. Some consumer’s budgets just don’t allow for spending on higher priced items. Personal savings are declining as a percent of dis posable income and consumer debt is rising. On balance, there is some underlying support for demand in the form of a growing economy, low unemployment and rising wages, and those three factors should provide some reason for optimism. But some consumers are, no doubt, priced out by high prices. Retail lamb prices as measured by the U.S. Department of Agriculture’s weekly retail featuring data indicate that prices increased from about $7.75 per pound in January to almost $10 per pound in March. But, the January retail featured lamb price was lower than the retail Choice beef price reported by USDA – suggesting that, at times, lamb can be competitively priced.

LAMB SUPPLIES LARGER Lamb production and slaughter exceeded year ago levels in the first quarter. Federally inspected lamb and yearling slaughter was 4.8 percent larger during the first quarter compared to a year ago. Mature sheep slaughter was up a whopping 8.4 percent. Weekly mature sheep slaughter doesn’t usually peak until April or May, so that high level might have some implications for ewe numbers going into next year. Lighter federally inspected dressed weights mitigated the effect of larger slaughter on lamb production. Lamb production was 1 percent larger in the first quarter than last year. Slaughter has likely peaked for the year, with weekly Federally inspected slaugh ter hitting just more than 44,000 head in mid-March. It should decline into mid-summer. Likewise, lamb production should decline in coming weeks, likely hitting below 2 million pounds per week by mid-summer.

On the price side, prices for lightweight, 60- to 90-pound slaughter lambs during the first quarter exceeded those of a year ago in almost every week, peaking at more than $260 per cwt. before Easter. Heavier, 100- to 150-pound slaughter lambs – whether mea sured using the national negotiated live or Sioux Falls markets – ranged from $60 to $100 per cwt. higher than those last year throughout the first quarter. Most wholesale cuts – with the notable exception of racks – had prices well above the depressed prices of a year ago. The fact that live lambs, the cutout and most wholesale cuts were able to achieve higher prices than a year ago in the face of larger lamb production and slaughter indicates some positive

6 • Sheep Industry News • sheepusa.org