Heavy lamb prices across Ontario sale barns have dipped steeply lower in the last three weeks, with year-over-year drops at some auctions over $0.30 (or more) a pound for the same weight class.
While some seasonal dips are expected at this time of year, Ontario sheep farmers are also up against a much higher than usual volume of western Canadian heavy lambs turning up at sales. At one sale early last week, the total lamb volume was double the average, and prices dropped accordingly — what’s going on?
First off, says Marc Carere, chair of Ontario Sheep Farmers, the fall downturn in the markets is not unexpected, though the recent loss of more than 20% for the heavy lamb market is significant, and well down from the year’s highs reached in May. What’s more, he says, the lamb market has been testing its five year average (lows) earlier this year, and analysts have been calling for a market “correction” for some time now.
That said, you can’t ignore the heavy volume of lambs coming east. Carere says there has been a marked “changed buying pattern” out west, largely because the North America Lamb Company (read more on that here) is now up and running. Because of the vertical integration of the company, the west has lost a major buyer, and that’s going to significantly impact lamb flow, he says.
The issues for Ontario’s — and Canada’s — lamb market still rest with limited or maxed out processing capacity and the seasonality of the business. While there is strong overall demand, there are still peak price and demand windows, and winter is not one of them. (Story continues below)
Producers looking for a recovery in prices will likely have to wait several months until demand picks back up in March and April (also when domestic supplies are lighter), however, a downward correction like this could mean even seasonal highs are subdued from what producers have enjoyed in the last few years.
“We’ve been down this road before,” Carere says, and those who have been in the business long term know that risk management is key to riding out these low price markets. Whether that’s through more sophisticated marketing arrangements or business risk management tools, producers do have some options in front of them. Carere also notes that resolving some trade issues (sheep and lamb cannot move freely south) would certainly help smooth out some of the new lamb flow patterns.
“If some western lambs could head south, that would help markets here,” he says.