Changes in the Sheep Industry IN THE UNITED STATES

MAKING THE TRANSITION FROM TRADITION

Committee on the Economic Development and Current Status of the Sheep Industry in the United States

Board on Agriculture and Natural Resources

Division on Earth and Life Studies

NATIONAL RESEARCH COUNCIL OF THE NATIONAL ACADEMIES

THE NATIONAL ACADEMIES PRESS

Washington, D.C.
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Committee on the Economic Development and Current Status of the Sheep Industry in the United States Board on Agriculture and Natural Resources Division on Earth and Life Studies

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THE NATIONAL ACADEMIES PRESS 500 Fifth Street, NW Washington, DC 20001 NOTICE: The project that is the subject of this report was approved by the Govern- ing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. This study was conducted in response to a Congressional request to the National Academies in the Agriculture Appropriations Bill (P.L. 109-97). Financial support was provided by Contract No. AG-3K06-C-06-0002 between the National Acad- emies and the Economic Research Service of the U.S. Department of Agriculture. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project. International Standard Book Number-13: 978-0-309-12161-3 (Book) International Standard Book Number-10: 0-309-12161-2 (Book) International Standard Book Number-13: 978-0-309-12162-0 (PDF) International Standard Book Number-10: 0-309-12162-0 (PDF) Additional copies of this report are available from the National Academies Press, 500 Fifth Street, N.W., Lockbox 285, Washington, DC 20055; (800) 624-6242 or (202) 334-3313 (in the Washington metropolitan area); Internet, http://www.nap. edu Copyright 2008 by the National Academy of Sciences. All rights reserved.

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The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding en- gineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineer- ing programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Wm. Wulf is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Insti- tute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sci- ences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. Wm. Wulf are chair and vice chair, respectively, of the National Research Council. www.national-academies.org

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COMMITTEE ON THE ECONOMIC DEVELOPMENT AND CURRENT STATUS OF THE SHEEP INDUSTRY IN THE UNITED STATES GARY W. WILLIAMS, Chair, Texas A&M University, College Station DEEVON BAILEY, Utah State University, Logan ORAL CAPPS, Jr., Texas A&M University, College Station LINDA A. DETWILER, Virginia-Maryland Regional College of Veterinary Medicine, Red Bank, NJ HUDSON A. GLIMP, University of Nevada, Reno (Emeritus) TIMOTHY HAMMONDS, Food Marketing Institute, Washington, DC DOUGLAS D. HEDLEY, Canadian Faculties of Agriculture and Veterinary Medicine, Ottawa HELEN H. JENSEN, Iowa State University, Ames PAUL S. KUBER, The Ohio State University, Columbus DAVID L. THOMAS, University of Wisconsin, Madison Staff AUSTIN J. LEWIS, Study Director RUTH S. ARIETI, Research Associate 

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BOARD ON AGRICULTURE AND NATURAL RESOURCES W. REG GOMES, Chair, University of California (Emeritus), Oakland ROGER N. BEACHY, Donald Danforth Plant Science Center, St. Louis, Missouri H. H. CHENG, University of Minnesota (Emeritus), St. Paul DANIEL M. DOOLEY, University of California, Oakland JOAN H. EISEMANN, North Carolina State University, Raleigh KIRK C. KLASING, University of California, Davis VICTOR L. LECHTENBERG, Purdue University, West Lafayette, Indiana ROBERT PAARLBERG, Wellesley College, Watertown, Massachusetts KEITH PITTS, Curragh Oaks Consulting, Fair Oaks, California PEDRO A. SANCHEZ, The Earth Institute, Columbia University, Palisades, New York HAL SALWASSER, Oregon State University, Corvallis NORMAN R. SCOTT, Cornell University, Ithaca, New York Staff ROBIN A. SCHOEN, Director KAREN L. IMHOF, Administrative Assistant EVONNE P. Y. TANG, Senior Program Officer AUSTIN J. LEWIS, Senior Program Officer PEGGY TSAI, Program Officer CAMILLA YANDOC ABLES, Associate Program Officer KARA N. LANEY, Associate Program Officer RUTH S. ARIETI, Research Associate KAMWETI MUTU, Research Associate JANET M. MULLIGAN, Research Associate ERIN MULCAHY, Program Assistant i

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Acknowledgments T his report has been reviewed in draft form by persons chosen for their diverse perspectives and technical expertise in accordance with procedures approved by the National Research Council’s (NRC’s) Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in mak- ing its published report as sound as possible and to ensure that the report meets institutional standards of objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. We wish to thank the following for their review of this report: Walter J. Armbruster, Farm Foundation, Oak Brook, IL Keith E. Belk, Colorado State University, Fort Collins Neil L. First, Mississippi State University, Mississippi State (retired) Kreg A. Leymaster, U.S. Meat Animal Research Center, Clay Center, NE Christopher J. Lupton, Texas A&M University, San Angelo Larry R. Miller, Cooperative State Research, Education, and Extension Service, Washington, DC (retired) Charles F. Parker, The Ohio State University (retired) Timothy A. Petry, North Dakota State University, Fargo James G. Robb, Livestock Marketing Information Center, Lakewood, CO Susan Schoenian, Western Maryland Research and Education Center, Keedysville Dawn D. Thilmany, Colorado State University, Fort Collins Clement E. Ward, Oklahoma State University, Stillwater Cynthia Wolf, University of Minnesota, St. Paul ii

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iii ACKNOWLEDGMENTS Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations, nor did they see the final draft of the report before its release. The review of this report was overseen by Dale E. Bauman, Cornell University, coordinator, appointed by the Division of Earth and Life Studies, and Harley W. Moon, Iowa State University (emeritus), monitor, appointed by the NRC’s Report Review Committee. The coordinator and monitor were responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the author committee and the institution. The committee was assisted in its task by the invaluable contributions of a number of people. Fitzhugh Elder, IV, U.S. Senate Appropriations Committee; Janet Perry and Demcey Johnson, Economic Research Service, USDA; Tosha Clark, Foreign Agricultural Service, USDA; Peter Orwick, Glen Fisher, Paul Rogers, and Tom McDonnell, American Sheep Indus- try Association; Jim Hodges, American Meat Institute Foundation; Bo Donegan, American Lamb Board; Maurice Shelton, Texas A&M University (emeritus); Jim Robb and Erica Rosa, Livestock Marketing Information Center; Gary Brester, Montana State University; David Gage, Bob Harlan, and Brad Bonner, Mountain States Rosen; Tony Catelli, Catelli Brothers Veal and Lamb; Bill Brennan, Iowa Lamb Corporation; Eran Wajswol, Val- ley Shepherd Creamery; Jean Walsh, Mohawk Valley Suffolks; Greg Nunn, Hackettstown Livestock Auction; Susie and Omar Mady, American Halal Fresh Meats; Sam Ferrara, SMF Enterprises; Michael Anthony, Gramercy Tavern; Katherine Marshall, Ann Seitzinger, and Diane Sutton, USDA, APHIS, Veterinary Services; and William Shulaw, The Ohio State University, College of Veterinary Medicine all provided important insights into the U.S. sheep industry. In addition, representatives of wool marketing warehouses and other wool experts responded to surveys about the U.S. wool indus- tries. Those who participated in these surveys are listed in Footnotes 1 and 4 of Chapter 5. The committee appreciates the contributions of all these individuals and organizations. Finally, the committee expresses deep appreciation to the staff of the NRC Board on Agriculture and Natural Resources who worked closely with the committee to facilitate every step in the process of bringing this project to fruition. We owe a particular debt of gratitude to Austin J. Lewis, Program Officer, and Ruth S. Arieti, Senior Program Assistant, for their unrelenting efforts to keep the committee on schedule and moving forward. Their highly professional management of the committee and the creative process was an indispensible component of the work of the com- mittee. They arranged for meetings, facilitated conference calls, formatted

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ix ACKNOWLEDGMENTS drafts, managed the committee website, assisted with committee meetings, and, in general, made the committee’s work easier and more effective. The committee is also grateful for the oversight of Robin A. Schoen, Director of the NRC Board on Agriculture and Natural Resources. Her support, guid- ance, and gentle encouragements were an important contribution. Laurian J. Unnevehr, professor at the University of Illinois, served as the NRC Board on Agriculture and Natural Resources liaison to the committee.

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Contents SUMMARY 1 The Committee’s Task, 2 Key Findings, 2 Conclusions, 13 1 DEVELOPMENT AND STRUCTURE OF THE U.S. SHEEP INDUSTRY 15 Historical Development of the U.S. Sheep Industry, 16 The U.S. Sheep Industry Value Chain, 24 The U.S. Sheep and Lamb Industry in Transition, 33 References, 33 2 THE U.S. LIVE SHEEP INDUSTRY 37 U.S. Sheep Production, 38 Sheep and Lamb Feeding, 65 Live Sheep Pricing, 80 Live Sheep Trade, 89 Sheep Research, Instruction, and Extension/Outreach, 89 National Sheep Organizations, 97 Policies and Regulations Related to the Live Sheep Industry, 100 Major Accomplishments, Opportunities, and Challenges of the U.S. Live Sheep Industry, 108 References, 115 xi

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xii CONTENTS 3 SHEEP HEALTH ISSUES 121 Management Practices Regarding Health, 122 Diseases of Economic Impact or Concern, 135 Threat of Emerging or Existing Diseases, 153 Major Accomplishments, Opportunities, and Challenges in Sheep Health, 156 References, 158 Appendix: A Chronology of Scrapie Control in the United States, 164 4 THE U.S. LAMB INDUSTRY 169 Lamb Slaughter and Production, 170 Lamb Marketing, 188 National Lamb Demand, 200 Lamb and Mutton Trade, 214 Lamb Byproduct Markets, 224 Policies and Regulations Related to the Lamb Industry, 229 Major Accomplishments, Opportunities, and Challenges of the U.S. Lamb Industry, 232 References, 239 5 THE U.S. WOOL INDUSTRY 247 Wool Production, 247 Wool Marketing, 249 Wool Processing, 255 Wool Demand, 257 Wool Policies and Regulations, 279 Major Accomplishments, Opportunities, and Challenges of the U.S. Wool Industry, 283 References, 288 Appendix, 290 6 THE U.S. DAIRY SHEEP INDUSTRY 295 Dairy Sheep Milk Production, 296 Dairy Sheep Management Systems, 298 Dairy Sheep Milk Quality, 299 Dairy Sheep Milk Marketing, Transportation, and Pricing, 300 Dairy Sheep Milk Processing, 302 Domestic and Imported Dairy Sheep Milk Supply, 303 Major Accomplishments, Opportunities, and Challenges of the U.S. Dairy Sheep Industry, 304 References, 307

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xiii CONTENTS 7 ALTERNATIVE AND EMERGING MARKETS 309 Ethnic Markets, 310 Additional Alternative Markets, 315 Major Accomplishments, Opportunities, and Challenges of Alternative and Emerging Markets, 319 References, 324 Appendix, 326 APPENDIXES A COMMITTEE STATEMENT OF TASK 333 B ABBREVIATONS AND ACRONYMS 335 C COMMITTEE MEMBER BIOGRAPHIES 341 D RECENT PUBLICATIONS OF THE BOARD ON AGRICULTURE AND NATURAL RESOURCES 345 TABLES AND FIGURES Tables 2-1 U.S. Sheep Inventories, Productivity, and Operations by Region, January 1, 2006, 39 2-2 U.S. Sheep Inventories and Operations by Flock Size, January 1, 2006, 40 2-3 Enterprise Budget for Public Land Range Sheep Operation: 2006 Expense and Income Analysis for a 3,000-ewe Range Production System, 45 2-4 Enterprise Budget for a 50-ewe Farm Flock Sheep Enterprise: 2006/2007 Operating Costs and Income, 46 2-5 Top 10 Sheep Breeds with Annual Number of Purebred Registrations at 20-year Intervals, 1965–1966, 1985–1986, and 2005–2006, 54 2-6 Sheep and Lamb Death Losses Due to Predation, 2004, 63 2-7 Major Lamb Processing Plants and Feedlots in the United States, 67 2-8 Performance of Pasture-fed and Drylot-fed Lamb, 71 2-9 Mountain States Lamb Cooperative Quality Grid, 84 2-10 Average Annual Public Funding of Livestock Research by Type of Livestock, 1998–2005, 95 4-1 U.S. Federally Inspected Sheep Slaughter by Region, 2006, 172

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xi CONTENTS 4-2 Lamb Quality Grading, 174 4-3 Comparison of Yield Grade Criteria for Beef, Pork, and Lamb Carcasses, 175 4-4 Top-Selling Lamb Subprimals, 2003–2005, 186 4-5 Top-Selling Lamb Cuts, 2003–2005, 186 4-6 Nutritional Comparison of Animal Protein Sources, 3-oz. Cooked Serving Trimmed of Visible Fat, 187 4-7 Estimated Elasticities of U.S. Per Capita Lamb Demand, 206 4-8 Lamb Demand Index with Alternative Elasticities, 1980 = 100 (Base), 213 4-9 Uses for Sheep and Lamb Byproducts, 225 5-1 Percentage of Wool Prepared by Growers for Sale to Major Wool Warehouses Using One of the Three Major Preparation Methods, 2007 Wool Clip, 252 5-2 U.S. Raw Wool Exports (Thousands of Pounds) by Country of Destination, Clean Yield, 2002–2005, 263 5-3 U.S. Raw Wool Imports (Thousands of Pounds) by Country of Origin, Clean Yield, 2002–2005, 265 5-4 Average Prices of U.S. Wool And Imported Australian Wool, Cleaned and Delivered to Charleston, SC, by Micron Grade, 2005, 268 5-5 Number of Wool Lots Processed by Warehouses and Pools Surveyed by Region, Year, Level of Preparation, and Wool Types, January 1992 to January 2002, 271 5A-1 Estimated Coefficients and P-values in the Hedonic Price Model, 292 6-1 Estimated Number of U.S. Dairy Sheep Producers and Number of Milking Ewes Per Flock, 2003, 297 6-2 Milk Production per Ewe in Flocks of Survey Respondents, 2003, 298 6-3 Estimated Number of Ewes Milked and Milk Production in the United States, 2003, 298 6-4 Proportion of Survey Respondents That Process Milk on Farm, Purchase Milk from Other Producers for Processing, or Wish to Start Processing Milk, 2003, 303 6-5 U.S. Sheep Milk Cheese Imports by Exporting Country, Quantity, and Value, 2005, 304 7A-1 Regression Results of Religious Holidays on Lamb Disappearance, 330

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x CONTENTS Figures 1-1 U.S. sheep and lamb inventories (January 1), 1867–2007, 16 1-2 Volume and value of wool production, 1909–2006, 18 1-3 Australian and USA total sheep numbers, 1986–2007 (million head), 22 1-4 New Zealand and USA total sheep numbers 1981–2006 (million head), 23 1-5 Sheep and lamb value chain diagram, 25 1-6 Farm-to-market linkages for lamb, 26 2-1 Geographic distribution of U.S. sheep and lamb inventories, 2002, 40 2-2 Breeding stock as a percent of total sheep and lamb inventories, 1867–2007, 41 2-3 Rates of change in sheep and lamb inventories by state, 1989– 2000 and 2001–2007, 43 2-4 Expected progeny differences (EPD) for 60-day weight and 120- day weight of Polypay lambs in flocks enrolled in the National Sheep Improvement Program and born between 1986 and 2005, 57 2-5 The sheep-lamb annual production cycle, 60 2-6 Lamb crop, lambs on feed, and percent on feed, 1960–1994, 66 2-7 Weekly average USDA lamb cutout value, October 2001–March 2007, 82 2-8 Feeder and slaughter lamb monthly live prices, January 2001– February 2007, 82 2-9 Monthly relative indexes for lamb, beef, and pork retail prices, January 2001–August 2005, 83 2-10 Average yield grade for mutton and lamb, 1992–2006, 84 2-11 Western direct carcass price minus imported carcass price, April 2001–May 2003, 85 2-12 Average pelt price for fall clips, January 2003–March 2007, 85 2-13 U.S. average feed costs, corn and hay, 1990/1991–2006/2007, 86 2-14 U.S. weekly sheep and lamb slaughter, January 2003–March 2007, 87 2-15 Percentage of lambs procured by packers by method of procurement, 2006, 89 2-16 Weekly U.S. live sheep exports to Mexico, August 1999–March 2007, 90 2-17 Public funding for all agricultural and livestock research, 1998– 2005, 95

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xi CONTENTS 3-1 Percent of operations that reported moderate or high concern for the top 15 conditions of concern, 136 3-2 Percent of operations on which the top 15 conditions of concern were known to be present in last 5 years, 136 3-3 Percent of operations where diseases were present (suspected or confirmed) during the last 3 years, 137 3-4 Percent of sheep that tested positive for scrapie by region, 146 4-1 Lamb slaughter, production, and average liveweight, 1970–2004, 171 4-2 Number of lamb packers and plants by market type, 172 4-3 Marketing arrangements for sale or transfer of feeder and fed lambs by producers, 193 4-4 Marketing arrangements for sale or transfer of lamb meat products by packers, 194 4-5 U.S. annual per capita consumption of lamb, 1909–2005, 201 4-6 U.S. lamb production, consumption, and imports, 1909–2005, 202 4-7 Comparing beef and lamb demand indices, 1980–2006, 214 4-8 Monthly lamb imports, January 2005–January 2007, 215 4-9 Lamb imports from Australia and New Zealand, January 2003– January 2007, 216 4-10 Imported lamb as a share of total lamb availability, January 2002–January 2007, 216 4-11 Relationship between imports and U.S. wholesale values, January 2005–January 2007, 218 4-12 Quarterly nominal unit values of lamb imports, January 2005– January 2007, 218 4-13 Wholesale prices of domestic and imported loins and leg, January 2005–January 2007, 219 4-14 Exchanges rates between the United States and Oceania over the period January 2004–March 2007, 221 4-15 U.S. lamb and mutton exports from 1981 to January 2007, 222 4-16 Pelt prices, average of fall clips (No. 1, No. 2, No. 3, and No. 4), 228 5-1 U.S. fiber demand at the mill and retail levels, 1995 to 2005, 258 5-2 Mill use of cotton, flax and silk, synthetic fibers, and wool, 1995– 2005, 259 5-3 U.S. wool demand at the mill and retail levels, 1995–2005, 261 5-4 Percentage difference in U.S. clean wool price by month relative to the base month of September, 273

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xii CONTENTS 5-5 Percentage difference in U.S. clean wool price by year relative to the base year of 1997, 274 5-6 Percentage difference in U.S. clean wool prices by U.S. region relative to the base region of the Central United States, 274 5-7 Percentage difference in U.S. clean wool price by level of preparation relative to the base preparation of original bag (OB), 275 5-8 Percentage difference in U.S. clean wool price by wool types relative to the base OB-wool breed, 276 5-9 Percentage difference in U.S. clean wool price by wool breed types relative to the base OB-wool breed, 276 5-10 Relationship between U.S. clean wool price and average fiber diameter based on the sample of 8,533 observations, 277 5-11 Relationship between lot size as measured by grease weight and U.S. clean wool price based on the sample of 8,533 observations, 278 5-12 U.S. farm price of wool, 1965 to 2005, 283 6-1 Location of dairy sheep farms in the United States and Canada in 2003, 296 6-2 Annual dairy sheep and lamb cycle, 299 6-3 Milk sales by the Wisconsin Sheep Dairy Cooperative, 1996– 2007, 301 7-1 Inventory of certified organic sheep and lambs in the United States, 1992–2005, 316

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