Sheep: Lamb outlook strong

Morrical: Imports are putting a cap on local price

-File photo Ewes graze in a pasture near Coon Rapids. Although flock and ewe numbers are down in Iowa, flock sizes are reported bigger than in recent history.

AMES — Lamb production in the U.S. remains strong and prices are holding their own despite the strong dollar, according to Iowa State University Extension sheep specialist Dan Morrical.

With more than half of the lamb consumed in the U.S. being imported, he said lamb can come into our country and still be competitive because of the strong U.S. dollar.

“Imported lamb is somewhat putting a cap on the lamb price in this country,” said Morrical, “but the lamb market is still very strong.”

That statement is backed by the fact that market lambs are bringing $1.35 to $1.50 live, he said, and that beef and swine producers are receiving much less per pound for their product. Input prices are also lining up with market prices.

Morrical said if there is a problem to be identified in the sheep industry, it would be seasonality — with most lambs being born in the spring and going to market from fall through Easter. He said that biology gluts the market with sheep all at once, driving the price down.

-File photo The outlook for the lamb market is strong, despite large import numbers. There are no reports of over-sized lambs to over-burden he supply pipeline.

Warehousing sheep on grass or other forages helps, he said, however lambs may gain too well and get too heavy.

But the good news is that there is currently no oversupply of big lambs — those weighing in the 200-pound range. He said several years ago, when the sheep market crashed, the average kill weights were almost 200 pounds, sending market prices plummeting.

Morrical said once there is a “hiccup” in the market, it affects prices for the remainder of the year.

Morrical said Jan. 1 inventory declined 2 percent nationally, while Iowa numbers held steady at 175,000.

Iowa’s producers have a 125 percent lamb crop, with Minnesota having the highest state average at 129 percent. Morrical said those numbers are far better than the national average of 105 percent. He said Texas has the most ewes, but one of the poorest lamb crops at 76.8 percent.

-File photo Dr. Dan Morrical, in red hat, greets farmers in this February 2015 file photo during a lambing workshop held on the Dave Laughton farm near Le Mars. Morrical said U.S. demand for lamb is strong.

The sheep industry is looking to bring national lamb crop numbers up to a 1.5 average in a three-year period. Morrical said that can’t be achieved through genetics due to the long generation interval, and said it can’t be done in three years as the reproductive management of the nation’s 77,000 sheep flocks is complex.

However, he said the lamb crop will never be improved if it is not a priority.

“Our production system (in Iowa) is more expensive, so we have to have a better lamb crop,” he said. “It’s the No. 1 factor in determining profit.”

He said bringing national lamb numbers up could mean more lamb meat than consumers could buy, but he said there is also a benefit lurking there.

“If we could increase our productivity that much, it decreases our cost of production, which increases our ability to compete with import, so we know that if we increase productivity, it will decrease price.

“But if we increase productivity in that way, we will still be able to make money even at a lower price.”

Demand for lamb

According to Morrical, the biggest change seen over the past decade has been the immigrant population, which tends to consume lamb and goat meat. He said they prefer lambs that weigh 80 to 90 pounds. He calls that the “ethnic market.”

Morrical said some producers have gone to raising hair sheep genetics because their size easily fits that niche market.

He said that ethnic market consumes between 25 to 33 percent of all U.S.-produced lambs.

“That has changed the whole industry as people have shifted from traditional wool sheep (of the Midwest and Eastern states), and sold into the ethnic market,” Morrical said. “Those lambs are no longer being born (January through March) and sold in the summer and early fall.

“That’s created even more angst on our supply because now we’re counting more heavily on range operations that lamb in April and May, and it’s increased our concentration of that supply.”

Morrical said most lamb meat is consumed on the East Coast, but as the palate of the U.S. consumer has changed, people are more daring in what they eat — consuming on a regular basis food that is native to people all around the world.

But lamb fits into a niche market that is seeking an alternative protein source with a rich, unique flavor.

“As we become more daring in what we eat today, lamb becomes something that people are more willing to try,” he said, adding that lamb is a more expensive protein. “But Americans are more affluent than they used to be, and can better afford to buy it now.”

He said producers are figuring out how to effectively manage large sheep flocks and that there is room for growth in the industry. But he said sheep producers need to be cautious about how big they get because even the newer ethnic market that has opened up can be overrun with supply.

An oversupply leads to plummeting market prices unless producers have an actual marketing plan, which Morrical said is important for all producers, but especially for those planning to expand exponentially.

“We kill less than 40,000 lambs per week. The sheep industry size magnitude is not there,” he said, “so any little blip in the supply can really cause us some consternation.

“I don’t discourage (producers) from getting bigger, but I do caution them that they need to know how they are going to market their lambs. It’s really important.”

Morrical said sheep flocks in Iowa are getting larger, with fewer flocks operating. He said at one time Iowa had 20,000 flocks and today there are closer to 3,000 flocks.

But he said the state has also gone from 450,000 ewes to 125,000 ewes.

The average flock size has doubled from 30 ewes to 60 ewes.

“There are a lot more operations that have 200 to 300, up to 1,000 or even 2,000 ewes,” Morrical said.

Changing industry

Morrical said he sees value-based marketing as something that would help producers do a better job of growing lambs that cut out well.

That process calls for an electronic ear tag that would identify the lamb’s owner, and the grower would be paid according to its carcass cut-out value as per the new Vision grading system.

He said the American Lamb Board has invested a quarter of a million dollars with two packers to put the Vision Grading System in place. It takes two images of the lamb carcass on the rail–one from the back (looking down from the top on a live lamb) and one from the side.

Based on those images and the carcass weight, formulas are used to determine the percent of lean yield value.

“It’s new technology and it hasn’t been as smooth to adapt as we would have liked,” Morrical said. “USDA has not given full blessing on its accuracy to base our prices off of it, so we’re still working with the USDA grader’s call.

“But we’re moving in that direction.”