US lamb price collapse creating headwinds

Nutrien Ag Solutions sheep farm.

Regular readers will know that we like to keep a close eye on the US imported lamb market, as it can dictate how much local processors are willing to pay. Our lamb competes with domestically produced lamb in the US.

US lamb prices had been running hot for the best part of a year up until May 2022.  Lamb in Sioux Falls, South Dakota, were quoted at $230/100lb lwt.  This seems a strange way of the quoting the price, but in essence it is 230¢/lb lwt, which converts to 510¢/kg lwt. 

In May the Aussie dollar was at around 70US¢ so the lamb price in the US was 728Au¢/kg, or 1584¢/kg cwt.  The US lamb price was nearly double Aussie lambs at that time.  Little wonder the US were taking as much of our lamb as we could process.

Figure 1 shows things have changed for US lamb producers.  Between May and August US lamb prices more than halved, before recovering some ground in September and October.  The lower AUD has cushioned some of the fall in our terms, but US lamb is now back at 935¢/kg cwt.  Still more expensive than our lambs, but not by nearly as much.

The reasons for the US lamb prices relate to supply and demand, as they always do.  According to Steiner, a recession looming in the US is causing foodservice traffic to slow, and lamb is a higher value meat in the US.  Additionally US beef prices have been easing, taking lamb lower with it.

On the supply side, there is a temporary flush in lamb supply as the US move into winter and lambs exit feedlots.

So far the fall in US lamb prices hasn’t really impacted imported lamb values.  Figure 2 shows the price of fresh racks and frozen legs imported from Australia.  The higher value rack price dipped a little in September, but has recovered most of that to remain well above last year’s levels.  Legs are cheaper than last year, and earlier this year, which will be taking some of the cream off processor margins.

What does it mean?

Falling US lamb prices aren’t disastrous for us, as they have come back to a level still higher than our values.  The reasons for the fall might pose some headwinds, with weaker demand for lamb in general not great for our exports.

There shouldn’t be too much pressure from export prices on lamb values yet, but there was a lot more upside when US lamb prices were running hot, which has now disappated

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Key Points

  • US lamb prices have more than halved since May
  • Lambs are still more expensive in the US than here, but the spread is much narrower.
  • Falling US lamb values haven’t impacted our export prices too much yet, but upside is limited.

Click on figure to expand

Data sources: MLA, steiner

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