Faltering Lamb Market Leaves
Feeders With Sense Of Urgency

By Colleen Schreiber

FORT WORTH — A sense of urgency is perhaps the best way to define the mood here at the recent annual meeting of the National Lamb Feeders Association. More than one feeder commented that he would likely run out of money before the industry runs out of overfat lambs.

With that in mind, the focus of the meeting was on working together to find ways to correct the situation. A great deal of the discussion centered on imports, price reporting and promotion.

A panel of experts including importers, lamb feeders, packers, a wool buyer and a pelt buyer as well as several government officials addressed members about the key issues impacting the lamb industry today.

Francis Cassidy, representing the Australian Meat and Livestock Corporation, told feeders that producers abroad share similar problems with their counterparts in the U.S. Total sheep numbers have fallen off dramatically, from 170 million head in 1990 to about 123 million in 1997. Likewise, domestic lamb consumption down under has fallen off from a peak in 1985 of 17.7 kilograms to 11 kilograms in 1996.

As in the U.S., there is also division, she said, among the various segments of the industry on how and who should pay for promotion. In the past, slaughter and import levees were used to pay for domestic promotion as well as promotion abroad. But exporters, Cassidy told the group, no longer want to pay a levee.

"They say they’ll pay a voluntary levee, but they’re not in favor of paying for any generic promotion. They only want to pay for direct marketing at the retail level."

Cassidy gave an overview of production and import figures, comparing the present to most recent past figures. She admitted that 1997 was a record year for exports of lamb. Australia exported 68,000 tons on a global basis. Overall, frozen exports increased by about 29 percent and chilled lamb by 13 percent.

The European Community, Cassidy said, continues to be one of Australia’s largest markets. In 1997 they saw an increase of about 23 percent to the EC, totaling some 18,000 tons of lamb.

"We’ve been riding on a wave of enthusiasm in the European Community because of increased demand following the BSE crisis in the beef industry," Cassidy told listeners. "There is concern among producers, however, whether that demand will be sustained."

The largest growth market for Australian lamb was South Africa, which grew 82 percent to about 8000 tons. The Middle East grew by about nine percent to 7000 tons.

The U.S. market, Cassidy said, accounts for about 20 percent of their total exports. This past year the U.S. market grew by about 25 percent to 13,000 tons.

When questioned about what the Australian Livestock and Meat Corporation is doing to reverse the declining trend in consumption at home, Cassidy assured listening lamb feeders that most of the money raised for promotion is in fact spent in their domestic market.

One big complaint voiced by feeders at the meeting, a complaint that has long been heard about imported product, was the disparity in price of imported versus domestic lamb.

"Why don’t you get your domestic product raised in price at home rather than trying to bring ours down?" one feeder questioned.

Cassidy assured feeders that Australian producers would love to get their price up, but she blamed their inability to do so in part on inadequate price reporting.

"We would love to know what the product is selling at in the retail stores," she said. "I think we need to get price discovery at the retail level.

"I know you’re concerned about the level of exports into the U.S.," she continued. "But we’re really quite small in terms of lamb production, and I don’t see lamb production increasing much over the next couple of years."

She said that of the 125 million sheep in Australia, only about 50 million were dedicated to lamb production. Most producers are still focused on wool production. Cassidy, however, did not deny that there is a push to "modernize their lamb" to produce a larger, leaner lamb that will better fit the needs of today’s consumer. Slaughter weights, she added, have increased slightly from 16.4 kilograms in 1980 to 18.5 in 1996.

As in the past, the importer focused on what she and her counterparts consider to be a benefit of imported lamb — maintaining a supply of lamb in the meat case 12 months out of the year.

"I think joint promotion is the wave of the future," Cassidy remarked. "We should work together to promote lamb as an item and a continuous market in the U.S. Ultimately, we’re going to be in a position where the retailers are carrying both products, and I think there’s an opportunity there for promotion. The challenge would be how to do this and still maintain our individual competitiveness."

New Zealand Meat Board spokesperson Bill Joyce echoed Cassidy’s comments.

"I think there’s areas where we can cooperate in order to keep fresh lamb in the marketplace 12 months out of the year," Joyce said. "We’re already doing this in areas like the UK. The Europeans have chains that have a specific brand that is provided seven months out of the year. Imported product is provided the other three months out of the year."

Unlike the situation in Australia, New Zealand producers’ focus is on lamb production, and New Zealand is the largest lamb exporter in the world by far. Last year they exported 400,000 tons of lamb. Joyce pointed out, however, that the U.S. only accounts for just over four percent of their total export market.

"We have a very diverse range of markets," he said. "We ship lamb to 95 markets around the world, the big ones being UK, France, Germany, the Middle East – 20,000 tons to Saudi Arabia, 10,000 tons to Jordan, Morocco 3000 tons. Some of those markets are very profitable and some far more profitable than the U.S. market."

The best markets, Joyce told the group, are those with a strong domestic base and a strong domestic consumption. Growth markets, for example, are France, the UK, Italy, North Africa, and Spain.

Like other large sheep producing countries, New Zealand’s sheep numbers have declined dramatically over the last two decades.

In 1982 New Zealand had 72 million sheep. By 1995, numbers had dropped to 48 million and experts are predicting 46 million head for 1998. Despite the decline, Joyce said, the export market has remained relatively static over the last decade. Efficiencies in production, like lambing percentages, he noted, have somewhat compensated for the decline in production.

Ed Avalos, marketing director for the New Mexico Department of Agriculture at Las Cruces, gave a report on the status of the Mexican sheep industry.

Avalos said the U.S. is a major player in live exports to Mexico, but they rank well below Australia and New Zealand in terms of tonnage of chilled or frozen lamb carcasses, and he doesn’t expect that to change much. In recent times, Chile has also became a big player in this market.

U.S. sheep meat is used primarily in Mexico’s barbacoa trade. For that reason, he said, Mexicans prefer live animals from the U.S. because they can buy truckloads rather than boatloads. In terms of subprimal and retail cuts, however, the U.S. comes in at a strong third in the Mexican market. The end user of that lamb is the high-end market.

Live exports to Mexico have declined, Avalos noted, from the peak level in 1993 of 830,000 head to 250,000 head in 1997. The peso devaluation has played a large role in the decline, because Mexico simply cannot afford to pay U.S. dollars for a product and then sell it for pesos.

Lamb production in Mexico is expected to increase slightly in 1998 due to higher prices in Mexico. Avalos told the group that he sees a window of opportunity for breeding stock from U.S. to Mexico.

Colorado lamb feeder Don Godby, who was also on the panel with the importers, voiced his opinion about imports.

"These people are organized. They know what they’re doing, and I hate to admit that, because I’ve never been a proponent of imported lamb or getting in bed with them, but they do present a good product," Godby said.

He voiced concern that if allowed to continue at this pace, imports might eventually set the price for domestic lamb.

"With the money exchange the way it is, it looks to me like more of that product is going to come this way."

He noted the importers’ ability to market their product. "They have one thing that we don’t have, and that is money. We’ve gone a year without any promotion funds. Is anyone talking about American lamb? I think we’re seeing the results of that today."

Referring to the industry-wide proposal for restructuring, Godby said, "The Tecker Group mentioned waiting two years before we look at promotion. Well, I’m here to tell you that if we wait two years, we won’t have to worry about it. If we think it’s bad today, it will only get worse without promotion. We’ve got to get some money put together for promotion."

Turning to the homefront, Godby touched on the decline in domestic production.

"I’ve been to conventions for over 30 years, and a lot of the problems are still the same. I still remember back in Waterloo, Iowa, Bob Davis would walk in at the stockyards office and he would shake his finger and say if we kill over 300,000 this week this market will be a quarter lower. Today we kill 70,000 and it’s anywhere from $3 to $5 to $8 lower almost every week. Makes you wonder why."

Godby, like others, believe U.S. producers in some respects have driven lamb customers away with the kind of product often produced.

"We’re bastardizing our own product," Godby said. "We produce the finest heavy lamb carcasses in the world, and the bulk of our trade wants it. What they don’t want it is overfat, wasty lambs. A lot of us in this room have done that in the last couple of years. Some lambs have the frame size to be killed at 100 to 110 pounds, but these same lambs often are being killed at 130 to 140 to 150 pounds."

Another Colorado lamb feeder, Richard Drake, agreed wholeheartedly.

"In 1997 I saw the industry produce the worst product in history, as far as I’m concerned," Drake said. "We had an average carcass weight well over 66 pounds. We cannot market our product by producing just heavy carcasses. We eliminate all those customers who want carcasses 65 pounds and down. As weights go up, customers go down. Why aren’t we killing more lambs? It’s simple; we have killed off our customer base."

Barry Carpenter, deputy administrator for USDA, addressed concerns over the continual increase of lamb imports into the U.S. as well as market and price information.

Price reporting, Carpenter noted, is a voluntary system.

"It’s only as good as the industry makes it. We don’t buy and sell anything. We have to rely on the industry to relate to us in a confidential manner what’s going on in the marketplace. The information we get isn’t controllable. It may or may not be the best information. It’s the price that you as an industry made available to us."

The industry has been pushing to move to a value-based system using the retail price as the basis, and USDA, Carpenter said, has been assisting in that effort.

"Over the years, USDA has tried to gather price information at the retail level. By all accounts that’s an insurmountable task," Carpenter told lamb feeders. "At this point we are convinced that boxed lamb is the common denominator where information can be collected to determine the true value of that lamb."

USDA is currently working on gathering boxed lamb data to build a carcass equivalent index.

"We’re working on getting that carcass value index, but it takes more information from breakers, slaughterers, etc. They need to be willing to tell us what’s going on in the marketplace, and right now we’re getting a mixed reaction," Carpenter said.

Despite that, the USDA spokesman told the group that his agency hopes to have a carcass value index for the industry to look at in the next 90 days.

He also brought NLFA members up to date on USDA’s efforts to make import information available to the industry.

"Last year we promised lamb feeders that we would make a very strong effort to get out and gather the information on imports. The importers who were in attendance at that meeting agreed to cooperate and provide us with information," he said, "but when we went to them they weren’t as willing to give out that information."

USDA, Carpenter pointed out, assured importers that any information gathered was proprietary information, which in essence assured them of the security of the information given. By midsummer, however, USDA had exhausted all their efforts with little to show for it.

Next, the agency enlisted the help of the Australian Meat Board, with which it has always had a good working relationship. They, too, were unsuccessful in gathering the necessary information.

"That brings me to say that I’m not really optimistic that we’re going to get any direct price and volume information from the importers, but we haven’t totally given up," Carpenter said.

He noted that what little import information is available comes from the Food Safety Inspection Service in the form of total volume, an "x" number of metric tons.

"The problem is, we have no way of knowing how much of each particular cut, whether it’s legs, racks, etc. We’re not sure that information isn’t already being collected, except that when it comes out of their database it’s all lumped together. We’re trying now to see if we can get that information so that we can at least give out volume on specific cuts."

Panelist Al Strube, owner of Strube Packing Company, Rowena, voiced his disappointment in USDA’s efforts.

"Our tax dollars are not doing us justice," he told fellow lamb producers and packers. "If they’re not going to fix it, we need to spend the money and have it corrected ourselves," Strube said.

Strube opened his goat slaughtering facility in 1985 and is now the largest killer in the U.S. with exports going to Korea, Japan, Saudi Arabia, Mexico, Puerto Rico. He recently worked himself into the lamb killing industry as well.

"We all know that we did not put out a quality product last year," Strube remarked. "We’re still suffering from those repercussions. That product continues to give the breakers the opportunity to come back on us to have an excuse to drive our price down. We will not overcome that in the near future."

He encouraged feeders, packers and breakers alike to share information.

"The breakers want to know what they can expect in terms of product in the near future. They lead right into what we had in 1997. They’re very scared of a repeat," he said.

He encouraged those in the lamb industry to take charge to correct the problems that have long plagued the industry.

"Goat producers in the last five to seven years have looked hard at what needs to be done to correct their problems and create a better product. They have not blamed their problems on someone else down the road. Instead, they have taken the initiative to improve in order to send the right product to the consumer."

In an effort to motivate listeners, outgoing NLFA president Sam Rudnick chastised lamb producers and others in the lamb industry for continuing to blame others for their problems.

"If you want to put the blame anywhere, put it right squarely on yourselves. In the past, the importers have always been the enemy. If not them, then it’s the packers and the processors. That’s got to stop. We are an industry. We have to pull together as an industry," he stressed.

"In 1950 we produced 630,000 tons of lamb. Last year it was 123,000 tons of lamb. That’s 507,000 tons of lamb that is no longer consumed here," he continued. "It appears that Australia and New Zealand are importing somewhere around 30,000 tons of lamb. That’s only about 470,000 tons that we’ve lost, and that’s our fault.

"We are the greatest agriculture country in the world. We have a far superior infrastructure to theirs. We can do it all. We have resources that these people do not have. There is no one to fear but ourselves."