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By Colleen Schreiber SAN ANGELO — Sheep numbers in the U.S., and even worldwide, are at unprecedented low levels. This dramatic decline in supply has led to higher prices and thus been positive for producers, but it puts lamb packers and processors in a precarious position. Among them is Ranchers’ Lamb of Texas, the state-of-the-art San Angelo packing plant established by sheep producers themselves. The high lamb prices of recent years have been great for growers, but Ranchers’ Lamb plant manager Ken Emrick is encouraging West Texas sheepmen to look beyond the here and now. "If you’re selling your lambs elsewhere, take whatever extra money you’re getting for your lambs and put it in a jar," Emrick says. "It won’t take long after this plant is closed for that jar to be emptied, and by then it will be too late. You and everyone else in West Texas will be out of the sheep business. "You might think getting a few cents more for your lambs is a great deal now," he adds, "but after this plant is closed, you won’t have us to use against them." Emrick is speaking hypothetically, of course, but he insists the hypothetical could become reality. "It’s a struggle. It’s a monthly, weekly, daily, hourly struggle, but we’re still here," Emrick says. "Everyone has a number of lambs they think they need to run through their plant to make money, and we’re all bound and determined to get to that number, but there just aren’t enough lambs to go around, so we’ll just keep losing money until someone closes or someone merges or someone buys someone else out, and that will happen," he insists. Emrick is the third manager to take over Ranchers’ Lamb. He’s been in the lamb business most of his professional career. Prior to coming to Ranchers’, he ran Grove Packing Co., a small family-owned company out of Chicago that processed lambs only. Emrick has been at Ranchers’ right at a year now, but it’s his second tour of duty in San Angelo. He worked at the Monfort plant here in the 1980s. "There’s not a lot of sheep left here," Emrick says. "Most of those who were here in the 1980s are all out of the business, and the ones who are left have gone through these cycles of lambs bringing from 20 cents to a dollar." The market is where it is, he reiterates, because of supply, not because of demand for the lamb product. "Demand for lamb is very, very small," he points out. Last week Ranchers’ killed 5300 lambs, a good number, Emrick says. He figures they need to kill 4500 lambs a week to get close to breakeven range, but because numbers in West Texas are so short they had been going out of state to secure much of that supply. "I’ve been here for a year now, and two or three weeks in July we made money buying lambs from out of state," Emrick says. "The other 49 weeks we broke even at best. There are too many packers competing for too few lambs, and those too few lambs are in a few hands. "We tried competing with them. We knew we were losing money on them, but we justified it because we were lowering overall plant expenses. We kept thinking that if we only kill 3500, we’re going to lose money, but what we discovered was if we killed 4500 we lost more money. "It didn’t take long to realize that buying lambs just to keep the plant running at or near capacity was the incorrect thing to do," Emrick remarks. "If you can’t buy them somewhere close to that profit/loss area, forget it. Go home, lose your money, take your beating." In a perfect marketing system, if there were such a thing, all segments of the lamb industry would make money. Emrick figures a $1.65 to $1.70 carcass f.o.b. the plant, which equates back to about an 80-cent lamb, would be close to what a producer and packer would need to make money. But the market has been favoring the producer for the last year or so, Emrick says, and rightly so. "If we can’t survive and make money based on the market, then we don’t need to be here." The kill side of the plant’s ledger sheet, Emrick says, has done well. The newer 10,000 square-foot fabrication unit has been the challenging side, but that was to be expected. "When you’re buying, killing and shipping, there’s a very narrow profit margin," Emrick insists. "If we stripped down and got rid of the fab or the retail and went back to shipping carcasses, we’d probably make money for a while, but only for a while. "Think about who’s left to ship carcasses to. There aren’t very many, and most all of them have a relationship with someone. Rosen Lamb has a relationship with Mountain States. Superior Farms has its own fabrication unit, Catelli has a partnership with Harold Harper. The only ones who don’t have a partnership are Lido Lamb & Veal, and Grove. Grove only takes two or three loads a week, and they may close or get merged with someone. Leto, who is out of California, only buys a load or two a week. "So to survive, we really have to box product. We don’t have any choice. If we close the fab and the retail, we may as well close the whole thing, because we’ll never survive," he insists. Survival, he adds, is in part about finding one’s niche and then fulfilling that niche better than anyone else. Ranchers Lamb, Emrick says, has found some of those niches, and it’s working hard to create more. "We have to find other ways to survive. If we’re going to be faced with smaller numbers, I need a way to run product through here at a better gross, because expenses are what they are. To do that, we need to fab more lambs and get a better return on them," he remarks. When Emrick came on board he cut the fabrication program significantly. What they didn’t fab they sold as carcasses. As new accounts have come on board and others have grown, he’s gradually increased the fab. It takes time to build accounts, but Emerick says Ranchers’ is definitely making progress. They secured a contract with HEB when the fabbing facility first opened in 2001, and the San Antonio-based retailer has been one of their best customers since. They supply boxed lamb to all of HEB’s 300 retail outlets. Ranchers delivers the product to HEB’s warehouses in San Antonio and Houston twice a week. They also direct deliver to HEB’s seven Central Market stores. "We try to do the things that no one else can do. Direct store delivery is one of those things we can do," Emrick remarks. Since coming to Ranchers’, Emrick has been seeking a contract with Wal-Mart. Finally, after many almost-starts, they were set to deliver their first order to Wal-Mart this past Friday. At the same time, Emrick was also meeting with another potential new account, Associated Wholesale Grocers in Oklahoma City. They have 200-some stores in Oklahoma, he says. In addition to HEB, Ranchers’ delivers product to Fiesta in Houston and the Albertson’s stores in Fort Worth. There are a couple of hundred of them in Fort Worth. They also have the Brookshire account in Tyler and Lufkin. Ranchers’ also recently secured a contract with Publix, one of the 10 largest-volume supermarket chains in the U.S. They have 787 stores in the Southeast, the majority in Florida. "We had one little bitty advantage when we went into Publix," Emrick says. "They wanted 60-pound lambs, but they’d been told by others that they had to buy 70 to 80-pound lambs. We have the product they want — yield grade threes, 60-62 pounds. We can supply it." Ranchers’ has been shipping about 10,000 pounds a week into Lakeland, Florida. They’re buying chucks and a variety of other cuts, and have been pleased with the product, Emrick says. The one concern of Publix was that Ranchers’ couldn’t fill their entire order. They turned to Superior Farms’ imported product to fill the remainder, and that product is going into their Deerfield Beach warehouse. "What concerns me," Emrick says, "is that the imported product is similar in size to our animals. We think our domestic product is a little better quality, but there is a big difference in the price," Emrick points out. "The domestic industry stands to lose one more big account because of price. No one really cares where they get it from," he adds. "We might think it’s important, but no one really cares where that animal comes from as long as the product tastes good. "I don’t have the answer to the imported problem," he adds. "No one does. I just know that we have to produce the product that the consumer wants. The industry keeps getting smaller, in part, because we keep producing what we want to produce, not what the consumer wants. "The majority of the lambs are in the hands of strong feeders. They want to make them weigh 82 pounds dressed, but retailers don’t want that big leg of lamb. Maybe the retailers should buy case-ready or maybe we should market it better, but when it’s one percent of your meat case, retailers aren’t going to take time to mess with it. So if you don’t give them something they can work with, they’ll either take it out or they’ll use something else." Another niche that Ranchers’ is breaking into is the halal Muslim market. To do that, they’ve gone strictly to a halal kill. Not all the product is marketed as such, but HEB, for example, will soon be getting this product. It will be marketed as Texas Halal. "It will be HEB’s brand, but Ranchers’ will slaughter and process it for them," Emrick says. "It should be a nice niche market for us." Emrick has also tried to get their foot in the door with Safeway. Safeway went strictly imported a few years ago and they haven’t come back, but Ranchers’ is beginning to get a foothold by direct delivering to some of their Tom Thumb and Randalls stores. Many retailers, he says, want packers to price their product six months out. "They tell us imported product has a ceiling on it. ‘Why can’t you put a ceiling on your product?’ Our industry is too segmented to do that," Emrick insists. "Producers might be willing to sell you lambs for June delivery, but they’re priced so high that it’s not worth it to us to tie into such contracts," he explains. Ranchers’ understands how sensitive retailers are about fluctuating prices, and because of that the packer often opts to maintain a price even when others are raising theirs just so they can keep their spot in the meat case. "Late spring and early summer, French racks were selling for $21 a pound. Others were selling them higher, but we never raised our price. We left it in there at that price. We lost money on that one item all summer. "Eventually, racks got so high that people took it out of the case and took it off their menus. Now we have an excess supply. Today you can’t give it away, but because we maintained our prices, we still have our spot in the meat case." One of Ranchers’ Lamb’s weaknesses, Emrick says, is in food service. The biggest stigma Ranchers’ has to overcome with food service, Emrick says, is with the size of their chops. Getting in with a distributor, he adds, would be a starting point. "We’re not in Sysco. We’re not in U.S. Foods or Stockyards. We’re in Ben E. Keith; they’re a nice distributor, but they’re small. "We have to grow our food service. We can sell the chucks and the loins to the retailers, but that leaves us with the racks, and that has to go somewhere." He’s worried some about the loss of the government roast contract. "The savior for the last few years has been these government contracts," Emrick says. "They (the government) used about 2000 head a week out of a 50,000-head slaughter. The racks were going to the hotel chains, and the legs and shoulders to the government. We shipped our last government contract the end of September. That’s gone now. It’s off the budget and won’t be back. It’s going to take awhile, but that’s eventually going to catch up with us." Because they’ve had trouble breaking in with the large distributors, Ranchers’ is delivering direct to some restaurants and hotels. They have a good array of accounts in Houston, including the Houston Country Club, the St. Regis hotel, Brennan’s and Americas restaurants. They also have an account with the Dallas Country Club. "It’s harder," Emrick admits. "The truck has to make a stop for four boxes, so it’s difficult, but we do get a little premium." Freight, Emrick says, is their biggest challenge after supply. Ranchers’ isn’t in the trucking business. Instead, they contract with a local trucking company to do their deliveries. Ranchers’ Lamb is also trying to improve their bottom line by fabbing more than just lamb. They’re also killing and fabbing some goats, and they’re fabbing veal as well. They have an account with Wal-Mart for their cabrito, and they’re working hard to grow that market. One of the biggest challenges with goats, he says, is in their poor dressing percentage. "People think we should be able to make money killing goats. If we kill 100 goats, we only get 2000 pounds of meat," Emrick points out. "Even less with kids, maybe only 1600 pounds. "It costs a lot of money to kill them when you figure it on a per pound basis, and everything we do here is done by the pound. We have to sell that cabrito for $3.50 a pound just to break even. That’s expensive goat." Price, he says, is the reason they don’t have HEB’s cabrito account. Despite these challenges, Emrick says, they will continue to expand their case-ready product for goat meat, and in time he hopes they will break into some new markets. Ranchers is also fabbing about 2000 pounds of veal a week. It is sold in Albertson’s, Brookshires and Wal-Mart as a case-ready product branded with the Ranchers’ Lamb of Texas logo just like their lamb product. Ranchers’ also tried killing hogs, but only for a short time. "We can kill them, but we don’t have the time and resources we need to market them," Emrick says. "It’s hard to break into the hog business when you have to compete with people like Farmland and IBP, plus there aren’t a lot of hogs in this area." Despite the somewhat pessimistic outlook for the sheep industry in general, Emrick says Ranchers Lamb is prepared to meet the challenges head on. "This is the best plant I’ve ever worked in," he says. "It’s efficiently run. Our producers are raising the right kind of lamb, and we’re putting out a very good product. We’ve just got to tackle the supply problem.. "If you truly want to be in the sheep business in the future, bring your lambs to us," he reiterates. "We’ll treat you fair 52 weeks out of the year. People can bring in a handful of lambs — five, 10 head — we don’t care. "If you don’t want to sell to us, I suggest you get out while the market is good. Sell your lambs and invest in something else. But if you want to invest in the future of the sheep industry, bring your lambs here. Be loyal to this plant and help keep the sheep business alive in West Texas," he implores. |
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