Market Advisor: Lamb prices show seasonal strengthFARGO - Lamb prices have shown a strong seasonal price improvement during February and March. Prices at northern Plains markets for fed lambs have increased from about $100 per hundredweight (cwt) in early January to more than $120 per cwt in mid- March. The strength in prices was due to both lower supplies of lambs and stronger ethnic and holiday demand for lamb meat.
By: Tim Petry, NDSU Extension Service, INFORUM
FARGO - Lamb prices have shown a strong seasonal price improvement during February and March. Prices at northern Plains markets for fed lambs have increased from about $100 per hundredweight (cwt) in early January to more than $120 per cwt in mid- March. The strength in prices was due to both lower supplies of lambs and stronger ethnic and holiday demand for lamb meat.
Lamb and yearling slaughter numbers are down about 2 percent from last year. Commercial lamb production is expected to be down more than 2 percent in 2010 because fewer lambs are available and the lambs have a slightly lower average dressed weight.
Lamb imports were down 16 percent from last year in January, which is a trend that started in 2008. After many years of increasing lamb imports and reaching a record high of more than 159 million pounds in 2007, imports declined almost 13 percent in 2008 and another 1 percent in 2009.
Australia and New Zealand are our two biggest suppliers of lamb meat. Typically, Australia supplies about 70 percent and New Zealand provides about 30 percent of our imported lamb. In 2009, imports from Australia increased almost 5 percent, but New Zealand decreased shipments by more than 12 percent.
Sheep numbers in New Zealand have been declining due to a variety of factors, such as the elimination of government subsidies, low wool prices, drought and competition from a more profitable dairy sector.
2009 lamb imports from New Zealand also declined due to a strong increase in the New Zealand dollar compared with the U.S. dollar. This makes imported New Zealand lamb much more expensive in the U.S.
A U.S. and worldwide economic meltdown resulted in lackluster demand and a contra-seasonal decline in slaughter lamb prices during the first four months of 2009. This year, prices are showing a greater than normal seasonal strength.
A number of religious and ethnic holidays where lamb traditionally is served occur during this time of the year. And some evidence suggests that a trend toward consuming more ethnic food is developing in the U.S.
The Chinese New Year was celebrated in mid-February. Chinese Americans are noted for consuming pork and poultry, but some also consume lamb as a holiday tradition.
Mawlid al-Nabi is a birthday celebration for the Prophet Muhammad, founder of Islam. Lamb is a traditional meal for that celebration, which occurred on Feb. 26.
The Jewish Passover celebration is March 30 through April 5 and the Christian Easter holiday falls on April 4. Both are important lamb consumption events.
The national lamb cutout value has increased mainly on the strength of lamb shoulder and leg prices, which are typical cuts that are served at home as holiday meals. Wholesale boxed legs are selling for about $325 per cwt compared with $270 per cwt last year.
Shoulder prices held up well last year because they are one of the lowest priced primal cuts, so it is more affordable during poor economic times. Prices are even higher this year due to the demand.
There is evidence that the struggling U.S. economy still is having an impact on the white tablecloth restaurant market. Boxed lamb loin prices are near last year's depressed levels and rack prices are even below last year. Boxed light- rack prices are near $510 per cwt compared with $535 per cwt last year and the previous five-year average of about $600 per cwt.
Racks tend to be a favorite menu item at expensive restaurants.
Feeder lamb prices also have increased seasonally as corn prices have moderated and slaughter lamb prices have increased.
The U.S. Department of Agriculture's National Agriculture Statistics Service released its annual sheep and goat inventory report on Jan. 29. According to the report, there was a total of 5.63 million head of sheep and lambs in the U.S., which is 2 percent less than in 2009. Drought in the Southwest from Texas through California and increasing predator losses in the Mountain states were reasons for the declining flock.
Some expansion in sheep flocks may occur this year because the number of replacement lambs 1 year and younger totaled 655,000 head, which is 1 percent more than last year. Furthermore, moisture conditions in the Southwest have improved and higher prices will be supportive as well.
Lamb prices will not continue to increase throughout the year at the same rate they have for the last couple of months. The historic seasonal price pattern for fed lambs shows a peak after the spring holidays are over, with a general decline into the heavy fall marketing period. However, prices likely will average above last year's levels.
Feeder lamb prices usually reach a seasonal peak before fed lambs. Prices for feeder lambs in the fall marketing period should be above last year but will be influenced by the size of the corn crop and the resulting corn prices.
Petry is a livestock marketing economist with the NDSU Extension Service.