Sheep Industry News November 2021

ample, 60- to 70-lb. lambs averaged $279.65 per cwt., 70- to 80-lbs. aver aged $264.61 per cwt., 80- to 90-lb. saw $266.80 per cwt., 90- to 100-lbs. averaged $263.44 per cwt., and 100- to 150-lbs. averaged $255.23 per cwt. In 2022, it is expected that the tight lamb supply situation will per sist. In theory, if lamb demand ex ceeds supply, then there is room for lamb prices at retail and foodservice to move higher. It is expected, how ever, that American lamb demand will be tempered by a substitution of imported lamb for American prod uct. There are also macroeconomic factors that might mitigate further lamb demand growth.

POTENTIAL MACROECONOMIC HEADWINDS

lamb liveweights at harvest have declined. In August and September, liveweights in Federally Inspected harvest averaged 119 lbs., down 5 percent from the same period in 2020 and 12 percent lower than the 2015-2019, five-year average of 135 lbs. At the beginning of October, 260,933 head of lambs were reported in Colorado feedlots – 30 percent higher than October 2020 and 16 percent higher than October’s five-year average. There are several possible explanations. The industry is further consolidating feedlots in Colorado, numbers are up at Double J Lamb Feeders (with their new processing facility in Texas), volume is building in anticipation of a particularly high-demand December sales, and there is some slowdown in harvest and numbers are building. Lamb imports totaled 172.8 million lbs. January to August, up 24 percent year-on-year. In this period, Australian imports were up 19 percent to 127.2 million lbs. and New Zealand imports were up 39 percent to 42.9 million lbs. Mutton imports were down 23 percent to 54.7 million lbs., of which Australian mutton imports were down 29 percent to 47.4 mil lion lbs. and New Zealand mutton imports were up 45 percent to 6.1 million lbs. In January to August, mutton exports totaled 1.83 million lbs., down 87 percent year-on-year. Lamb exports totaled 255,000 lbs., down 18 percent year-on-year. There might be multiple reasons for lower lamb and mutton exports, including domestic record-high prices. It is expected that lower lamb and mutton exports reflect the strong lamb and mut ton domestic markets. Since the advent of COVID-19, adult sheep slaughter has increased while lamb harvest has declined. Adult sheep harvest was about 6 percent of lamb harvest in April 2020 and climbed to 10 percent in August 2021. As the price of lamb in creased, the production of mutton increased to provide a more com-

Real or perceived reductions in domestic incomes might put a damper on lamb demand in coming months. Previous research by ASI found that income is a significant positive correlation with lamb demand. Further, a recent Survey of Consumers by the University of Michigan reports that inflationary concerns in coming months will be “driven by an income psychology.” This means that if consumers feel that their dollar won’t go as far due to higher-priced goods, then they effectively feel as if their incomes have contracted. The Univer sity of Michigan also found that surveyed consumers complained about “lower living standards due to inflation.” The Survey of Consumers reports that expectations of household incomes for the top third of consumers are expected to fall in the year ahead. Lamb is typically a higher-priced protein – often a luxury item – and many consumers are price sensitive so this macroeco nomic phenomenon could adversely affect lamb demand into the new year. The August Survey of Consumers revealed the, “least favorable economic prospects in more than a decade." Although consumer economic expectations might improve, due to the “emotional im pact,” consumer spending might slow for some time. DOMESTIC PRODUCTION LOWERS; IMPORTS UP In January through September, estimated lamb harvest was 1.32 million head, down 1 percent year-on-year. Estimated lamb produc tion January to September was 60.95 million lbs., down 4 percent year-on-year. Freezer inventory is relatively low. Lamb and mutton in cold storage totaled 22 million lbs., up 5 percent monthly and down 44 percent year-on-year. Lower harvest numbers combined with lower harvest weights yields lower production volume. As lamb demand has expanded,

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