AMERICANS consume far less lamb today than they have at any point in the past 100 years.
According to data from the U.S. Department of Agriculture's Economic Research Service (ERS), per capita consumption of boneless American lamb in 2012 was 0.31 lb., down from nearly 4.9 lb. prior to World War I (Figure 1).
Even so, lamb prices have been fairly strong in recent years, which may actually put the industry at a competitive disadvantage, according to the recently released "American Lamb Industry Roadmap Project," a study conducted by The Hale Group on behalf of the industry.
The report — "designed to identify and analyze the major challenges facing the American lamb industry (and) to propose the most effective solutions to those challenges" — notes that in 2010, retail lamb prices represented a 43% premium to beef, an 85% premium to pork and a 229% premium to chicken (Figure 2).
While the beef industry is currently facing the challenge of record retail prices potentially driving cost-conscious consumers to more budget-friendly proteins, the beef industry at least has a well-established and relatively well-funded marketing and promotion apparatus in place. The Hale report points out that the limited funds available for promoting American lamb are one of several issues plaguing the industry.
Also, similar to a concurrent discussion on the need for a quality grading system in the pork sector (Feedstuffs, Dec. 23), the lamb industry roadmap points out that lamb meat quality is "quite variable," particularly in terms of fat cover, and that imported lamb is a more consistent product. Imports, in fact, were roughly equivalent to the volume of U.S. production in 2012, according to ERS data.
With wildly variable profitability in recent years, U.S. lamb production has fallen sharply. Since 1980, domestic production has dropped by more than 150 million lb. on a carcass-weight basis, while imports have grown by more than 100 million lb.
The challenge of promoting domestic lamb versus a more consistent imported product is significant: The American Lamb Board's marketing and promotion functions are funded by an annual budget of $2.5 million, compared with Australia's budget for lamb promotion in the U.S. of $6.7 million, according to the Hale report.
While calling for "aggressive change," the lamb roadmap concludes that for the traditional U.S. lamb industry to experience growth and consistent profitability, the industry needs to drive "dramatic reductions in fat content of lamb and improvement in product consistency," perhaps by moving to a system where the majority of lambs are sold on a value-based pricing system.
"Producers must view themselves as being primarily in the meat business, not primarily in the lamb or wool business," the roadmap says. "All industry participants must be paid based on quality, not just quantity."
The report also calls on the sheep industry to make productivity improvements rapidly to "make up for lost time" in comparison to foreign producers. To do so, the report's authors said lamb producers must make decisions "based on the numbers" and sound analysis, not based on tradition or intuition.
According to a report from USDA's Agricultural Marketing Service (AMS), in the 10 weeks following Sept. 1 — and following USDA "bonus" purchases of U.S. lamb products — the lamb carcass cutout made a 117% increase in value. The last time the cutout posted such a significant gain during a comparable 10-week period was three years ago, when the cutout rose 120% between Jan. 28 and May 6, 2011.
"That rapid increase was attributable to demand for lamb legs for the Easter marketing period, the single largest marketing period of the year for lamb cuts," the AMS report explains. "At that time, the leg primal value, fully one-third of the value of a lamb carcass, increased by 124%. Lamb meat supplies were reduced at that time as fewer lambs were processed and at lighter average dressed weights."
Toward the end of 2011, however, the pendulum began to swing the other way. During an 18-month period, lamb weights increased, "resulting in the production of heavier, over-finished and less desirable lamb meat," according to AMS; it said the shift in quality placed domestic lamb producers at a disadvantage to imported products in the marketplace.
The net result was a decline in market prices for lamb meat over the 18-month stretch, culminating in a 17% decline in the value of the lamb cutout from the peak level it had achieved on May 6, 2011, driven by a 37% decline in the value of leg cuts.
However, lamb producers took measures to correct the situation by reducing lamb weights and producing more desirable lamb products. Even so, a backlog of product in cold storage continued to hamper the market.
In an effort to help reduce this extra inventory, AMS conducted three bonus-buy surplus removals, the most recent including 1.1 million lb. of product (two-thirds leg cuts and one-third shoulder cuts) beginning in August 2013.
With holiday buyers coming into the marketplace — the Thanksgiving/Christmas season is second only to the Easter season in terms of driving demand for lamb — they found a reduced supply of cuts of desirable weight and quality as well as imported lamb that was far more competitive than in the prior year.
Competition in the spot market for available supplies of lamb cuts quickly heated up, and lamb prices rose sharply. Led by a 163% increase in the value of lamb racks, the lamb cutout jumped 117% in 10 weeks and was just shy of $331/cwt. on Dec. 24, up from $272 during the same week a year ago.