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Market Advisor: Lamb Prices to Continue Strong

Higher prices are being fueled by shorter supplies of lambs and strong demand for lamb and byproducts.

By Tim Petry, Livestock Marketing Economist

NDSU Extension Service

Lamb prices set a record high in 2010, which is welcome news for producers after the last several years of depressed prices. The last record high year for slaughter-lamb prices was 2005. The 2010 prices exceeded that old record by more than 15 percent. Slaughter-lamb prices were 25 percent higher than the depressed prices of 2009, and feeder-lamb prices were 33 percent higher.

Higher prices are being fueled by shorter supplies of lambs and strong demand for lamb and byproducts.

Lamb and mutton production for 2010 was 163 million pounds, which was down from the 171 million pounds in 2009 and down from 187 million pounds in 2005. Total lamb and mutton imports were 169 million pounds in 2010, down 2 million pounds from 171 million pounds recorded last year. This decrease, coupled with the 8 million pound decline in production this year, means lamb availability in the U.S. declined by 10 million pounds.

A U.S. and world economic meltdown resulted in lackluster demand for lambs in 2009. Fed-lamb prices at major markets in the northern Plains started 2010 at around $100 per hundredweight and steadily increased throughout the year to about $160 per hundredweight. Fed-lamb prices usually peak seasonally in midsummer and then decline the rest of the year. Last year, prices continued to increase in the last half of the year.

Early in the year, lamb prices were bolstered by a stronger demand for the religious/ethnic holidays, such as Mawlid al-Nabi, Passover and Easter. Both wholesale lamb shoulder and leg prices, which are typical cuts served at home during the holidays, strengthened nicely compared with year-earlier levels.

However, the struggling U.S. economy continued to impact the white tablecloth restaurant market. Both wholesale loin and rack prices, which are typical restaurant menu items, were even below the depressed levels recorded in 2009. However, by the fourth quarter, loin and rack prices improved nicely, with loins trading about 50 percent higher and racks commanding more than 60 percent higher prices than in 2009. This signaled a welcome return of the restaurant business.

Lamb byproduct prices are very dependent on the export market. Byproduct prices increased nicely as the value of the U.S. dollar declined and the economies of other countries recovered faster than in the U.S. For example, lamb pelt prices began 2010 at $4.50 and ended the year at $9.

In spite of corn prices rising more than 50 percent compared with last year, feeder lamb prices responded favorably to increasing fed-lamb prices. Ninety-pound feeder-lamb prices started the year at about $115 per hundredweight and increased to near $175 by year’s end.

What is ahead for lamb prices in 2011?

Domestic lamb and mutton production is expected to decline about 3 percent as both slaughter numbers and dressed weights decline. The U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS) reported that on July 1 there were 3 percent fewer ewes 1 year and older and 2 percent fewer replacement lambs on U.S. farms and ranches than a year ago. NASS will release sheep and lamb numbers as of Jan. 1 on Jan 28. It will be interesting to see if higher prices in the last half of 2010 stimulated any interest in retaining more ewe lambs.

High U.S. lamb prices could stimulate more imports next year, but imports likely will be held in check by a continued weakness in the U.S. dollar and the economies in other lamb-importing countries improving faster than in the U.S. Australia, our largest supplier of lamb, is in a flock- rebuilding phase after several years of drought, so production is down. Lamb imports from Australia in 2010 were down 7 percent.

A 3 percent decline in lamb production and a 3 percent increase in imports in 2011 would leave U.S. lamb supplies almost equal to 2010 but down from 2009 and many previous years.

On the demand side, ethnic and holiday demand for lamb is expected to stay strong. The U.S. economy is recovering slowly, but unemployment is expected to stay at historically high levels in 2011. Lamb prices may be near the last half of 2010 levels in 2011. However, if normal seasonal price patterns develop, lamb prices could be lower than 2010 by the fall of 2011.

Volatility in all agricultural prices, including feed grains and lambs, can be expected in 2011, so lamb feeders may want to consider price risk management strategies for both corn and lambs.

NDSU Agriculture Communication - Jan. 19, 2011

Source:Tim Petry, (701) 231-1059,
Editor:Rich Mattern, (701) 231-6136,
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