1. 2014 Sheep Industry Review Prepared by the American Sheep Industry Association for the American Lamb Board May 2015

3. Executive Summary The sheep and lamb industry enjoyed a good year in 2014. Although freezer inventories were high, strong lamb demand helped support higher retail prices, an increase in lamb imports, and higher live and meat prices. The industry was able to maintain high-quality lambs throughout the year which likely contributed to the market’s robustness. Replacement ewe prices were 60-percent stronger in 2014 and suggests that flock rebuilding was occurring. In the Live Markets The 3-market feeder lamb auction price saw a 45-percent gain in 2014 to $204.36/cwt. Markets included San Angelo, Ft. Collins and Sioux Falls. At $177.24/cwt. feeder lamb prices in direct trade were 43-percent higher year-on- year. Slaughter lambs prices gained 26% to 31% in 2014 depending upon market. Slaughter lamb prices at auction gained 31% in 2014 to $156.76/cwt. Formula- traded slaughter lambs gained 26% to $300.86/cwt. ($151.10/cwt. live-weight equivalent). Live, negotiated prices strengthened by 24% to $156.06/cwt.

4. Executive Summary, page 2 Pelts Lower The international pelt market was depressed in 2014. Fall Clips (previously shorn) averaged $6.75 per piece in 2014, down 47% annually. No. 1 pelts (previously shorn) averaged $5.34 per piece, 47-percent lower. Imperials (never shorn) averaged $8.04 per pelt, 34-percent lower. Feedstuffs Down At 98 cents per lb., estimated cost of gain in Colorado feedlots fell 24% year-on-year. Corn averaged $6.88 per bu. in 2013/14, up 8% year-on-year. Alfalfa averaged $198.33 per ton in 2013/14, down 6% year-on-year. In the Meat Markets The lamb meat market was sharply higher in 2014. The weighted average carcass price averaged $322.71/cwt. in 2014, 24-percent higher year-on-year. The net carcass value (after processing/packaging costs) averaged $355.62/cwt., 26-percent higher annually. All primals gained in 2014 with the loin, trimmed 4 x 4 gaining the relatively low 9% and the 8-rib rack, medium seeing the largest gain at 47%.

7. Feeders Jumped 43%-45% in 2014  The 3-market feeder lamb auction price saw a 45-percent gain in 2014 to $204.36/cwt.  Markets included San Angelo, Ft. Collins and Sioux Falls.  At $177.24/cwt. feeder lamb prices in direct trade were 43-percent higher year-on-year.

9. Direct Trade Down Sharply from 10 Years Ago, but Maintains in Recent Years Direct trade dropped 7% in 2014 to 192,950 head

12. Alfalfa averaged $198.33 per ton in 2013/14, down 6% year-on-year.

15. 2014 Slaughter Lamb Prices Gained from 26% to 31% Depending Upon Market o Slaughter lamb prices at auction gained 31% in 2014 to $156.76/cwt. o Formula traded slaughter lambs gained 26% to $300.86/cwt. ($151.10/cwt. live- weight equivalent). o Live, negotiated prices strengthened by 24% to $156.06/cwt.

18.  Slaughter weights in carcass-based formula trades averaged 77 lbs. (153.16 lbs. live- weight), 3-percent lower in 2014.  Weights in live, negotiated trade were 148 lbs., up 6%.  By comparison, federally-inspected weights averaged 69 lbs. in 2014, down 0.06%.

22. Carcasses & Cutout Higher Annually  Weighted average carcass price averaged $322.71/cwt. in 2014, 24-percent higher year-on- year.  The gross carcass value averaged $369.45/cwt., up 24%  The net carcass value (after processing/packaging costs) averaged $355.62/cwt., 26-percent higher annually.

25.  8-rib rack, medium gained 47% to $810.34/cwt.  Leg, trotter-off, 4365.07/cwt., 13-percent higher.  Shoulder, square-cut, saw a 25-percent gain to $300.80/cwt.  Loin, trimmed 4x4 $501.71, up 9% annually.  Ground lamb $540.38/cwt., up 2% annually.

28. Yield Grades for Federally Inspected Lamb and Mutton Percentages derived from total lbs. Source: USDA, AMS, Livestock and Seed Division YG1YG2YG3YG4YG5 20125%28%37%18%12% 20137%36%35%14%7% 20146%33%41%14%6%

30. V. Retail & Food Service

31. The Most Popular Featured Items (domestic and imported) Gained in 2014, $ per lb.

32. Ralmonline, 2008

34.  Packer price spreads do not include any costs of processing.  Packers sell wholesale primals (cuts) which are combined together and called the cutout.  Packers also sell carcasses, to the processing industry and to one another.  The price spreads assume that all that is processed sells and no allowance is made for cold storage tonnage.

35.  The live-to-carcass spread averaged $16.07 per head in 2014, down 53%.  The live-to-cutout spread averaged $49.33 per head, down 16% annually.  The carcass-to-cutout spread averaged $32.19 per head, up 32% annually.

38.  Reduced Russian demand and reduced demand from Chinese tanneries facing environmental clean-up costs  Fall Clips (previously shorn) averaged $6.75 per piece in 2014, down 47% annually.  No. 1 pelts (previously shorn) average $5.34 per piece, 47-percent lower in 2014.  Imperials (never shorn) averaged $8.04 per pelt, 34- percent lower.

39. U.S. Pelt Prices Weaker

42. Is Flock Rebuilding Occurring?

46. 1.Domestic lamb production down 0.4% to 149.7 mill. lbs., 2.Lamb imports up 12% to 164.5 mill. lbs., and 3.Total consumption (or disappearance) up 6% to 314.2 mill. lbs.

50. Lamb imports were up 11.9% in 2014 to 164.5 mill. lbs.

52. Australian lamb imports in 2014 were up 20% to 121.3 mill. lbs.; NZ lamb imports were down 6% to 41.8 mill. lbs. Australian Lamb Imports Up Sharply in 2014

54. Mutton Imports Higher: Up 16% to 30.3 mill. lbs. –AUS up 31% to 25.9 mill. lbs.; NZ down 35% to 3.8 mill. lbs.

56. Total Live Sheep Exports up in 2014  Total live exports up 39% to 75,693 head,  Live exports to Mexico up 10% to 35,634 head,  Exports up to Canada by 78% to 38,916 head,  And “other” exports up 1261% to 1,143 head: nearly 1,000 head to Russia, the rest to Guyana

58. X. Nontraditional Market Andrew, 2006.

59.  The nontraditional market is often characterized by a lighter-weight lamb, around 100 lbs., but very variable depending upon customer.  The nontraditional market is mainly comprised of lambs sold direct to consumers.  Some nontraditional lambs are processed by state inspected plants and even some FI plants.  The largest nontraditional markets are the livestock auctions at New Holland, PA and San Angelo, TX, but nontraditional markets exists across most auctions.

66. Spread Between U.S. and AUS Rack More than Doubled in 2014  In 2014 the U.S. rack, roast-ready, frenched, special (cap-off) averaged $1,905/cwt, up 45%;  AUS rack, cap-off, 28 oz. and up averaged $909/cwt., up 2%.

67. *Note weight differences: U.S. rack 1.5-3.0 lbs. and imported rack 28 oz. +, not a perfect comparison, but useful as a snapshot.

72.  2015 spring/summer pasture and range conditions started off very well with the exception of CA, and to some extent OR and NV (LMIC, 5/11/15).  Topsoil and subsoil moisture conditions are poor throughout CA, with 85% of cropland acreage rated as very short and short for topsoil moisture conditions, and 90% of cropland acres rated very short and short on subsoil moisture conditions (LMIC 5/11/15).

74.  The U.S. dollar is strong, in part, because the U.S. economy is growing, compared to lower growth rates in Europe, Japan and China.  LMIC reported in mid-May: “Differences in economic growth rates, fiscal policy, and other factors have caused the value of the U.S. dollar to surge, impacting relative price levels,” (5/11/15).  U.S. meat imported tonnage from Australia surged 96% in 2014 (20% for lamb) compared to a year ago (LMIC, 5/11/15).

75.  All Fresh Beef demand index for the first quarter of 2015 rose by 16% and pork’s demand rose by 17% (LMIC 5/11/15).  For both beef and pork, prices were higher year-on-year and imports helped offset domestic production shortfalls.  Higher income will also help support lamb demand in 2015: In the 12 months to March 2015, average per capita disposable income rose 2.4% to over $38,000 (Federal Reserve Bank, St. Louis).

77.  Tighter supplies could put pressure on prices.  For 2015, slaughter lamb prices on a carcass basis could range from $309 to $315 per cwt., up 5% year- on-year (5/8/15).  Sixty- to 90-lb. feeders could range from $210 to $219 per cwt., up 4% year-on-year.