Supply and demand part of global lamb price drop: experts

High feed prices, oversupply and lower consumer demand are some of the factors believed to be causing the falling price of lamb, say industry analysts.

“I would suggest that it’s mostly a demand-and-supply type of issue,” said Chris Panter, a provincial livestock market analyst with Alberta Agriculture. He said since the historic 2011 peak, rail-grade prices for lamb have fallen about 45 per cent. Live prices have fallen about the same. The prices are down about 20 per cent from the five-year average.

Over the last few years, producers were building up herds and the supply shrank, driving up prices. But then the U.S. drought hit, forcing many lambs on the market. U.S. prices dropped and Canada’s have followed suit.

Panter also said the global demand for lamb has dropped a bit, though in Canada consumption is still higher now than it was in the 1980s and early 1990s.

The price of feed is also high, which raises the break-even point for producers, Panter said. The big season for lamb — Easter — came early this year. Now consumers are in a transition between Easter and barbecue season, and Panter said it’s hard to predict what might happen for lamb when people go shopping for meat to grill.

The chair of Alberta Lamb Producers (ALP) also cited high feed prices and a glut of lamb on the markets.

“It’s not a Canadian thing. It’s a global thing,” said Ronald den Broeder. He said in 2012 producers took a wait-and-see approach as prices started dropping, but now that they’re into the second year of falling prices it’s going to be harder for producers to absorb the lower prices.

Producers have had mixed reactions to the lower prices, with some considering leaving the industry while others think it might be a good time to get in, said den Broeder.

“We’ve worked hard the last four or five years to make the sheep industry a notable industry and a serious industry and if these prices are going to stay the way they are, people have to pay bills and they might be forced to different things,” den Broeder said. The ALP has been communicating as much as it can about the price issue to its members and is taking their input and ideas, he said.

Dwayne Beaton, CEO of Sungold Specialty Meats, a large lamb processor based in Innisfail, also listed lessening global demand, oversupply due to the U.S. drought and high feed prices as factors in the price drop.

“It’s kind of a perfect storm scenario where a number of things all happened at the same time to cause the price to go down,” Beaton said. “Especially in the United States there’s been a decrease in consumer demand for lamb products, so that combined with the supply issue where ewe lambs are being sold by producers who don’t want to feed because it’s too expensive, the two of them together create a decrease in price,” Beaton said. After prices hitting historic highs, “there ultimately had to be a correction,” he said.

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