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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Page 61
Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Page 63
Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Page 64
Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Page 65
Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Page 66
Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Page 67
Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Page 68
Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Page 69
Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Page 70
Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Page 71
Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Page 72
Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Page 73
Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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Suggested Citation:"2 The U.S. Live Sheep Industry." National Research Council. 2008. Changes in the Sheep Industry in the United States: Making the Transition from Tradition. Washington, DC: The National Academies Press. doi: 10.17226/12245.
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2 The U.S. Live Sheep Industry A n evaluation of the current economic status of the overall U.S. sheep industry must begin with an examination of the live sheep compo- nent that anchors the U.S. sheep industry value chain as outlined in the previous chapter. The live sheep component of the supply chain en- compasses all functions and processes required to raise and feed sheep and lambs and deliver them to packers for slaughter. The process begins with breeding, which generally occurs only during specific times of the year. The typical biological cycle results in the majority of lambs being born in the spring. After weaning, some lambs intended for specific markets for young, lighter‑weight lambs are sent directly to slaughter. Other lambs are put on forages to increase frame size and body weight, before being sent to feedlots and placed on grain-based rations. The remaining lambs are finished on high‑quality forages. Finished lambs, also known as slaughter or fat lambs, are sent to packers where they are slaughtered, and the pelts and offal are separated from the edible products. Although affected by a wide variety of forces relating to demand, policy, trade, price, and much more, the economic condition of the downstream components of the sheep value chain is most critically dependent on the economic fortunes of the live sheep component of the chain. Changes in sheep production technology and pricing, or health issues, for example, ripple all the way downstream from live sheep markets through the various components of the value chain. Consequently, this chapter evaluates the current status of the live sheep industry with a focus on the primary factors driving the industry with the exception of factors relating to sheep health, which are examined in detail in Chapter 3. Following an examination of live 37

38 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES sheep production, feeding, trade, pricing, and policies in the United States, the chapter concludes with a summary discussion of the major accomplish- ments and future opportunities as well as the key challenges facing the live sheep component of the U.S. sheep industry. U.S. SHEEP PRODUCTION In the United States, sheep and lambs are raised primarily in small farm flocks in the Midwest and the East and on larger ranching operations in the West. Market lambs are the primary source of income for sheep producers, with some additional income being generated from the sale of wool and cull ewes and rams. Sheep Inventory and Operations The five largest states in terms of sheep inventories are Texas, Cali- fornia, Wyoming, Colorado, and South Dakota (inventories by region are shown in Table 2-1). Over one‑third of all sheep (34.1 percent) are found in the mountain‑range states of Colorado, Montana, South Dakota, Utah, and Wyoming. Together, these states, along with Texas and New Mexico and the western states of Arizona, California, Idaho, Nevada, Oregon, and Wash- ington, account for nearly 70 percent of all U.S. sheep and lambs, but only 37.1 percent of U.S. sheep operations, indicating clearly that the U.S. sheep industry is still primarily dominated by range sheep production systems. An estimated 25 percent of the national sheep inventory spends a significant portion of the year grazing on western public land permits managed by the Forest Service of the U.S. Department of Agriculture (USDA) and the Bureau of Land Management (BLM) of the U.S. Department of the Interior (USDI) (ASI, 2002). In contrast, midwestern and eastern states account for roughly 30 percent of all sheep and lambs but nearly two-thirds (62.9 percent) of all sheep operations, indicating that more intensive smaller farm flock produc- tion systems are the norm in these two regions (Table 2-1). Productivity (lambs produced per 100 ewes) is much higher in the confined, intensive systems of the Midwest and East (Table 2-1). The lower level of productivity in the range states is primarily due to their extensive, low‑input production systems and higher predator losses. The Mountain states have a higher level of productivity than the other range states primar- ily because they still utilize shed lambing systems. Approximately half of all U.S. sheep are found on farms with fewer than 500 head of sheep and the other half on farms with more than 500 head (Table 2-2). Even though sheep numbers are evenly divided between large and small operations, the latter account for most of the sheep operations in the United States (98.4 percent). Consequently, only about 1.6 percent of all

THE U.S. LIVE SHEEP INDUSTRY 39 TABLE 2-1  U.S. Sheep Inventories, Productivity, and Operations by Region, January 1, 2006 All Sheep and Lambs Sheep Operations Breeding Market Lambs per Number Share Sheep Sheep 100 Ewes Number Share (1,000 (1,000 (1,000 Regiona head) (%) head) head) (head) (1,000) (%) 1 1,280 16.5 800 480 104 9,060 13.5 2 1,470 18.9 980 490 83 8,000 11.8 3 2,650 34.1 1,460 1,190 121 8,000 11.8 4 1,200 15.4 665 535 135 14,270 21.1 5 1,170 15.1 730 440 125 28,250 41.8 Total U.S. 7,770 100.0 4,635 3,135 112 68,280 100.0   aStatesincluded in regions as follows: 1 = Arizona, California, Idaho, Nevada, Oregon, and Washington; 2 = New Mexico and Texas; 3 = Colorado, Montana, South Dakota, Utah, and Wyoming; 4 = Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and Oklahoma; 5 = All other states. Source: USDA (2007g). sheep operations account for half of all U.S. sheep inventories. These larger operations are almost exclusively range sheep operations in the western part of the United States (Figure 2-1). Industry sources suggest that sheep and lamb numbers may be as much as 10 percent higher than reported by USDA. Although not well documented, this view is widely held in the industry and may be due to the following: • National Agricultural Statistics Service surveys include operations with farm income of at least $1,000. An increasing number of small-scale sheep flocks exist on farms with little or no earnings from their sheep op- erations or do not report the small income earned from sheep for various reasons. • Animal slaughter is reported for inspected slaughter plants where animals and carcasses are individually inspected. Sheep and lambs may be slaughtered at home or in local noninspected plants. Custom slaughter for specialty markets such as halal and kosher slaughter in inspected plants may not be reported if the carcasses are not individually inspected, which is not required for custom slaughter. Committee members interviewed several sheep producers, livestock market representatives, lamb order buyers, specialty lamb market processors, wool handlers and processors, sheep product vendors at various levels, and others on an informal basis as part of this project to obtain industry views on the status of the U.S. sheep industry.

40 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES TABLE 2-2  U.S. Sheep Inventories and Operations by Flock Size, January 1, 2006 Flock Size (head) Item 1–99 100–499 500–4,999 5,000+ Inventories (%) 28.7 22.0 33.8 13.5 Operations (%) 90.8   7.6   1.5   0.1 Source: USDA (2007g). Sheep and Lambs - Inventory: 2002 1 Dot = 1,000 Sheep and Lambs United States Total 6,341,799 FIGURE 2-1  Geographic distributionNew 2-01 and lamb inventories, 2002. of U.S. sheep Source: USDA (2002). • The number of suburban small farms of 1–5 acres is increasing. Many of these farms may have 5–10 sheep as “lawn mowers” or “weed eaters.” Also, they may have sheep to maintain their agricultural property tax exemption. Lambs produced from these flocks may be primarily used for home consumption or bartered for other goods or services.

THE U.S. LIVE SHEEP INDUSTRY 41 100 95 90 85 80 Percent 75 70 65 60 55 50 1867 1873 1879 1885 1891 1897 1903 1909 1915 1921 1927 1933 1939 1945 1951 1957 1963 1969 1975 1981 1987 1993 1999 2005 Years FIGURE 2-2  Breeding stock as a percent of total sheep and lamb inventories, 1867–2007. Fig 2-02.eps Source: Calculated from data in USDA (2007g). • Youth 4-H or Future Farmers of America sheep projects may be viewed by farm owners as youth income, rather than farm income, and may or may not be reported. Sheep and lamb inventories include breeding sheep (ewes, rams, and replacement lambs) and nonbreeding sheep and lambs. Breeding stock as a percentage of total sheep and lambs has been declining over the years from about 97 percent in the late 1800s to a low of 72 percent in 2001, reflecting the increasing productivity of U.S. sheep breeds and a general trend toward disinvestment in sheep production (Figure 2-2). The phase-out of wool price supports under the Wool Act between 1992 and 1994 led to a major sell-off of breeding stock as the profitability of wool production declined sharply. As a consequence, the share of total inventories accounted for by breeding stock tumbled from around 85 percent in the early 1990s to 73 percent in 1995 (Figure 2-2). The breeding stock share of inventories has stayed at about that same level since that time. Transition in the Regional Distribution of Sheep Inventories A dominant characteristic of the sheep industry since at least World War II has been the steady decline in sheep and lamb inventories (see Chapter 1).

42 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES Focusing on the change in aggregate numbers over time, however, conceals an important recent phenomenon in the industry that is changing the tradi- tional national pattern of sheep production. A simple trend analysis of the sheep inventory data indicates that the decline in sheep numbers has slowed significantly and even reversed in some regions of the country. Analyzing the two periods of 1989–2000 and 2001–2007, the compound annual rate of change in sheep and lamb inventories by state was calculated and com- pared in the two time periods and across all states for which there were continuous data series. The remaining states were aggregated as a single region. For the 1989–2000 period, the estimated coefficients of the time trend variable for all states and the total U.S. are negative, and strongly so in many cases, indicating a continued negative rate of change in inventories during that period. For the more recent years of 2001–2007, however, the results differ substantially, indicating that many states are no longer in decline in sheep and lamb inventories. Figure 2-3 shows a comparison of the rates of change in inventories by state over the two periods. In four states (California, Utah, North Dakota, and Nevada), the rates of decline are larger for the more recent period of 2001–2007 than for the 1989–2000 period. As well, New Mexico shows little change in the rate of decline between the two periods. These five states represented 19.6 percent of total U.S. sheep and lamb inventories on January 1, 2007. For most states with larger shares of the national flock, the rates of decline have abated substantially. The United States as a whole appears to be still in decline for the period, although the rate of decline in inventories has slowed from over 4 percent to less than 2 percent annually. In addition, over the last 4 years (2004–2007), total U.S. inventories have been relatively stable. Several states showed positive rates of inventory change for the 2001– 2007 period, including Pennsylvania, Wisconsin, Michigan, Oklahoma, Missouri, New York, Virginia, and the “Other States” category in Figure 2-3. This group of states represents over 16 percent of U.S. sheep and lamb inventories. For all other states, the annual rates of change in 2001–2007 were less than half the rates during the 1989–2000 period. In the case of Texas, for example, the rate of decline in inventories during 2001–2007 was –1.7 percent compared to –4.6 percent during the earlier period. Al- though the smallest in terms of sheep and lamb inventories, the Other States category, which includes those states for which continuous data were not The analysis used a simple time trend, semi-log regression to calculate the rates of change in U.S. sheep inventories by state for the two periods of 1989 to 2000 and 2001 to 2007. The regression model was: log Yij = αi + βi Xij + εij where Yij = January 1 inventory of all sheep and lambs for state i in year j and Xij = time trend (1 for first year, 2 for second year, . . .) for state i in year j.

THE U.S. LIVE SHEEP INDUSTRY 43 Texas California Wyoming Colorado South Dakota Utah Montana Idaho Iowa Oregon Minnesota Ohio NewMexico Arizona Pennsylvania Kansas North Dakota Nebraska Wisconsin Michigan Oklahoma Missouri Nevada New York Virginia Illinois Indiana Washington West Virginia Other States Total U.S. –10 –8 –6 –4 –2 0 2 4 Compound Rate of Change (%) (States Ranked by 2007 Inventories, Highest to Lowest) 2001–2007 (%) 1989–2000 (%) FIGURE 2-3  Rates of change in sheep and lamb inventories by state, 1989–2000 and 2001–2007. Fig 2-03.eps available for the full period of 1989 to 2007, exhibited the second fastest inventory growth during the more recent years. Clearly, considerable change is taking place in growth rate and location of U.S. sheep and lamb inventories. While inventories in some states con- tinue to erode, those in many other states have now halted their long-term decline and show modest growth in aggregate terms. The last few years

44 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES may be the beginning of a transition period in which growth in farm flocks is coupled with a slower overall decline in range sheep flocks, contributing to a more stable level in the national flock than has occurred in the past 60 years. A major contributor to this transition is the increase in hair sheep production in Texas and the farm flock states. These states have also expe- rienced increases in meat goat production. To some extent, these transitions have been due to substitutions of hair sheep and meat goats for wool-pro- ducing sheep breeds and mohair goats, but some farms have added hair sheep and/or goat enterprises. Benefits of hair sheep and goats include their adaptability to humid climates, elimination of the need for shear- ing (shearers are sometimes difficult to find), increased ethnic demand for lighter‑weight slaughter lambs and goats, and their use in weed and brush control programs. Hair sheep and meat goat breed shows and exhibitions have also been significant contributors to this increase. However, there is concern that selecting these animals on the basis of subjective evaluation may be detrimental to selection for their desired “easy care” attributes. The Profitability of Sheep Production Decisions made by lamb producers determine the supply of feeder lambs each year and, ultimately, the supply of lamb meat. Each year, sheep producers assess the prices and net returns received from feeder lambs and decide whether and how many ewes to slaughter or retain as capital stock for breeding purposes. The decision to retain ewes for breeding indicates optimism on the part of producers about market conditions. By the same token, the decision to sell ewes for slaughter indicates that producers may not anticipate high enough prices to hold back a significant number of ewes for future production. Other factors, such as low rainfall and available for- ages, may also affect decisions on ewe retention. Examples of production costs and returns are presented in Table 2-3 for a 3,000-ewe public land range sheep production operation in Nevada and in Table 2-4 for a more intensively managed 50-ewe farm flock enterprise in Wisconsin. Although there are numerous variations of both range and farm flock sheep production systems in terms of size and management, and profitability may differ with each variation and from year to year, these two examples suggest that sheep production has been profitable in recent years, on the average for operations of this size using the depicted management systems. The major difference in these examples is that labor and manage- ment costs are the largest expense for public range operations at 39 percent of all expenses, while family labor provides the labor for farm flock enter- prises and is not considered an “out of pocket” expense. However, family labor has an opportunity cost for alternative economic activities that is not

THE U.S. LIVE SHEEP INDUSTRY 45 TABLE 2-3  Enterprise Budget for Public Land Range Sheep Operation: 2006 Expense and Income Analysis for a 3,000-ewe Range Production System Item Per Ewe ($) Total $ EXPENSES Labor (herder, plus support at lambing) 20.00 60,000 Management (owner oversight or employed manager) 10.00 30,000 Public land lease (10 months/year) 3.25 9,750 Public land maintenance and improvements 1.00 3,000 Facilities and equipment depreciation, operation, maintenance 9.00 27,000 Supplemental feed, minerals, private pasture management 8.00 24,000 Ram costs 3.00 9,000 Vaccination, medication, internal and external parasite control 5.00 15,000 Water hauling (varies from 1 to 4 months of year) 2.00 6,000 Shearing 3.00 9,000 Marketing lambs, wool, cull ewes 4.00 12,000 Guardian and herding dog expenses 1.00 3,000 Operating capital interest 2.00 6,000 Predator control (direct expenses, contributions to state programs) 2.00 6,000 Miscellaneous, including dues and subscriptions 2.00 6,000 Total Expenses $75.25 $225,750 INCOME 0.95 lamb sold/ewe × 40.72 kg/lamb × $2.21/kg 85.50 256,000 4.53 kg wool/ewe × $3.09/kg 14.00 42,000 0.15 cull ewe × 59.09 kg × $0.66/kg 5.85 17,550 Wool Loan Deficiency Payment @ $0.33/kg 1.50 4,500 Total Income $106.85 $320,550 Return on investment $30.60 $91,800 Investment costs (animals, equipment, facilities, etc.) $180.00 $540,000 Estimated return, investment, and risk (%) 17.0 Break-even cost per kilogram of lamb sold (wool and cull ewe income constant) = $1.5465 Explanation of Budget:   • Of the 5 producers interviewed for this analysis (17,000 ewes total), lamb sales varied from 0.9 to 1.1 lambs per ewe at average weights from 38.6 to 47.6 kg per lamb at prices from $2.09/kg to $2.38/kg. Includes an average of 0.2 ewe lambs per ewe (20%) retained as replacements.   • Lambs sold and sale weights may vary ± 5% due to climatic conditions, predation, and seasonal forage quantity and quality. Lamb sale prices have been relatively stable for these producers, and wool prices have almost doubled during the last 3 years. Source: Update of the Standardized Performance Analysis (SPA) project initiated by Oltjen and Glimp (1992).

46 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES TABLE 2-4  Enterprise Budget for a 50-ewe Farm Flock Sheep Enterprise: 2006/2007 Operating Costs and Income Item Per Ewe ($) Total $ EXPENSES Feed Hay and grain 39.31 1,966 Salt and minerals 2.25 112 Supplemental feed for finishing lambs 20.16 1,008 Pasture maintenance 8.00 400 Health program Internal and external parasite control 8.96 448 Vaccinations 4.24 212 Other veterinary medications, services 5.20 260 Shearing 3.64 182 Ram replacement 6.00 300 Bedding straw 6.24 312 Marketing and transportation 7.95 398 Supplies 5.20 260 Manure disposal 7.00 350 Building maintenance 6.00 300 Interest on operating expenses 3.90 195 Total operating expenses 134.05 6,703 INCOME 1.4 Lambs/Ewe @ 59.09 kg/lamb × $2.09/kg 172.90 8,645 Cull ewes and rams 16.53 826 Wool 2.50 125 Wool loan deficiency payment 1.25 62 Unshorn lamb pelt payment 1.44 72 Total operating income $194.60 $9,730 Return on land, labor, and investment $60.56 $3,027 Investment costs (animals, facilities, equipment, land improvements) $338.00 $16,900 Estimated return to labor, investment, and risk (%) 17.9 Break-even cost per kilogram of lamb sold (wool and other income constant) = $1.6237 Source: Thomas (2007). Copyright 2007 by David L. Thomas. Used with permission. included in these calculations. If family labor costs are included, many small farm flocks may be only marginally profitable; however, a sheep enterprise may be a more economically competitive use of farm family labor than other possible enterprises. Because most range operations up to 5,000 ewes are managed by the owner, the return on investment and management for those operations would be higher than that shown in Table 2-3 by $10 per ewe, or 18.9 per-

THE U.S. LIVE SHEEP INDUSTRY 47 cent, with a lower break-even price per kilogram of lamb sold of $1.4606/kg ($0.6625/lb). The major advantage to farm flock enterprises is their ability to sell heavier harvest‑ready lambs and more lambs per ewe because of their higher feed inputs (52 percent of expenses) and low family labor costs. The public land range operation has the advantage of lower feed (15.5 percent of expenses) and facilities costs, and economies of scale such as lower vet- erinary and marketing costs per ewe. Increasing ewe productivity can be a major factor in enterprise profitability, but increased income from produc- tion increases must exceed cost inputs. Variations in range sheep production systems include higher inputs of labor and facilities with shed lambing and supplemental feeding in most of the Intermountain states with higher‑quality forage resources on summer rangelands that increase both number and weight of lambs weaned per ewe, to the extensive low‑input private rangelands range sheep operations in western Texas and New Mexico that result in lower productivity. Although not documented in this analysis, profitability of these variations may be similar to the range enterprise presented in Table 2-3. Farm flock enterprises are the primary sheep enterprise in the eastern United States and are also quite common in the western states in irrigated valleys and in higher rainfall regions such as northern California, Oregon, and Washington. Farm flock sheep operations may vary from 5 to > 500 ewes with the norm being from 5 to 50 ewes. The major difference is that range flocks of > 1,000 ewes are considered an important business enterprise, while farm flocks of < 100 ewes may be considered a secondary enterprise on the farm. Commodity cash receipts for sheep, lamb, and wool products at the farm level in 2006 were estimated at about $497.7 million, with wool ac- counting for about 5.1 percent of this amount (USDA, 2007a). In relation to all commodity cash receipts, sheep, lambs, and wool account for only 0.21 percent of commodity receipts for farms, and only about 0.42 percent of all animal/livestock receipts. In a few states, the share of total cash receipts for sheep, lambs, and wool is 1 percent or more, including Colorado (2.1 percent), Utah (1.5 percent), and Montana (1.0 percent). Many factors impact the profitability of sheep production in the United States. Although U.S. wool prices are 20–30 percent below world market prices for comparable wool grades, prices have doubled since 2000 (see Chapter 5). Government programs, including the wool loan deficiency pay- ment (LDP) program and payments for retained replacement ewes in 2004 and 2005, have supported profitability and encouraged industry expansion. A number of other external and internal factors contribute to industry prof- itability, among which the most salient are the following: • Scale of operation. There are numerous advantages to sheep enter- prises larger than 1,000 head. Input costs such as vaccines, drugs, trans-

48 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES portation, and labor may be half the cost per animal for a 1,000‑head flock compared to a 100‑head flock. Perhaps as important is that producers with large flocks view sheep as a primary business enterprise and, consequently, strive for increased efficiency in their operations. Producers with small flocks, on the other hand, generally consider sheep as a secondary enterprise with lower returns to investments in productivity increases. • Distance and access to markets. Transportation costs, feedlot and slaughter plant locations, and distance from major production areas to major areas of consumption can affect profitability. As inventories have declined and production has become more geographically dispersed over time, the numbers of auctions, feedlots, and slaughter plants have declined as well, while the average distance that animals must be hauled to market has increased. Small flock producers are particularly disadvantaged in their access to major auctions and traditional buyers. • Labor cost and availability. Sheep producers are required to have herders with their sheep while their sheep are grazing on public lands. Labor is the largest expense of sheep production for these producers. Since the do- mestic availability of herders is low, U.S. Department of Labor H2A work visa permits have been used to bring herders in from other countries. With homeland security concerns, the time required to obtain a work visas has increased from 1–2 months to 3–6 months (WRA, 2007). A similar prob- lem exists with obtaining temporary work visas for highly qualified sheep shearers who have historically come to the United States from Australia and New Zealand during their southern hemisphere winter off-season. Lack of available sheep shearers in states with lower sheep numbers has resulted in producers either quitting sheep production or shifting to hair sheep or meat goat breeds (see Chapter 5). • Feed costs. Feed costs may account for over 50 percent of all ex- penses in intensive sheep production systems (Thomas, 2007). Increasing use of feed grains for ethanol production may impact lamb feedlot costs of gain. An increasing cost for feed could shift emphasis in finishing lambs for slaughter from feedlots to high‑quality pasture and alfalfa and other crop aftermath grazing. Increased feed grain prices could also discourage lamb feeders from overfeeding lambs to excessive fat levels because of cheap gain costs. Higher feed grain costs could have a larger impact on the cost of poultry and pork production than on sheep production, which would improve the competitive retail margin of lamb relative to those of other meats products. • Wool. Wool is now of minor importance to more intensive sheep production systems and may even be considered a liability within some breeds and locations. However, in range sheep production systems where limited feed resources can limit the weight of lamb weaned per ewe, wool is more important to the sheep enterprise. The sheep breeds best adapted

THE U.S. LIVE SHEEP INDUSTRY 49 to range production systems with limited feed resources also tend to be the best wool‑producing breeds (see Chapter 5). Sheep Genetics and Breeds Sheep are thought to have been domesticated over 10,000 years ago from captured animals from the wild breeds of sheep in central Asia. Since domestication, sheep have evolved through selection to meet humans’ needs for meat, wool, and milk for cheese production. They have been selected to be adapted to specific environments as well as for specific product needs. The breeds adapted to range production systems, including the Rambouil- let, Merino, Targhee, and Columbia breeds, have strong flocking instincts, meaning that they will generally be together, at least within sight distance of others in the flock when grazing and will bed down together at night. Breeds such as the Suffolk, Hampshire, Dorset, and Polypay, on the other hand, are adapted to more intensive pasture and crop production systems and generally do not have strong flocking behavior. Genetics Early selection was based primarily on desired phenotypic traits, de- pending on the needs and desires of the breeder and their communities and clientele. The 20th century was the major transition period to perfor- mance-based selection for desired traits. Advances in technology to improve selection for traits to improve growth and reproduction, for example, have resulted in the weight of lamb produced per ewe to more than double in the last 60 years. Lamb meat is now also leaner and more nutritious. Milk output by dairy sheep breeds for cheese production has experienced similar productivity increases. Although the wool yield per animal has not increased to the same extent as meat yield in the United States, wool productivity has advanced in other countries like Australia. All of the economically impor- tant wool traits are highly inheritable and can be improved more rapidly than most traits. Production economics have, to a large extent, dictated selection empha- sis within specific countries and environments. Adaptability to the environ- ment in which the animal is expected to produce is still probably the most important economic trait. Multiple advances in environmental adaptability have been made, such as improvements in growth and reproductive traits in range breeds that evolved initially for wool production. Specialized sire breeds have been developed that permit crossbreeding all or a portion of the range flock ewes to increase the weight of lamb produced per ewe while maintaining the hardiness and the wool production of the foundation ewe flock. Hair breeds have been imported for use in the more humid and

50 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES subtropical environments and in regions with inadequate number of sheep shearers, where wool may be a liability. Dairy sheep breeds, developed in the more traditional sheep milking regions of Europe, have supported the development of this new industry in the United States. The sheep genome is being mapped and, when completed, will provide the foundation for future genetic improvement in the sheep industry. Gene markers for a number of important economic traits are being intensively investigated. A few have already been identified, such as the gene marker for superfine wool by New Zealand scientists and a group of markers that can be used to select for internal parasite resistance. An increasing number of gene markers will likely be identified in the future that will improve the industry’s ability to accelerate genetic progress. The continued development of gene markers will require close working relationships between scientists, producers, economists, and investors to identify research priorities and to validate the potential markers identified. The application of this new knowledge will be essential to future global competitiveness of the U.S. sheep industry. Sheep Breeds The most recent edition of the Sheep Production Handbook lists 49 breeds of sheep in the United States (ASI, 2002). There are some recent im- ports, however, such as the Lacaune, Charollais, and Ile de France, that are not listed. Consequently, there are currently over 50 breeds of sheep in the United States, among which there is a large amount of variation in body size, appearance, and the amount and quality of meat, wool, and milk produced. The wide variety of breeds allows producers to choose the breeds that best meet the requirements of a specific production environment or market situa- tion. However, the wide variety in breeds utilized in this country has resulted in wide variation in the type and quality of lamb and wool marketed. Sheep breeds in the United States can be grouped according to principal function or use: • General purpose breeds. These are breeds with a good balance be- tween meat and wool production and adaptability to a reasonable range of environmental conditions. Such breeds may be the best choice for small flocks where the logistics of a crossbreeding program are not feasible. Some breeds in this group are Dorset, Montadale, and Polypay. • Maternal range breeds. These are the predominant U.S. breeds in terms of total population numbers. In general, they are characterized by good adaptability to more difficult environments, above average fleece weight and quality, and longevity. Ewes of these breeds are found primarily in the range areas of the western United States, including the Merino, Ram-

THE U.S. LIVE SHEEP INDUSTRY 51 bouillet, Targhee, and Columbia breeds, and crosses among these breeds. Maternal range breeds such as the Romney are also found in the coastal hill areas of the Pacific Northwest. • Prolific maternal breeds. The Finnsheep and Romanov breeds set themselves apart from other breeds because of the very large numbers of lambs born to a ewe at each lambing. Many Finnsheep and Romanov flocks will average three or more lambs per ewe. In addition, these two breeds are noted for a very young age at puberty and for excellent newborn lamb vigor. These breeds are often crossed with general purpose and range breeds in order to produce crossbred ewes with greater lamb production for farm flock production systems. • Sire breeds. The most important characteristics of these breeds, used primarily to sire crossbred market lambs, are large mature size, rapid growth rate, superior muscling, and lower carcass fat. The Suffolk and Hampshire are the dominant breeds in this group. Less common sire breeds include the Oxford, Shropshire, and Texel. • Dairy breeds. These are breeds that are milked with machines as are dairy cows and dairy goats. The milk is processed into specialty cheeses and yogurts. Dairy sheep production is a relatively new industry in the United States (see Chapter 6). There were no specialized dairy breeds in this country until the 1990s. Two dairy breeds that excel for milk production have been imported from Europe: the East Friesian and the Lacaune. • Hair breeds. These breeds do not produce wool but, instead, have a hair coat like that of cattle. They were developed in the humid tropics where a wool coat would be a disadvantage. They are adapted to a hot, humid climate, and tend to be more tolerant of internal parasites than many wool breeds. They are popular in the southeastern United States where wool sheep are not well adapted and among a growing number of flock owners throughout the United States who have responded to the low value for wool and the high cost of shearing. Hair breeds in the United States are Dorper, White Dorper, Katahdin, St. Croix, Barbados Blackbelly, and Royal White. • Specialized wool breeds. These breeds are raised primarily to pro- duce colored fleeces or fleeces with other unique characteristics desired by fiber artists, hand spinners, or weavers. Breeds in this group tend to be the long-wooled breeds (breeds that grow wool with a long fiber length). Longer-fibered wool is somewhat easier to spin than shorter-fibered wool. Some breeds in this group include Shetland, Icelandic, Lincoln, and Border Leicester. • Hobby or rare breeds. The majority of the 50‑plus breeds of sheep in the United States are not used in commercial production to any great extent and, therefore, contribute little to the national supply of meat, wool, or milk. The hobby breeds are found almost exclusively in small purebred

52 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES flocks and are generally raised for competitive exhibition. Owners of the elite flocks of these breeds sell a large portion of their sheep as breeding animals to other purebred breeders. The less successful breeders sell the majority of their animals as market animals. Although some hobby breeds are found in relatively large numbers relative to other breeds (e.g., South- down and Cheviot), their primary reason for existing is still exhibition and not the production of food and fiber. Some breeds of sheep are recognized by the American Livestock Breeds Conservancy as rare (e.g., Romeldale, American Jacob, Cotswold, and Navajo-Churro) and in need of preserva- tion (ALBC, 2007). While the hobby and rare breeds contribute very little to current supplies of sheep products, they may possess traits of importance to production in the future. Germplasm from several breeds of sheep, in- cluding both minor and major breeds, has been collected and preserved for possible future use through the National Animal Germplasm Program of USDA (USDA, 2008). Crossbreeding is a common practice in the production of market lambs. In the western range flocks, only enough of the ewes of the maternal range breeds (Merino, Rambouillet, Columbia, or Targhee) or crosses among these breeds are usually mated to rams of these breeds to produce the number of replacement females needed to maintain flock numbers—about 40 percent of the ewe flock. The remaining ewes are mated to rams of the sire breeds (Suffolk or Hampshire) to produce more desirable market lambs. A similar crossbreeding system is often used in larger farm flocks but with ewes that will produce more lambs than the maternal range breeds. The ewe flock may be composed of general purpose breeds or crossbred ewes produced by mating the prolific maternal breeds of Finnsheep or Romanov with the maternal range breeds or general purpose breeds. In these farm flocks, 25 to 30 percent of the ewes must be bred to produce the replacement ewes and 70 to 75 percent of the ewes can be mated to Suffolk or Hampshire rams for the production of market lambs. One challenge with these cross- breeding systems is the poor fitness and lack of longevity among rams of the traditional sire breeds, which increases costs of producing commercial market lambs. An increasing number of range producers are breeding all of their ewes to maternal range breed sires and becoming specialized producers of replace- ment ewes. These replacement ewes are sold to other range producers who prefer to purchase all their replacements ewes and breed all ewes to terminal sire breed rams for the production of market lambs. Most breeds of sheep are represented by a national breed association. The primary purpose of the breed association is to maintain pedigree re- cords on animals of the breed and to provide breeders and owners of these purebred animals with registration papers as proof of breed purity. These

THE U.S. LIVE SHEEP INDUSTRY 53 associations also promote their respective breed to the commercial sheep industry and potential new purebred breeders, set standards for acceptable breed type, and sponsor shows and sales for their breed. An estimate of the number of registered purebred breeding sheep can be obtained by using the number of new purebred animals registered each year (an average of 81,474 for 2005 and 2006) (Table 2-5) and making some reasonable assumptions about the lamb production of registered ewes (1.20 lambs raised per ewe mated), the proportion of male lambs registered (20 percent), the proportion of female lambs registered (40 percent), and the ewe‑to‑ram ratio among purebred‑registered breeding sheep (15:1). These assumptions yield an estimated U.S. population of registered purebred breeding sheep in 2005–2006 of 241,000, or about 5.3 percent of the total U.S. breeding sheep inventory. This relatively small population of registered purebred sheep has a large influence on the genetic potential of the U.S. flock since most of the ewes and lambs in commercial flocks are only one or two generations removed from a purebred registered ram. A recreational purebred sheep industry has developed among the reg- istered purebred flocks in which animals are valued more for their ability to win shows and less for their ability to efficiently produce meat, wool, or milk. Although especially the case for “hobby” breeds of sheep, many of the flocks raising registered purebred animals of the breeds commonly used in commercial sheep production also are involved in this recreational purebred sheep industry. While the use of purebred sheep primarily as show animals provides an interesting recreational activity for many adults and youth and a lucrative source of income for some breeders, the recreational use of purebred sheep provides little of benefit to the commercial sheep in- dustry. Recreational purebred sheep are selected primarily on conformation traits that are not highly correlated with the efficient production of meat, wool, or milk. The genetics from many of these sheep eventually reaches commercial sheep flocks. Table 2-5 presents the top 10 breeds among the number of pure- bred registrations in 20‑year intervals from 1965–1966 to 1985–1986 to 2005–2006. In some cases, the numbers in Table 2-5 are not indicative of the relative number of animals of a particular breed in the U.S. sheep population. For example, there are more sheep of the maternal range breeds (Rambouillet in particular) in the United States than any other breed, but most are nonregistered purebreds, individuals of a high percentage of one of the maternal range breeds, or crosses among the maternal range breeds in large range flocks. The two maternal range breeds listed in Table 2-5 (Rambouillet and Columbia) never rank first in number of registrations but always follow the sire breeds of Suffolk and Hampshire, the primary breeds of rams used to sire commercial market lambs in the United States. Part of the reason for the high registration numbers for Suffolk and Hampshire

54 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES TABLE 2-5  Top 10 Sheep Breeds with Annual Number of Purebred Registrations at 20-year Intervals, 1965–1966, 1985–1986, and 2005–2006 Average of 1965 and 1966a No. of % of Total Rank Breedc Registrations Registrations  1 Suffolk 32,314 27.9  2 Hampshire 26,168 22.6  3 Corriedale 12,448 10.7  4 Southdown 8,986 7.7  5 Columbia 6,502 5.6  6 Shropshire 6,352 5.5  7 Dorset 6,070 5.2  8 Rambouillet 5,742 4.9  9 Cheviot 3,274 2.8 10 Montadale 2,718 2.3 Top 10 breeds 110,574 95.3 All breeds 116,011 100.0 Average of 1985 and 1986b No. of % of Total % Change from Rank Breedc Registrations Registrations 1965–1966  1 Suffolk 65,133 44.7 101.6  2 Hampshire 16,325 11.2 –37.6  3 Dorset 13,672 9.4 125.2  4 Rambouillet 12,189 8.4 112.3  5 Columbia 7,756 5.3 19.3  6 Southdown 4,820 3.3 –46.4  7 Corriedale 4,477 3.1 –64.0  8 Shropshire 3,435 2.4 –45.9  9 Polypay 3,408 2.3 NAd 10 Montadale 2,764 1.9 1.7 Top 10 breeds 133,979 92.0 21.2 All breeds 145,638 100.0 25.5 relative to the maternal range breeds is their popularity as recreational show sheep, especially in market lamb or club lamb shows. However, changes over time in the number of registrations and rank in registrations of breeds are generally indicative of the popularity of that particular breed in commercial sheep production. Total purebred registrations decreased by 34,537 (–29.8 percent) ani- mals over the 40‑year period from 1965–1966 to 2005–2006 (Table 2-5).

THE U.S. LIVE SHEEP INDUSTRY 55 TABLE 2-5  Continued Average of 2005 and 2006b No. of % of Total % Change from Rank Breedc Registrations Registrations 1965–1966  1 Suffolk 13,428 16.5 –58.4  2 Hampshire 8,784 10.8 –66.4  3 Dorset 8,729 10.7 43.8  4 Dorper 7,020 8.6 NAd  5 Southdown 5,793 7.1 –35.5  6 Katahdin 5,316 6.5 NAd  7 Rambouillet 3,472 4.3 –39.5  8 Columbia 2,950 3.6 –54.6  9 Shropshire 2,607e 3.2 –59.0 10 Montadale 2,064 2.5 –24.1 Top 10 breeds 60,163 73.8 –45.6 All breeds 81,474 100.0 –29.8   aMead (1967).   bDeakin (2007).   cBreeds in bold type were among the top 10 breeds in registration numbers at all three time periods.   dBreed associations for the Polypay, Katahdin, and Dorper breeds were not present in 1965–1966.   eNumber of registrations for the Shropshire breed was not available for 2006. Sources: Mead (1967), ASI (2002), and Deakin (2007). However, there was not a constant decrease over this period because the number of registrations halfway through this period in 1985–1986 was actually higher than in either 1965–1966 or 2005–2006. The percentage decrease in total sheep inventory during this 40‑year period was over twice as great as the percentage decrease in purebred registrations. This suggests that registered sheep numbers were not reacting to the same factors or in the same manner as the total sheep inventory. Many purebred sheep are in small flocks with little potential for generating significant amounts of income or in flocks that are maintained for competitive exhibition and recreation. Such flocks are less affected by external economic factors than larger commercial flocks so it is not surprising that trends in purebred registration numbers and total sheep inventories differ. Eight breeds (Suffolk, Hampshire, Dorset, Southdown, Rambouillet, Columbia, Shropshire, and Montadale) were among the top 10 breeds for registration numbers in all three time periods (Table 2-5). Between 1965– 1966 and 1985–1986, Polypay replaced Cheviot, and between 1985–1986 and 2005–2006, the two hair breeds of Dorper and Katahdin replaced Cor- riedale and Polypay in the top-10 group. Both Dorper and Katahdin have

56 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES had increases in number of registrations in most years from the time their registration numbers were first reported in 1996 and 1995, respectively (Deakin, 2007). The Dorset was the only breed present in 1965–1966 that posted an increase in registration numbers over the past 40 years (+43.8 percent) and is evidence of the breed’s popularity as a general purpose breed for commercial production (Table 2-5). In 1965–1966 and 1985–1986, the top 10 breeds represented over 90 percent of total registrations among all breeds. In 2005–2006, however, the top 10 breeds accounted for only 74 percent of total registrations, indicating a growing interest in recent years in the breeding of minor breeds or new breeds among hobbyists, breed preservationists, and hand spinners. There are more breed choices today than there were 40 years ago. Registration numbers were reported for 17 breeds in 1965–1966 (Mead, 1967), rising to 33 breeds in 2005–2006 (Deakin, 2007). The most significant change in breed composition of the national flock in the past 10 years has been the increase in number of hair sheep and hair sheep crosses during a time when the national sheep inventory and purebred sheep registrations have declined. Population numbers of hair sheep and their crosses are not collected by USDA; however, an indication of their popularity can be determined by examination of purebred registrations (Deakin, 2007). From 1997 to 2006, the total number of registrations of animals of all purebred breeds decreased by 19 percent (from 95,523 to 77,340 head), and the top four wool breeds (Suffolk, Hampshire, Dorset, and Southdown) decreased by 32 percent (from 52,686 to 36,035 head). Hair sheep breed registrations, on the other hand, increased by 246 percent from 1997 to 2006 (from 4,032 to 13,944 head) and accounted for 18 percent of all purebred sheep registrations in 2006. The popularity of hair sheep has been due to their “easy care” nature. They do not require shearing, are more tolerant of internal parasites (Wil- deus, 1997), and are comparable or superior in ewe productivity (weight of lamb weaned per ewe mated) to many wool breeds, especially in hot, humid environments (Bunge et al., 1995). A negative effect of the growth in hair sheep numbers has been increased hair contamination of the national wool clip with fleeces from hair-wool sheep crosses and with fleeces from wool sheep in mixed flocks of wool sheep and hair sheep (Talley, 2008). The National Sheep Improvement Program (NSIP) is available to breed- ers of purebred sheep to calculate estimates of genetic merit of individual sheep across flocks for the economically important traits of fleece weight, staple length, fleece grade, direct weaning weight, indirect weaning weight (milk), postweaning weight, and number of lambs born. In addition, some breeds have developed specific estimates of genetic merit for traits with special importance to their breed such as ewe productivity (weight of lamb weaned per ewe lambing) and fecal egg count (indicator of internal parasite resistance). Access to NSIP is through a sheep breed association or a group

THE U.S. LIVE SHEEP INDUSTRY 57 of breeders of a particular breed who will take responsibility for collection of the performance data, put it in a form needed by NSIP, and submit it to NSIP for analysis. Flocks enrolled in NSIP have shown positive genetic changes over time for economically important traits. As an example, Figure 2-4 presents the expected progeny difference (EPD), the estimate of improved genetic merit identified by NSIP, for 60­‑day and 120‑day weights from 1986 to 2005 of Polypay sheep in flocks enrolled in NSIP. A doubling of the EPD is an esti- mate of genetic merit of an individual animal. Polypay lambs born in 2005 were expected to be about 0.91 kg heavier at 60 days and 1.81 kg heavier at 120 days than Polypay lambs born in 1986 because of genetic improvement. Most of this gain came in the past 8 years, probably because the breeders had more confidence in the use of EPDs when making selection decisions in later years after they had some experience in their use and value. The earliest users of NSIP were the Targhee, Suffolk, and Polypay breeds. More recently, the Dorset, Hampshire, Katahdin, Rambouillet, Columbia, and Romney breeds have joined NSIP. In 2005–2006, records from approximately 110 flocks, including 7,000 ewes and 11,000 lambs, were processed by NSIP across these nine breeds. The Katahdin breed was represented with the most flocks (34). Four of the breeds (Hampshire, Rambouillet, Columbia, and Romney) had five or fewer flocks represented (Notter, personal communication, 2007). While estimates of genetic merit from NSIP will aid in the genetic improvement of the U.S. sheep population, the participation numbers indicate that fewer than 20 percent of U.S. sheep breeds and a minority of breeders within these breeds are using the genetic 60-day Weaning weight, lbs 120-day Postweaning weight, lbs 1 3 0.5 2 EPD EPD 1 0 0 -0.5 -1 1986 1990 1994 1998 2002 2006 1986 1990 1994 1998 2002 2006 Year Year FIGURE 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 (1 pound [lb] = 0.4536 kg). Source: NSIP (2007). Copyright 2007 by NSIP (National Sheep Improvement Program). Used with permission.

58 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES technology available through NSIP. For the most part, selection decisions in U.S. purebred sheep flocks are based on a visual, subjective evaluation of the appearance of an animal or within-flock performance records (e.g., fleece weight, fleece grade, lamb body weights, and/or ewe litter size) that yield less accurate estimates of genetic merit than those available from NSIP. As a result, genetic progress in the U.S. sheep population is less than could be the case if existing genetic technology were more widely utilized. Reproductive Efficiency and the Sheep Production Cycle Reproductive efficiency is the most important economic trait in sheep production. It is a complex trait that includes seasonality of mating, ovula- tion rate, fertilization of ova by sperm, embryo implantation and survival to parturition, and the birth of live, healthy lambs. The gestation length in sheep ranges from 140 to 155 days, depending on breed, fetal number, and other management factors. Sheep are generally considered seasonal breeders. As the day length decreases (increases), estrus and ovulation rates increase (decrease). Although there are exceptions, breeds developed and managed closer to the equator tend to have less seasonal breeding restrictions than breeds developed and managed in regions with greater seasonal variation in day length. Breed variations in reproductive efficiency range from the Finnsheep breed that averages over 3 lambs per ewe to breeds developed in more arid, harsher environments that may average less than 1.5 lambs per ewe. Because the gestation length averages 150 days, and lambs may be early weaned at 60 days or less, the potential for at least 3 lamb crops in 2 years exists. However, most production systems are planned for lambing to occur when the highest‑quality forage resources will be available to meet the increased nutrient needs for lactation and lamb growth. The sheep production cycle may vary due to production system, avail- able nutrient resources, climatic constraints, available labor, and other enterprise activities on the farm or ranch. Reproduction is the first stage of the cycle and includes several critical points (NRC, 2007): • Premating “flushing.” Producers may set aside or provide high- er‑quality feed resources for 3–5 weeks before the breeding season to im- prove ovulation rate and mating success. • Pregnancy. The breeding season is normally 35–40 days or two ewe estrus cycles. Embryo implantation occurs approximately 21–25 days after the ewe becomes pregnant. Higher‑quality feed resources and minimum stress are critical during this period. • Gestation. Gestation length may vary from 140 to 155 days. After implantation, ewes are managed to maintain or slightly increase body

THE U.S. LIVE SHEEP INDUSTRY 59 weight for the next 75–80 days. Most of the increase in fetal weight is dur- ing the last trimester of pregnancy. Good nutrition is more critical during this period. • Parturition. Lambing systems vary from “lock the gate and do not disturb” in much of New Mexico and Texas, to managed range lambing systems in portions of the western states, to intensive shed lambing systems in many of the Mountain states and the Midwest. The lambing season normally lasts 40–45 days. Managing nutrient needs, minimizing climatic stress, and controlling predators are critical during this period. • Lactation. The peak nutrient demands in all sheep production sys- tems are from the last 2–4 weeks of gestation through the first 6–8 weeks of lactation to optimize fetal and lamb growth and ewe milk production. Most production systems plan lambing to be synchronized with peak production of high-quality forages. This may result in April and May lambing in the western and northern states, and November and December lambing in the South, Southwest, and Mediterranean climate regions where higher‑quality pasture and forage crops are available in the fall and winter. • Weaning. Weaning age may be as young as 5–30 days in sheep dairies and may range from 60–100 days in more intensive production systems with more expensive feed costs. Most range production systems wean lambs at an average age of 120–150 days. Although many lambs may be ready for slaughter at weaning, most will require additional growing and/or feedlot finishing before slaughter (Figure 2-5). Lambs may reach slaughter weight and condition postweaning by graz- ing on high‑quality forages such as improved grass-legume pastures, wheat and other small‑grain pastures, and crop residues such as alfalfa. Heavier feeder lambs at weaning and lighter‑weight lambs after postweaning graz- ing will be finished in feedlots where they will receive concentrate-based diets. After weaning their lambs, ewes are usually culled for age and other production problems such as physical defects or poor lamb performance. The ewe flock will then be managed to maintain body weight until the pre- mating flushing period. Environmental Impact and Management Livestock species strive to survive, thrive, reproduce, and be produc- tive in the environment within which they are placed. Appropriate grazing or improper overgrazing may occur depending on management practices followed by the producer. Historically, sheep overgrazing occurred on both private and public rangelands. On private lands, producer experience, education programs, and state and federal incentives for range and pas- ture improvements, such as water capture and distribution, fencing, and

Fall Lambs for Slaughter 60 Lighter Weight Lambs 27–36 kg Heavier Finished Lambs to 63 kg Fall Lambs on Spring Pasture and/or Feedlot to Finished Weight Ewes and Fall Lambs on Pasture Mature Animals on Pasture Before Lambing Ewes and Fall Lambs on Pasture Ewes Bred for Fall Lamb Fall Lambing Season Crop Fall Lamb Cycle January February March April May June July August September October November December Spring Lambing Season Ewes Bred for Spring Lamb Crop Spring Lamb Cycle Mature Animals on Range Ewes and Lambs Together on Range or Pasture Mature Animals on Range or Feed Supplement or Feed Supplement Range Lambs on Feed to Finish Weight Range Lambs on Feed to Finish Weight Mature Animals on Pasture Ewes and Lambs Together in Farm Flocks Mature Animals on Pasture or Feed Supplement or Feed Supplement Farm Flock Lambs Pastured to Finish Weight or Grain Fed Farm Flock Lambs Pastured to Finish Weight or Grain Fed Spring Lambs for Slaughter Spring Lambs for Slaughter Heavier Finished Lambs to 63 kg Lighter Weight Lambs 27–36 kg Wool Shearing Season for All Mature Animals FIGURE 2-5  The sheep-lamb annual production cycle. Fig 2-05.eps landscape (smaller type would be < 6 pts if reduced to fit portrait style)

THE U.S. LIVE SHEEP INDUSTRY 61 other restoration practices, have generally improved both land and animal productivity. Public lands were inappropriately grazed in many areas prior to the Taylor Grazing Act of 1934, which resulted in issuance of grazing permits to producers that control season of use, stocking rates, flock man- agement, and herding requirements. Federal public land grazing permits are administered by the USDI BLM and by the U.S. Forest Service (USFS). State-owned lands may also issue livestock grazing leases on certain lands. This section reviews both the potentially positive and negative impacts of sheep grazing management practices and the impacts of public policies and their implementation. Sheep Diet and Grazing Behavior Because of diet preferences and their resulting selective grazing patterns, individual animal species may cause shifts in plant communities (Rector, 1983). For example, sheep may prefer forbs and grasses in the spring and early summer and shift to shrubs and mature grasses in the late fall and winter, while cattle may consume some forbs in the spring and some shrubs in the fall but primarily prefer grass communities. Grazing only sheep may result in a shift to grass plant communities, whereas grazing only cattle may result in a shift to shrub and forb plant communities. Goats will consume some grasses and forbs, but generally consume a larger amount and a wider range of shrub species than do sheep. Dramatic increases in invasive plant species and their impacts on the integrity and health of natural resources in the United States have been documented (Westbrooks, 1998; Pimentel et al., 2000; Gaskin and Schaal, 2002). Others have shown that prescribed grazing using sheep and/or goats can control invasive plant species and restore healthy plant communities (e.g., Glimp and Haug, 2004). A recently published handbook on grazing was designed as an education manual for producers interested in using pre- scribed grazing practices and for land managers who may want to utilize sheep and goat grazing for invasive species control, grazing firebreaks, and other rangeland restoration practices (Launchbaugh, 2006). The dietary overlap between sheep and other herbivores including cattle, goats, deer, and elk is generally considered moderate to low, depend- ing on the available plant community (Cook, 1985). Optimum plant species diversity and animal performance tend to occur when properly managed multispecies grazing is utilized (Glimp, 1988; Walker, 1994). In states with The Sheep & Goat Research Journal published a special issue in 1994 titled “The Role of Sheep Grazing in Natural Resource Management” which stimulated both research and education programs on appropriate sheep management practices to enhance natural resource management.

62 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES mostly private lands, where fee hunting is economically important, foraging relationships between domestic and wildlife species are important to the land manager. In western states with large public land holdings, wildlife are generally managed by the state, yet federal land managers are responsible for land management. Conflicts often occur when wildlife populations are not controlled, thus requiring land managers to reduce livestock grazing to avoid overgrazing and damage to plant communities and rangeland health. Most public land grazing permits are for single species grazing, yet most public lands would benefit from multispecies grazing management (Walker, 1994). Wildlife Interactions Other than wild predators, perhaps the most contentious domestic sheep and wildlife interaction issue is with bighorn sheep. The primary concern is the perception that domestic sheep will transmit diseases to bighorn sheep. T. McDonnell (personal communication with the commit- tee in 2007) estimates that, because of this perception, grazing permits for > 200,000 sheep have been revoked in the last 10 years and permits for > 50,000 sheep are currently at risk. The principal disease issue is pneu- monia and other respiratory diseases from Pasturella spp. infections. The basis for physical barriers between domestic and bighorn sheep is research by Foreyt et al. (1994), in which deaths of bighorns occurred following inoculation of captive bighorns with large doses of Pasturella hemolytica from healthy domestic sheep. Knowles and Rink (2006) emphasized a number of facts that they claim are often overlooked or ignored in considering wildlife interactions with sheep: • Bighorns and other wildlife species populations are often infected with various strains of Pasturella spp. and may transmit the organism to other members of the population. Martin et al. (1996) and Ward et al. (1997) isolated Pasturella from bighorns in Alaska and Idaho that had never been in contact with domestic sheep. • Pasturella spp. normally will not trigger pneumonia episodes unless infected animals are stressed. Stressors in bighorn herds may include un- dernutrition, predator attacks, trapping and relocation, hunting and other human disturbances, climate, and other disturbances related to inappropri- ate habitat. • No die-offs of bighorns in their natural habitat have ever been proven to be due to contacts with domestic sheep. • Pasturella spp. do not form spores and thus, are infectious for a very

THE U.S. LIVE SHEEP INDUSTRY 63 short time period, almost requiring nose‑to‑nose contact among animals for transmission. • Wildlife biologists have been successful in requiring barriers of 5–8 km between bighorn herds and domestic sheep flocks. Some biologists are advocating increasing the barrier to 12–13 km. When bighorn herds recruit new habitat closer to domestic sheep grazing permits, producers are often forced to vacate the permits. • Groups supporting wildlife interests are often in conflict with domes- tic sheep producers about the validity of scientific evidence. • Knowles and Rink (2006) emphasized the need for research that addresses the genetic basis of enhanced susceptibility of bighorn sheep to respiratory disease; the percentage of bighorn sheep that carry and trans- mit pathogens associated with respiratory disease; and what, if any, are the conditions that trigger transmission of pathogens and development of respiratory disease in bighorn sheep in their natural habitat. Predation Management Historically, predators have been the largest cause of sheep and lamb deaths for many years (USDA, 2005). In 2004, sheep producers lost 224,200 sheep and lambs to animal predators (Table 2-6). This represented 37.3 percent of the total losses from all causes and resulted in an economic loss of $18.3 million to farmers and ranchers. Coyotes accounted for over 60 percent of all confirmed predator losses with domestic and feral dogs second at over 13 percent. The primary predators in the “All Other Predators” cat- egory include wolves, vultures, and feral hogs. Feral hogs are becoming an TABLE 2-6  Sheep and Lamb Death Losses Due to Predation, 2004 Sheep Killed Total Value of Predator Number (head) % Loss ($1,000) Coyotes 135,600 60.5 10,707 Dogs 29,800 13.3 2,807 Mountain lions, cougars, or pumas 12,700 5.7 1,101 Bears 8,500 3.8 769 Foxes 4,200 1.9 285 Eagles 6,300 2.8 438 Bobcats 11,100 4.9 814 All others 16,000 7.1 1,376 U.S. total 224,000 100.0 18,297 Source: USDA (2005).

64 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES increasing problem in Texas and other southern states. An excellent review of predation issues was published in a special edition of the Sheep & Goat Research Journal titled “Predation” (SGRJ, 2004). The issue contained research and invited review papers from leading U.S. and international authorities that were presented at a symposium sponsored by the American Sheep Industry Association (ASI). Shelton (2004) pointed out that predation costs may be much larger than actual losses due to producer expenses for protection from predators and hidden costs due to predator injuries to animals, abortions, stress effects on performance from predator attacks, and even some preventive measures such as night penning that may affect animal performance. The most in-depth analysis of the economics of predation management and the importance of predator control programs for livestock is provided in a literature review by Bodenchuk et al. (2002). In five studies of losses where predator control programs were absent, annual losses averaged 5.7 percent for adult sheep and 17.5 percent for lambs. In eight studies where predator control programs were present, average annual losses were 1.6 percent for adult sheep and 6.0 percent for lambs. Based on comparative losses in the absence of predation management versus losses with management activi- ties across all livestock, Bodenchuk et al. (2002) estimated direct economic benefits to livestock producers of $62,606,770. They suggested that this estimate is conservative because of ancillary benefits to other livestock and wildlife species present where management programs are in place. They then estimated that investments in livestock predation management programs are approximately 40 percent federal and 60 percent from cooperative state programs. On the basis of estimated market values of livestock saved versus predation management program costs, they estimated the benefit-cost ratio (BCR) from predator management to be 3.1 to 1. Considering only federal investments in livestock predation management, they estimated a BCR of 6.75 to 1. Using the Jahnke et al. (1987) nonagricultural multiplier effect of 3.0, they estimated the total economic BCR from all predation management expenditures to be 12.2 to 1. Considering just federal expenditures, the total economic BCR was 27 to 1, suggesting that the tax revenues generated from the increased economic activity may be significantly greater than the federal expenditures for the predation management. Because of increased predation by wildlife species, significant invest- ments are being made in USDA predation management programs to protect various wildlife species (Bodenchuk et al., 2002). Mule deer, pronghorn antelope, bighorn sheep, wild turkey, and other upland game birds are examples where specific populations were being decimated by predation, and management activities have benefited their recovery. Predation manage- ment programs have also been used to protect threatened or endangered species populations such as the black-footed ferret, San Joaquin kit fox,

THE U.S. LIVE SHEEP INDUSTRY 65 Utah prairie dog, and Mississippi sandhill crane. A BCR analysis of wildlife protection programs is difficult because of the intrinsic benefits of wildlife to the public. As stated earlier, wildlife populations have also benefited from USDA livestock predation management programs. In some situations, livestock producers may also benefit from predation management programs for wildlife. Sheep producers have also made direct investments in nonlethal meth- ods for protection of their flocks from predators. Principal strategies used include: • Fencing. Permanent and portable electric fencing, as well as perma- nent predator‑proof traditional net fencing around perimeters, are used. Predator‑proof fencing may also be used for night lots, holding pens, and corrals. • Guardian animals. Guardian dogs are the most widely used guardian animal. An estimated 60 percent of all producers with over 100 sheep use guardian dogs. Other guardian animals include llamas, burros, and mules. Guardian dogs have been reported as 65–85 percent effective in protection against predators in various surveys, depending on the type of predator (e.g., coyotes, dogs, lions, or bears) and management conditions (intensive or extensive pasture management, herding). • Shed lambing. Controlled lambing conditions protect lambs at their most vulnerable stage. Increasing costs of labor, facilities, operating ex- penses, feed, and other expenses make shed lambing increasingly expensive in relation to the value of the lambs saved. • Herding. Sheep producers with public land grazing permits are re- quired to have a shepherd with each flock. Although expensive, predation and other factors would require herders on grazing permits even if they were not required by the land management agencies. Surveys of sheep and goat producers clearly indicate that a significant portion of them would be forced to abandon sheep and goat production without USDA predation management programs (USDA, 2005). The belief that predator losses were a major factor in the decision of many former producers to abandon sheep and goat production is widely held in the industry. SHEEP AND LAMB FEEDING Sheep are ruminants that have a complex digestive system with a stomach containing four compartments (reticulum, rumen, omasum, and abomasum). The rumen, or primary fermentation vat in the ruminant diges- tive system, contains many species of bacteria and protozoa that enable the

66 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES digestion and utilization of cellulose and other complex fibrous components of grasses, weeds, and certain shrubs. Once the more complex components have been digested in the rumen, they may be absorbed through the ru- men wall for utilization or passed to the other stomach compartments and intestines in less complex forms and as bacterial components for further digestion and absorption. Sheep are considered opportunistic grazers in that they select the more nutritious plant species available during the various seasons of the year. Their ability to utilize a diversity of plant species means that they can be managed in a wide range of ecological environments. The digestive anatomy and physiology of sheep and their nutrient requirements were reviewed recently by the Committee on the Nutrient Requirements of Small Ruminants of the National Research Council (NRC, 2007). The USDA has not reported the number of lambs on-feed since 1994 (Figure 2-6). This makes any statement relating to the number of lambs being placed on feed speculative. The precise effect of the loss of this in- formation on price discovery and marketing agreements and contracts is unknown. But, the lack of this type of information may reduce transpar- ency in the market. For example, feedlot operators, breakers, and packers appear either unable or unwilling to reveal sequencing (numbers of lambs 25,000 35% Percent of Lamb Crop 30% 20,000 1000s of Head 25% on Feed 15,000 20% 10,000 15% 10% 5,000 5% 0 0% 0 64 66 68 90 2 80 84 86 88 94 82 92 72 78 70 76 74 6 6 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 Year Lambs on Feed Total Lamb Crop Percent on Feed FIGURE 2-6  Lamb crop, lambs on feed, and percent on feed, 1960–1994. Fig 2-06.eps Source: Data from USDA (National Agricultural Statistics Service) and compiled by Livestock Marketing Information Cener (LMIC: http://www.lmic.info/). Used with permission.

THE U.S. LIVE SHEEP INDUSTRY 67 TABLE 2-7  Major Lamb Processing Plants and Feedlots in the United States Firm/Plant Name Location Capacitya (head) Packers: Swift & Company Greeley, CO 4,000/day Superior Packing Denver, CO 2,000–2,500/day Superior Packing Dixon, CA 4,000–5,000/day Iowa Lamb Corporation Hawarden, IA 1,500–2,000/day Wolverine Packing Detroit, MI 1,500–2,000/day Den-Franco Corporation Chicago, IL 1,500–2,000/day Feedlots: Harper Livestock Eaton, CO 80,000–100,000 Cactus Hill Feeders Windsor, CO 60,000 Double J Feedlot Ault, CO 45,000 Rule Feedlots, Inc. Brighton, CO 40,000–50,000 Mountain View Lamb Feeders Eaton, CO 40,000 Richard Drake Eaton, CO 25,000 aCapacity per unit of time for packers and one-time carrying capacity for feedlots. Source: Boland et al. (2007). coming out of feedlots per time period) because this might influence relative bargaining positions among the market segments. Lambs typically are born in the spring, weaned in the fall, and then fattened for slaughter either in feedlots or on grass (see Figure 2-5). Light lambs that were recently weaned are referred to as “feeder” lambs because they are typically placed in feedlots or on grass to fatten before slaughter. Feeder lambs typically weigh between 27 and 41 kg when they are placed on feed and 50–64 kg at slaughter. Lambs that are ready for immediate slaughter are referred to as “slaughter” lambs. Carcasses are typically about 52 percent of the lamb’s live weight, suggesting that most lamb carcasses weigh 26–33 kg. While lamb slaughter takes place throughout the year, there is a strong seasonal upswing each spring because demand increases during the early spring. Table 2-7 lists locations of the largest sheep feedlots and packers in the United States. Wether lambs are fed in feedlots or on forage depends on the type of feed available (concentrate or forage) and the availability of land. Forage- based operations have been traditionally used where forage/crop aftermath (after the harvest of grain or forage) and land resources are available. Financial inputs may vary depending on the type of forage system used in either a backgrounding or finishing operation. These operations vary in size and scope and have been the focus of increasing interest with the growing popularity of alternative markets (natural and organic). Drylot feeding

68 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES operations rely on grains and harvested forages to feed lambs, much like cattle feeding operations. In both types of feeding operations (feedlot and forage), the genetic type of the sheep fed varies because of size, operation location of the feeding system, and availability of lambs in close proximity to the operation. Each of these operations differs in its goals based on the type of lamb marketing options that are available. The following discussion details the two types of feeding operations, the challenges that they face, and the direction in which they are headed. Commercial Feeding Versus Field Finishing Operations According to USDA (1994, 2003), of the total 1.52 million sheep and lambs on-feed in 1994, 1.02 million were in feedlot operations and 447,000 were in forage-based operations. Of the total lambs on-feed, 38 percent weighed 38.6 kg and under, 40 percent weighed 39.0 to 47.6 kg, and 22 percent were over 47.6 kg. Colorado (385,000), California (215,000), and Wyoming (194,000) were the top three states for lambs on-feed across feeding operation type (drylot or forage-based operations). Forage-fed lambs under 38.6 kg numbered 294,500, whereas lambs in the same weight category in a drylot environment numbered 268,000 head. Furthermore, as the weight of lambs increased, the number of lambs in a drylot environment increased as well when compared to forage-based systems. Across the 16 states surveyed by USDA in 1994, 752,000 head (in two categories: 38.6 to 47.6 kg, combined with 47.6 kg and above) were in drylot feeding op- erations, compared to 152,000 combined across the two weight categories in forage-based systems. Although these data were collected over 10 years ago, a similar ratio between drylot and forage‑based operations is believed to reflect current feeding operations. In the Midwest and Mountain states, large populations of lambs are typically fed in a drylot environment and placed on a concentrate diet (high‑energy diets referred to as concentrate/grain-based diets). Although drylot feeding operations can be found on the East and West coasts, the typical lamb feeding operation in those states is forage-based. These feeding operations rely on improved pasture, natural grasses on owned land, and/ or grazing rights on public lands, as well as cool-season grasses and crops (Brassicas), depending on location of the operation and resource allocation. The terrain in the forage feeding areas is typically suited to grazing rather than concentrated feeding operations. In some areas, a popular practice among sheep and lamb producers is planting and harvesting a second crop during a single growing season that grows well into the first frost (brassi- cas). The large feedlot operations in the central Midwest and the Mountain states have the largest number of lambs on-feed at any one given time.

THE U.S. LIVE SHEEP INDUSTRY 69 Furthermore, feedlot operations are typically located near grain‑growing regions, reducing the cost of transporting harvested feeds. According to USDA (2007b), packers are located near consumer outlets and feeders are typically located near the packers. The largest packing operation is in the Denver area and the largest concentrated lamb feeding operations are also located in that same region. The types of feeder lambs used in drylot operations are typically from a western white‑face ewe (Rambouillet, Targhee, Columbia, or another ma- ternal breed that are used in a crossbreeding system to maximize maternal traits) and then bred to a meat‑type sire (Suffolk, Hampshire, or a cross of the two breeds). The end result of this terminal cross is a lamb that is known for performance, carcass characteristics, and a high‑quality pelt. The large forage‑feeding operations use a similar type of lamb, phenotypically and genotypically. Only a few of the many breeds discussed earlier are actually used in commercial operations and make up the genetic base of the com- mercial U.S. sheep and lamb industry. Although there is a changing dynamic in the types of sheep various producer groups use in their operations (those breeds that are considered heritage), dairy and hair sheep are sparking inter- est in small farm flock communities. Once lambs have been acclimated to a grain diet, gains on concentrates result in elevated average daily gains (Murphy et al., 2003). This enhanced performance is observed in both lambs fed grain diets from weaning direct to drylot as well as those lambs that were fed a forage‑based background- ing diet and then finished in a drylot environment prior to harvest (Murphy et al., 2003). Many studies have reported that animals that are fed an ad libitum (free-feeding) diet of concentrate generally have higher average daily gains than animals that are fed or grazed on legumes (Tatum et al., 1988; McClure et al., 1994; Murphy et al., 1994). In addition to enhanced growth rate, lambs fed on a high‑concentrate diet result in more rapid intermus- cular, intramuscular, subcutaneous, and internal (kidney, pelvic, and heart) fat deposition, when compared to forage-fed lambs (Crouse et al., 1978; Murphy et al., 2003). The deposition of fat is only an issue if lambs are fed for an extended period of time when efficiencies of lean tissue growth have declined and the lamb’s metabolism produces fat at a more rapid rate. Although lamb fat in moderation helps in providing a distinct flavor profile, excess fat is the least desirable in lamb when compared to pork and beef. The current market structure in the lamb industry does not provide pro- ducers and feeders an incentive to produce lean lambs. Rather, the market continues to offers an incentive to maximize weight regardless of the share of the carcass weight composed of fat. Notter et al. (1991) and Murphy et al. (2003) reported that lambs fed to slaughter weight on a high‑concentrate diet when compared to lambs fed a high‑concentrate/forage mixed diet or an all‑forage diet resulted

70 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES in higher mechanical shear force values resulting in a tougher consumer product. Crouse et al. (1978) concluded that lambs on high‑energy (con- centrate) diets are physiologically more mature when compared to lambs on low‑energy or low‑protein diets, which could explain differences in shear force values. In beef, physiological maturity has an impact on tenderness values as a result of increasing amounts of connective tissue and collagen crosslinks (Goll et al., 1963). Bouton et al. (1978) reported that in sheep, progressive increases in toughness could be seen in sheep meat from animals 2 months to 8 years of age. Subtle increases in fat deposition as a result of high‑concentrate diets may help offset the effect of physiological maturity and elicit a more acceptable mouth feel and sustained juiciness, resulting in a more positive eating experience (Weir, 1960). The advantages of feeding a high‑concentrate diet include less land use, more rapid rate of gain, and higher feed efficiency, resulting in an accelerated market readiness. Lambs are often fed high‑concentrate diets past their optimal endpoint or slaughter weight, leading to carcasses with excess fat cover. The typical concentrate diet includes corn as the energy component. Although the energy component may vary from region to region, the largest traditional drylot feeding operations are located near corn‑growing regions. Corn prices have been on the rise in recent months as corn finds a foothold in the biofuel industry. According to Mosier (2006), U.S. fuel ethanol pro- duction is expected to exceed 7.5 billion gallons before 2012, a doubling of ethanol production over 2004 when only 10 percent of the U.S. corn crop was utilized for fuel production. The rising cost of corn has many in the livestock industry considering feeding alternatives, including substitute energy sources for animal feeds or shifting to forage feeding. Enhancing the efficient use of solar energy, recycling nutrients to the soil, using noncompetitive renewable resources (high cellulosic), contribut- ing to soil and water conservation, investing lower amounts of capital, and adding enterprise flexibility are some of the advantages of forage feeding systems (Ely, 1994). Forage feeding on a large scale occurs in the San Joa- quin Valley and the Imperial Valley in California, the Willamette Valley in north central Oregon, and the Columbia River Basin in Washington State. These areas of the West are rich in harvested forage production (legume and grass hay), turf and grass seed production (such as rye and Kentucky bluegrass seed), legume seed production (such as alfalfa seed), and sod pro- duction for commercial and residential landscaping. Grazing lambs on these forage types during the winter months reduces the environmental impact of grazing in extensively managed rotational grazing systems. The result is a healthier forage stand, increased seed production, and other advantages for the subsequent growing season. This method of managing forage and grass production systems has replaced the use of field burning, which is

THE U.S. LIVE SHEEP INDUSTRY 71 now illegal in some states because of pollution and potential smoke-related respiratory complications. The largest forage‑feeding operations are in the West, but forage feeding is practiced nationwide, although the practice varies in scale and forage type. Forage‑feeding operations begin stocking up on lambs during the winter and early spring, reaching maximum capacity just prior to Easter. Lambs on-feed in forage-based systems are typically either fall born or are from the previous spring crop. Fall‑born lambs typically reach 5 to 7 months of age by the time of harvest with an average finish weight of 54.4 kg. Spring‑crop lambs are typically 12 to 14 months at time of harvest with an average finish weight of 65.8 kg. The USDA (2007b) reports that the average weight of finished market lambs in the United States is 61.2 kg. In addition, the USDA (2001) reports an average live weight at harvest of 63.0 kg with a relatively wide range around the average, regardless of size of operation. The main benefit of forage feeding over drylot feeding has tradition- ally been understood to be a reduction in total body fat. Allowing sheep to graze a feedstuff, rather than harvesting the feedstuff mechanically for feeding, also results in reduced production cost and less environmental im- pact. However, ASI (2002) reported (Table 2-8) a decrease in performance for forage-fed (daily gain 0.15 kg) compared to drylot-fed lambs (daily gain 0.26 kg). Even though pasture‑fed lambs may not grow as fast as lambs fed concentrate diets, forage feeding is more economical with less potential health risks (Schoenian, 2007). Research studies have concluded that to prolong skeletal and muscle growth in sheep, energy intake must be reduced (Yambayamba and Price, 1991; Berger, 1991; Shanks et al., 2000). The result is a decrease in fat deposition potentially from an increase in muscle mass. The low‑input forage‑feeding system requires producers to ship animals long distances to market and sometimes across state lines. The same is often required even TABLE 2-8  Performance of Pasture-fed and Drylot-fed Lambsa Daily Gain Feed Consumed Feed:Gain Carcass Fat Feeding System (kg) (kg/day) Ratio (%) Pasture 0.154 — — 23.9 Pasture + supplemental feedb 0.263 1.00 3.79 27.3 Drylot, 13% CP 0.268 2.06 7.71 33.2 aInitial weight = 31.75; Slaughter weight = 50 kg. b13%CP (crude protein) supplement; same as drylot, 13% CP. Source: ASI (2002). Copyright 2002 by ASI (American Sheep Industry Association). Used with permission.

72 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES with drylot feeding, however, because of the distribution of lamb production across the United States. In some cases, fall‑born lambs may stay with their mothers until they have reached an acceptable harvest weight and fatness (49.9 kg live weight). Lambs are selected based on perceived carcass fatness (market readiness based on USDA yield grades) and sorted into two groups—those ready for slaughter and those not meeting the buyer’s criteria, which are sent to a feedlot. Ideally, lambs shipped to packers are between a yield grade 1.9 to 2.9 (measuring 3.81 to 6.35 mm of backfat at the 12th/13th rib interface) (USDA, 1992). Although forage operations are used to finish lambs, they can also be used to prepare lambs to maximize frame growth (backgrounding) before finishing lambs in a drylot system. Lambs that are forage fed for back- grounding purposes will enter the drylot with less internal and external fat cover but maximum skeletal frame growth. Because of the seasonality of sheep and lamb production, the lamb feeding season must be spread out over a 12‑month period, resulting in lambs of various slaughter weights and ages, which complicates efforts to optimize carcass production. Arnold and Meyer (1988) concluded that lambs grazing irrigated pastures before finish- ing in drylot had less fat over the longissimus muscle and a lower percentage of kidney and pelvic fat than lambs that were weaned and placed directly in a drylot. Shanks et al. (2000) reported that body weight at the end of a backgrounding period on stubble barley was greater when compared to lambs fed a concentrate ration in a drylot. They also concluded that lambs in drylot situations may experience greater stress, which affects their perfor- mance, but that, in most cases, concentrate diets increase gain and reduce time to market. Shanks et al. (2000) also found that mechanical shear force was increased for lambs on concentrate diets from time of weaning versus those that were backgrounded initially and then fed concentrate before harvest. Crouse et al. (1978) found that physiological maturation rate was potentially elevated in lambs fed a concentrate diet from weaning compared to those that are backgrounded on forage and then fed concentrate or those that are forage‑fed until harvest. New forage varieties have been investigated that yield potentially fa- vorable results in performance when compared to more traditional grazing opportunities. Brassica species, including turnips, rape, and tyfon (a hybrid of turnip and Chinese cabbage), seem to be promising new forages (Koch et al., 2002). Brassicas are fast growing and tolerant to frost and cold, and many producers are using them as second crops after harvest of primary crops in rotation. They can be planted from mid- to late summer after the harvest of the primary crop and then grazed through the fall and winter (depending on geographical location). Tyfon and turnips are near maxi- mum production in about 60 days and rape in 75 days. Koch et al. (2002)

THE U.S. LIVE SHEEP INDUSTRY 73 reported that lambs grazing turnips for 39 days gained 0.18 kg/day and drylot lambs gained 0.20 kg/day, which initially suggests that there is little performance difference in the feeding phase. When this time was extended past 40 days, lamb performance when grazing turnips was lower compared to the performance of concentrate-fed lambs. Except for their tolerance to cold, Brassicas perform similarly to other forage‑based systems. Using forage and concentrate in combination can help maximize growth and reduce carcass fat deposition if managed using proper evaluation meth- ods and guidelines as to when a lamb is market ready. Proper feed manage- ment is often not done because of lack of incentive since few industry groups use any type of grid marketing option to encourage feeders to send lambs to packers at the optimal point in their growth to meet specific quality and yield specifications. Forage‑based systems also have limitations, including problems with availability of forage during the feeding season, since lambs often are not the primary reason that the forage crops are grown. Also, not all forages perform the same. Some breeds of lambs are more suited for the more intensive management system of commercial drylot feeding op- erations. Some large commercial producers that utilize public land grazing allotments in combination with private land forage resources, however, are managing sheep and lambs with little supplementation year round. Falxa et al. (2002) reported that while there may be opportunities for diversification of land use in the coexistence of sheep and cattle, these two species have been shown to exhibit complementary, supplementary, and competitive relationships depending upon the stocking rates of the two spe- cies and the type of land resources available. After reviewing 200 studies, Van Dyne et al. (1980) concluded that sheep consume 50 percent grass, 30 percent forbs, and browse for the other 20 percent, while cattle consume 70 percent grass, 15 percent forbs, and 15 percent from browsing. Falxa et al. (2002) also concluded that improved balance in utilization of forage types may result in increased animal performance and stocking rates, as well as improved cash flow, when cattle and sheep are grazed together. Most range sheep production systems are managed on lands that do not produce adequate forage resources to produce slaughter-ready lambs. Although backgrounding weaned lambs on high‑quality forages is desirable where forage resources are available, these resources may either be unavail- able to many producers or inadequate to produce gains and finish lambs for harvest. High‑quality forages also tend to be seasonal in their availability, which may result in seasonal restrictions in lambs available for slaughter. Lamb feedlots provide high‑quality concentrate finishing programs that aug- ment gains provided by forage‑based systems. They can also provide lambs for harvest on a year‑round basis and provide an important assembly func- tion for packers seeking adequate numbers for plant operations. However, lamb feedlots, because of their environmental and management effects on

74 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES range‑raised lambs and high animal concentrations per unit of land, gener- ate issues related to animal digestive health and diseases, and environmental impacts that must be closely monitored. Typically, feeder lambs (31.8–49.9 kg) are purchased for feeding operations and placed on an 80‑percent con- centrate (grain-based) and 20‑percent forage diet, which tends to optimize performance (see Table 2-8). Specialty sheep operations influence commercial lamb production through the sale of breeding stock to commercial producers and the dis- tribution of surplus lambs into the commercial system. These impacts may include, for example, purebred breeding flocks that produce rams for sale to commercial flocks, and large commercial flocks that specialize in the production of replacement females for those producers that prefer to purchase replacement ewes rather than raising their own. Other specialty operations producing lambs may include highly specialized wool produc- ers that consider lamb as a byproduct and dairy sheep production systems whose primary objective is to optimize milk production. Lamb Feeding Arrangements According to the USDA (2001), 15.1 percent of all operations that re- ported selling lambs to a feedlot, including herded open range, fenced range, farm flock, and feedlots, retained complete ownership (contract feeding), 5.6 percent retained partial ownership (producer/feeder), and 79.3 percent retained no ownership (i.e., the drylot feeder purchased the lambs). Bastian and Whipple (1998) concluded that the options available to lamb producers for sale of their lambs included sale directly to the feedlot, producer‑retained ownership through the feeding phase, and producers selling fed market lambs direct to the packer. Bastian and Whipple (1998) also reported that packers owned about 28 percent of all lambs fed in the United States in the late 1990s. Williams and Davis (1998) reported many large range operations sell feeder lambs directly to feedlots under contract or feed their own lambs and sell to the packer under contract. Over time, the sheep industry has gradually shifted from marketing lambs through public markets to direct marketing through various types of contractual agreements. In the latter case, producers who retain possession of their animals through the feeding phase typically raise their sheep on a forage-based feeding operation. Smaller range producers concentrate on marketing lambs through public auction and through inter- mediaries, although some also sell finished lambs directly to packers. Farm flock producers tend to produce and feed lambs and then sell them directly to packers. Packers generally prefer to purchase lambs by the truckload (roughly 400 head depending on the size of the lambs and the transport vehicle)

THE U.S. LIVE SHEEP INDUSTRY 75 to reduce transportation costs. Purchase methods may include direct pur- chase in truckload lots from feedlots and individual producers with larger operations, or buying lambs at auction markets that exist in several states, the largest of which is Producers Livestock Auction in San Angelo, Texas. Smaller lots of lambs from producers are usually grouped together into larger loads. Various approaches are used for assembly, including Internet auction, telephone auction, cooperatively negotiated sales for specified as- sembly days and locations, delivery to a designated buyer representative, and “buy days.” “Buy days,” increasingly popular in eastern and midwest- ern farm flock states, are established dates and locations agreed to by buyers and sellers. Producers deliver their lambs, which are weighed and graded by the buyer, and price is negotiated. Once the buyer has enough lambs for a truckload, the lambs are then delivered to the harvest facility. Feedlot Lamb Nutrition and Health Lamb feeders use a variety of methods to finish lambs. Feeding opera- tions vary on when and how they wean their lambs and when the weaned lambs are moved into the feeding operation. In concentrate and forage‑feed- ing systems, lambs are normally exposed to feeds or forage prior to weaning (ASI, 2002). Lambs sent to feedlots are normally introduced to concentrates through a creep‑feeding system (pen arrangement so only lambs and not their dams can enter). Young lambs can handle both forage and concentrate diets because of the early development of their ruminant stomach system (ASI, 2002). In some cases, supplemental concentrates that parallel the diets found in most drylot feeding operations are fed to young lambs in conjunction with forage-based diets in order to elevate lamb performance and efficiency of feed conversion. The success of lambs entering a feeding system is dependent on the first few weeks of the feeding period after arrival. When they arrive, lambs are usually hungry, thirsty, and stressed from travel since many must be hauled long distances to reach their final feeding destination. Typically, they are fed harvested forages to help them acclimate to their new environment with a salt supplement to aid in their off-truck water intake. Additionally, they are usually dewormed for internal parasites, topically treated for external parasites, and vaccinated for enterotoxemia Type D. Other vaccinations and preventative measures may be offered depending on the location and type of feeding operation as needed for satisfactory lamb performance. As reported by the USDA (2001), feedlot operators receive limited information related to prearrival health status of lambs being shipped. There are a number of reasons that the transfer of animal health information may be hindered. However, information related to preshipment vaccinations and other medi- cations could enhance feedlot efficiency and reduce animal disturbances.

76 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES Prearrival records provide critical information for quality assurance, food safety, and consumer awareness of the history of the food animal products that they consume. Some pharmaceutical products used as preventative or disease treatments have required withdrawal periods to ensure that there are no drug residues in the meat that may have an effect on human health (Roeber et al., undated). The packing industry and the ASI developed the National Sheep Safety and Quality Assurance (SSQA) program as an attempt to address concerns related to quality assurance and food animal product production. The SSQA program was designed to educate all sheep producers (commercial, farm flock, hobby farms, purebred, and club lamb) on the proper handling and practices of live animal production and helps assure consumers that the products they consume are safe and wholesome. Many states have taken leadership in developing curricula to instruct members of agricultural youth programs (such as 4-H and Future Farmers of America [FFA]) about proper handling and practices related to their livestock project experiences (Kuber, 2005). Improvements in animal welfare, food safety, and quality should con- tinue to build consumer confidence in lamb as a safe and wholesome food product. Nevertheless, 37.5 percent of the feedlot operators responding to the USDA’s National Animal Health Monitoring System (NAHMS) survey indicated that they had never heard of the ASI SSQA program, and another 40.6 percent indicated that they had heard of it but were not familiar with it (USDA, 2001). Only 6.3 percent of the responding feedlot operators indicated that they were very familiar with the program. In contrast, the National Pork Producers Council (NPPC) has successfully operated a similar program since 1989 with the backing of the packing industry, since packers require all producers from whom they purchase hogs to be certified (NPB, 2007). The NPPC program has reportedly reduced carcass blemishes and drug residues and helped assure consumers that pork products have been monitored and verified throughout the production process (NPB, 2007). Many feedlot owners apparently have little interest in the prearrival health history of the feeder lambs entering their feedlots. The NAHMS sur- vey results showed that 41 percent of responding feedlot owners considered the prearrival vaccination history of lambs entering their lots to be unim- portant (USDA, 2001). Only 21 percent considered the vaccination history to be very important. Also, 52 percent considered prearrival deworming history information to be unimportant and only 14 percent very important. Yet a majority of those same feedlot operators responded that prearrival procedures (such as treatment for parasites and clostridial vaccinations) could reduce sickness and death in feedlot lambs. Even though the respond- ing feedlot operators recognized the effectiveness of prearrival procedures in reducing sickness and death among feedlot lambs, few recognized the impor- tance of obtaining prearrival information on lambs in determining the type

THE U.S. LIVE SHEEP INDUSTRY 77 of lambs they will accept into their feeding operations and the preventative measures needed upon arrival to prevent illness and death. The NAHMS survey results also indicated that about 75 percent of responding feedlot operators processed new arrivals as a group within 72 hours of arrival (USDA, 2001). Nearly all feedlot owners, regardless of feedlot size, indicated that they treat new arrivals for internal parasites and vaccinate against clostridial disease (Types C and D). Only the large operations (greater than 5,000 head), however, indicated that they treat for external parasites. Internal parasites and clostridial diseases have the most impact on feedlot lamb performance and efficiency of production and are the diseases most often treated. The NAHMS survey further reported that the leading causes of death among feedlot lambs across all feedlot sizes include respiratory disorders (29.1 percent), enterotoxemia (28.7 percent), shipping fever/pneumonia (12.8 percent), other digestive orders (6.1 percent), and crowding as well as parasites (5.8 percent). For smaller feedlot operations (less than 500 head), the NAHMS survey reported that the leading cause of death was shipping fever pneumonia (34.1 percent). Among the larger feedlots (more than 500 head), respiratory disorders and enterotoxemia were responsible for the majority of the deaths (31.1 percent and 30.1 percent, respectively). Health concerns specific to sheep and lambs from weaning to maturity in feeding operations are reviewed in the Sheep Production Handbook (ASI, 2002). The health section of the handbook reviews the clinical signs, diag- nosis, treatment, and prevention of the common diseases of concern in the sheep and lamb feeding industry, including rumen lactic acidosis and entero- toxemia (overeating), urolithiasis (urinary calculi), polioencephalomalacia (polio), salmonellosis (Salmonella dysentery), pneumonia (pasteurellosis, shipping fever), rectal prolapse, copper toxicity, copper deficiency (enzootic ataxia or swayback), selenium deficiency, contagious foot-rot, and parasites (internal and/or external). In many cases, these diseases affect production efficiencies such as growth rate, weight gain, and fat deposition. In more severe cases, they may result in irreversible damage and even death. In any case, disease affects the feeder’s profit margin from loss of production, increased costs of labor and medical supplies in treating sick animals, and pharmaceutical costs for preventative measures. Sheep Feedlot Environmental Impact and Management The U.S. Environmental Protection Agency (EPA) defines an animal feeding operation (AFO) as a location that confines animals in an area for > 45 days in a year (EPA, 2002). A large concentrated animal feeding op- eration (CAFO) for sheep includes operations with 10,000 or more sheep confined to an area for more than 45 days in a year. A sheep AFO may be

78 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES defined as a medium CAFO if it has at least 3,000 sheep and either a man- made ditch or pipe carrying manure or wastewater from the feeding opera- tion or surface water with which sheep come in contact running through the area where sheep are confined. All CAFOs are required to have a permit, for which the minimum EPA requirements are as follows, although there may be additional state requirements: • Implement a nutrient management plan; • Submit annual reports to the permitting authority; • Keep permit current until the operation is closed and all manure is removed; and • Keep records of all nutrient management practices for at least 5 years. The nutrient management plans for sheep CAFOs must include provi- sions to: • Ensure adequate manure storage capacity; • Properly handle dead animals and chemicals; • Divert clean water from the production area; • Keep animals out of surface water; • Use site-specific conservation practices; • Develop and implement ways to test manure and soil; • Ensure appropriate use of nutrients when manure is spread on land other than the CAFO area; and • Keep accurate records of nutrient management practices. Although not a part of EPA standard CAFO requirements, sheep feed- lots may come under pressure from communities if dust control or odors are of concern. States may also have additional requirements or standards that must be met by lamb feedlots. New Feedlot Technologies and Management Practices New technologies and more efficient management practices are show- ing promise in terms of enhanced production efficiency and cost reduc- tion in feedlot operations. Feedlot managers/owners are making strides in improving nutrition, health, growth performance and feed efficiency, and potential market value. They are utilizing innovative approaches to select and segregate lambs upon arrival to the feedlot; utilizing feedback informa- tion from the packing plants to determine which lambs, feed rations, and management practices performed the best; utilizing live animal imaging to identify lambs that will perform the best in the feedlot; and, finally, using

THE U.S. LIVE SHEEP INDUSTRY 79 real-time ultrasound (RTU) to determine when lambs are properly finished for harvest. The following is a brief discussion of these feedlot applications to improve performance and product quality. • Feedback to origin flocks. According to the NAHMS survey, 50 percent of responding feedlot operators never or almost never reported occurrences of disease, performance, or carcass quality back to the produc- ers of origin. Another 25 percent of the respondents only provided such information sometimes. At least one quarter of feedlot owners, however, did provide feedback information to producers to assist them in determin- ing needed genetic and management improvements (health and efficiency of production). Feedback information can be used for genetic improvement, health management, and other quality improvements by the producer. With this information producers can prioritize genetic and management needs that will optimize performance and profitability at both the producer and feeder level. • Segregating lambs upon arrival to the feedlot. Improvements in ef- ficiency can be attained through segregation of lambs based on sex and frame size prior to feeding in concentrate feeding operations. Commonly accepted in the industry is that lambs with more potential for frame growth will finish at heavier weights. Many feedlot operators feed lambs for the same amount of time and to the same endpoint regardless of age, sex, frame size differences, and/or fat cover. Because lambs vary in their growth poten- tial based on their genetic makeup and metabolism, sorting feeder lambs and managing their feeding regimen according to characteristics affecting growth potential would optimize the rate of gain and profitability. The ad- ditional revenues earned from sorting, however, must be sufficiently above the additional labor and facility costs associated with sorting or there will be no incentive for feedlots to sort their lambs. If the industry were to develop scientifically based, objective criteria for sorting and evaluating lambs based on their growth potential, producers and feedlot operators would have a valuable tool for evaluating (and pricing) lambs based on growth potential. Based on such criteria, lambs evaluated as exhibiting relatively less growth potential could be marketed earlier and at lighter weights compared to those that might be judged as capable of greater gain and/or likely to produce lean carcasses. Segregation of lambs at the point of feeding could increase feed efficiency by up to 70 percent (U.S. International Trade Commission [USITC], 1999). • Live animal imaging. This emerging technology provides an objec- tive evaluation of frame score, composition (muscle, fat, and bone), and growth potential. Studies in pork (Suster et al., 2003) and beef (Nada et al., 2005) have reported a high level of accuracy for evaluation of total body composition (bone, muscle, and fat) using this process. There are a number

80 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES of ways imaging could be used, both by producers and feedlot operators to determine muscle growth potential and the type of feeding regime best suited to their needs. Sorting lambs using an objective system such as a live animal imaging unit would help in selecting lambs that are market‑ready with more accuracy. • Ultrasound technology. Miller (1998) reported that the use of real- time ultrasound has had considerable impact in reducing excess fat in swine herds as major breeding companies have employed that technology in their selection process. Houghton and Turlington (1992) report that the ultra- sound technology is a cost-effective, noninvasive approach to estimating carcass composition and quality of live animals. Brethour (1994) reported similar results with ultrasound technology in estimating muscle quality. There are currently certification programs in the beef and the pork industries for technicians that utilize RTU to estimate live animal and carcass yield and quality grades, but no such program exists in the sheep and lamb industry. However, some technicians certified to use RTU on beef and pork also use this technology on sheep. LIVE SHEEP PRICING Price determination and price discovery have become increasingly important issues for the U.S. sheep industry. Price determination relates to the broad forces of supply and demand that lead to market‑clearing prices. Changes in the market environment generated by increased lamb imports and consumer preferences and market shocks, such as the border closures that resulted from the first discovered case of bovine spongiform encepha- lopathy (BSE or mad cow disease) in December 2003, have all influenced the location and slope of the demand and supply schedules for lamb and mut- ton. Price discovery refers to the efficiency and accuracy with which buyers and sellers are able to gather and interpret market information, which is then incorporated into individual negotiations for trading sheep. Concerns about price discovery are often related to a lack of adequate price reporting or reporting from markets with few buyers and/or low volumes of sales, also referred to as “thin” markets. Price Determination Basic economic theory defines the quantity of a product demanded by consumers at the retail level as being a function of its own price, the prices of substitute and complement products, consumer income, consumer tastes and preferences, and quality (typically measured by yield grade in the case of lamb and mutton). Seasonality may also play a role in the demand for agricultural products, especially for a product such as lamb whose consump- tion is heavily influenced by annual holidays.

THE U.S. LIVE SHEEP INDUSTRY 81 Economic theory also suggests that the quantity of lamb supplied at the retail level is a function of its own price and costs as determined by the underlying production function for firms in the industry. Seasonality and cycles also play a significant role in meat production because of gestation periods and other issues related to biological lags. Imports influence retail supply because almost all imports are in carcass form (very few live sheep are imported into the United States) and may also influence retail demand if imported and domestic products are differenti- ated. Domestic and imported lamb may be differentiated to a degree because imported lamb tends to be leaner and have a lighter carcass weight than domestic lamb. Because the supply of agricultural products is typically fixed in the short run because of biological lags, demand models for food and agricultural products are often specified as being price dependent. This is also referred to as “inverse” demand and simply indicates that prices adjust to existing quantities rather than the reverse. The demand for live sheep is an indirect or a “derived” demand that is reflected from the retail demand/supply of lamb and mutton meat back through the supply chain to the farm level. Consequently, the demand (price) for sheep ready for slaughter is a function of the quantity of sheep offered for sale; retail/wholesale meat prices; processing, packaging, and other marketing costs; feeding costs beyond the farm gate; the price of pelts (a jointly produced product); and seasonality. In addition, a recent study sug- gests live prices are also a function of the pricing method used to procure ewes and/or lambs (RTI, 2007). Farm‑level supply for sheep is expected to be a function of the farm-level price, feeding costs (corn and/or hay), and seasonality. The price (demand) for feeder lambs is expected to be a func- tion of the price offered for slaughter lambs and the costs (availability) of feed resources, while feeder lamb supply is determined by prices and costs of production at the farm level. The lamb cutout value has increased in both nominal and real terms since 2001, suggesting a relatively strong market for domestic lamb (Figure 2-7). However, live lamb prices have been flat to slightly lower, on average, during the past 5 years (Figure 2-8), indicating that an increasing margin has been required during the past 5 to 6 years to pay for production and marketing costs beyond the farm gate. Lamb is more expensive than some competing meats, specifically beef and pork. However, in relative terms, lamb prices have remained fairly constant with beef during the past 5 years, as suggested by indexes of retail prices (Figure 2-9). Beef is usually considered the closest meat substitute for lamb, and lamb appears to have maintained a relatively stable competitive position with beef since 2001. However, lamb’s competitive position with pork has been eroding since 2003 based on relative indexes of retail prices as depicted in Figure 2-9.

82 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES $300 $250 $200 $ per cwt $150 $100 $50 $0 10/19/2001 1/19/2002 4/19/2002 7/19/2002 10/19/2002 1/19/2003 4/19/2003 7/19/2003 10/19/2003 1/19/2004 4/19/2004 7/19/2004 10/19/2004 1/19/2005 4/19/2005 7/19/2005 10/19/2005 1/19/2006 4/19/2006 7/19/2006 10/19/2006 1/19/2007 Week/Year Fig 2-07.eps FIGURE 2-7  Weekly average USDA lamb cutout value, October 2001–March 2007 (1 hundredweight (cwt) = 45.36 kg). Source: Data from USDA (Agricultural Marketing Service) and compiled/adapted by LMIC. Used with permission. $160 $140 $120 $ Per cwt $100 $80 $60 $40 $20 $0 Jan-01 Mar-01 May-01 Jul-01 Sep-01 Nov-01 Jan-02 Mar-02 May-02 Jul-02 Sep-02 Nov-02 Jan-03 Mar-03 May-03 Jul-03 Sep-03 Nov-03 Jan-04 Mar-04 May-04 Jul-04 Sep-04 Nov-04 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Month/Year Feeder Lambs 60–90 lbs. San Angelo, TX Slaughter Lambs 90–115 lbs. Sioux Falls, SD Fig 2-08.eps FIGURE 2-8  Feeder and slaughter lamb monthly live prices, January 2001– February 2007 (1 hundredweight (cwt) = 45.36 kg). Source: Data from USDA (Agricultural Marketing Service) and compiled by LMIC. Used with permission.

THE U.S. LIVE SHEEP INDUSTRY 83 FIGURE 2-9  Monthly relative indexes for lamb, beef, and pork retail prices, January 2001–August 2005. Source: USDA (2007c). The USDA yield grades signal a measure of the amount of external fat over the ribeye area. As the amount of external fat increases, the percentage of meat available for retail sale decreases. Yield grades range from 1 to 5 with yield grade 1 indicating the least amount of fat (USDA, 1992). Qual- ity measured by yield grade has been declining on the average for domestic lamb and mutton since 2000 (Figure 2-10). Packers often develop “grids” whereby they reward lamb sellers based on quality. Table 2-9 presents an example of a grid that is used by the Mountain States Lamb Cooperative. Few publicly available data are available for assessing relative prices between domestic lamb carcasses and imported lamb carcasses. Some data are available for selected periods from the USDA weekly reports (USDA, 2007c). These data suggest that imported carcasses are less expensive, on the average, than domestic carcasses (Figure 2-11). However, the difference in price between domestic and imported lamb fluctuates considerably and time periods apparently exist when the two prices are essentially equal (Figure 2-11). The average price for sheep pelts has dropped considerably since 2004 (Figure 2-12), while feeding costs, as measured by corn prices, have increased dramatically in the last year. The price of hay has also trended upward over the last few years (Figure 2-13). Increasing feed costs do not necessarily disadvantage domestic lamb relative to other meats, however, because feeding costs affect all segments of the domestic livestock industry.

84 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES Fig 2-10.eps FIGURE 2-10  Average yield grade for mutton and lamb, 1992–2006. Source: USDA (2007c). bitmap image TABLE 2-9  Mountain States Lamb Cooperative Quality Grid Carcass Yield Premium ($/kg) Discount ($/kg) 1 — — 2 0.176 (0.08/lb) — 3 0.110 (0.05/lb) — 4 — 0.176 (0.08/lb) 5 — 0.661 (0.30/lb) Source: Boland et al. (2007). Increasing corn prices, however, may place domestic lamb, which is mostly fed on concentrates in feedlots, at a disadvantage with grass-fed imports as corn prices rise. The price for mature sheep, specifically cull ewes, is expected to be af- fected by retail meat prices, the number of ewes being slaughtered, process- ing costs, and on-farm production costs. Mature sheep slaughter follows a seasonal pattern with low points occurring in the early spring at lambing time. Both mature sheep and total sheep slaughter (mature, yearlings, and lambs) have trended slightly downward as domestic sheep numbers have declined (Figure 2-14). Recent droughts have affected on-farm feeding and

THE U.S. LIVE SHEEP INDUSTRY 85 $ Per cwt Date FIGURE 2-11  Western direct carcass price minus imported carcass price, April 2001–May 2003 (1 hundredweight (cwt) = 45.36 kg). Source: USDA (2007c). Fig 2-11.eps bitmap image w/ vector horizontal axis label (Date) $16 $14 $12 $10 $ Per Pelt $8 $6 $4 $2 $0 3/6/2006 9/6/2006 3/6/2004 3/6/2005 3/6/2003 9/6/2004 9/6/2005 5/6/2006 9/6/2003 5/6/2004 5/6/2005 5/6/2003 3/6/2007 1/6/2006 7/6/2006 1/6/2004 1/6/2005 1/6/2003 7/6/2004 7/6/2005 7/6/2003 1/6/2007 11/6/2006 11/6/2004 11/6/2005 11/6/2003 Week/Month/Year FIGURE 2-12  Average pelt price for fall clips, January 2003–March 2007. Source: Data from USDA (Agricultural Marketing Service) and compiled by LMIC. Used with permission. Fig 2-12.eps

86 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES $90 $4.00 $80 $3.50 $70 $3.00 $60 $ Per Ton $ Per Bushel $2.50 $50 $2.00 $40 $1.50 $30 All Hay Per Ton $20 $1.00 Corn Per Bushel $10 $0.50 $0 $0.00 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Crop Year 2006-07 FIGURE 2-13  U.S. average feed costs, corn and hay, 1990/1991–2006/2007 (1 ton = 907.18 kg). Fig 2-13.eps Source: Data from USDA (National Agricultural Statistics Service) and compiled by LMIC. Used with permission. maintenance costs, and predators also inflict a significant cost on sheep producers as discussed earlier. Price determination in the U.S. sheep industry appears to be affected by most of the same market forces as other domestic meat products. All meat segments in the United States are characterized by dominance by the domestic retail market, keen competition from other meats, and high levels of concentration in feeding and packing. Unique features relating to the sheep industry, compared to other meats such as beef and pork, are its low consumption level compared to other meats, relative importance of ethnic markets, loss of a large portion of market share to imports, and large losses to predators. Price Discovery Feeder lambs are typically sold either under contract or some other negotiated pricing method directly to feedlots or through auctions at sale barns (cash sale). Cash sales are by far the most common method for pric- ing feeder lambs, with only approximately 8 percent of feeder lambs being

THE U.S. LIVE SHEEP INDUSTRY 87 80 4.5 1000s of Head of Ewes 1000s of Head Total 70 4 60 3.5 3 Sheep 50 2.5 40 2 30 1.5 20 1 10 0.5 0 0 1/4/2003 3/4/2003 5/4/2003 7/4/2003 9/4/2003 11/4/2003 1/4/2004 3/4/2004 5/4/2004 7/4/2004 9/4/2004 11/4/2004 1/4/2005 3/4/2005 5/4/2005 7/4/2005 9/4/2005 11/4/2005 1/4/2006 3/4/2006 5/4/2006 7/4/2006 9/4/2006 11/4/2006 1/4/2007 Week/Month/Year Total Sheep Slaughter Mature Sheep Slaughter FIGURE 2-14  U.S. weekly sheep and lamb slaughter, January 2003–March 2007. Fig 2-14.eps Source: Data from USDA (National Agricultural Statistics Service) and compiled by LMIC. Used with permission. purchased under contract (RTI, 2007). A recent study by RTI (2007) found that while there is a slight trend toward more direct sales for feeder lambs, auction markets remain by far the most important pricing mechanism for feeder lambs. The USDA reports live lamb prices for markets in 18 different states on a monthly basis (USDA, 2007c). San Angelo, Texas, is the largest auction market for feeder lambs in the nation. Other important live lamb auction markets include Centennial, Colorado, Newell and Sioux Falls, South Dakota, and New Holland, Pennsylvania. The San Angelo market has often been used in the past as the primary market for western live lamb price quotes, and the New Holland market is often the reference market in the eastern United States. Buyers at lamb auctions are primarily feedlot op- erators or buyers purchasing lambs that will be slaughtered at light weights for ethnic (primarily halal) markets. These lighter lambs, while referred to as feeder lambs, will actually be slaughtered at 27–41 kg liveweight. There are some movements toward further integration in the lamb market. For example, the Mountain States Lamb Cooperative is attempting to inject more cooperation in the lamb market by its recent joint venture with B. Rosen and Sons, a large lamb fabricator, processor, and distributor based in the New York City area. Most slaughter lambs are now being priced using formulas or are packer fed (RTI, 2007). Thus, rather than being driven by live markets, the lamb

88 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES price discovery process now largely reflects carcass or cut-out values so that price is determined by negotiation or formula related to carcass quality. As a result, a significant amount of the risk is shifted from the buyer to the seller, especially for pricing based on quality. The USDA also reports both a daily carcass price and a daily cutout value for lamb (USDA, 2007c). The cutout value is a composite price that is an average of the wholesale value of all muscle cuts. The daily lamb cutout value is actually a rolling average for five days to account for the fact that the market for some cuts is thin on some days of the week. The USDA also reports prices for imported carcasses as well as for pelts. Imported carcasses represent a competing but separate market with American lamb because imported carcasses tend to be smaller and leaner than American carcasses. Mandatory price reporting (MPR), legislated in 1999 and fully imple- mented in 2001 (Schroeder et al., 2002), requires prices for all “boxed lamb and lamb carcasses reported on form LS-128 and LS-129 must be reported on an FOB plant price basis” as well as live lamb purchase prices to be reported to the USDA Agricultural Marketing Service (AMS). Because the lamb market is quite thin, prices for specific time periods may not be reported because of confidentiality reasons (E. Rosa, personal communica- tion, 2007). The MPR system has resulted in more price reporting for live lambs and lamb meat and has generated more information on imported lamb carcass prices. For example, the weekly direct slaughter sheep prices reported by AMS (USDA, 2007c) can be both domestic and imported prices, but often do not report imported prices (E. Rosa, personal communication, 2007). Again, the biggest single problem with the MPR system for lamb at this point is missing data resulting from confidentiality issues. Formula pricing has become a major pricing method for lambs. Packers may also work on a grid system that offers higher prices for carcasses whose quality exceeds a set base and lower prices for carcasses below the base qual- ity (see Table 2-9). The base price is typically determined from either the USDA carcass or cutout value. McDonnell (personal communication, 2007) indicated that 94 percent of the variation in lamb prices can be explained by changes in USDA carcass and pelt prices, a conclusion also reached by Greer and Ward (2000). Although slaughter lambs are procured by packers in a number of dif- ferent ways, formula pricing is one of the most important methods (Figure 2-15). The fact that over 80 percent of lambs are procured for slaughter through formula pricing or auctions indicates that both methods are im- portant. McDonnell (personal communication, 2007) emphasizes the im- portance of the USDA carcass and cutout values both in formula pricing, contracts, and cash negotiations. In September 2006, the Risk Management Agency of USDA established a price protection program for lamb called Livestock Risk Protection for

THE U.S. LIVE SHEEP INDUSTRY 89 Percent Procured by Method 45 42.2% 39.4% 40 35 30 25 20 15 12.0% 10 4.9% 5 0.8% 0.7% 0 ct ed a d r ts ns ul te ra tio wn po m tia nt c r Im r-O go Fo Co Au Ne ve ke Li c Pa FIGURE 2-15  Percentage of lambs procured by packers by method of procurement, 2006. Fig 2-15.eps Source: RTI (2007). Lamb (LRP). This program is available in more than half of the states and is designed to allow producers to protect against declines in national slaugh- ter lamb prices below a selected coverage price. This coverage is available through crop insurance agents. The LRP program is a positive development for many sheep producers because it offers the potential for reducing some of the risk associated with lamb production. LIVE SHEEP TRADE The United States exports a substantial number of live sheep (mostly cull ewes) to Mexico. However, sheep exports to Mexico have only begun to recover from the BSE border closure in 2004 and are still far below levels of exports experienced in 2003 (Figure 2-16). In 2006, live sheep exports (slaughter ewes) to Mexico increased 57 percent to 124,343 head as com- pared with the year earlier. SHEEP RESEARCH, INSTRUCTION, AND EXTENSION/OUTREACH Most of the sheep research in the United States is conducted by three groups: (1) state land‑grant universities, (2) the USDA, and (3) private companies. Although there is no accurate estimate of the amount of sheep research conducted by private companies, the amount is small relative to

90 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES 16,000 14,000 12,000 Head Per Week 10,000 8,000 6,000 4,000 2,000 0 8/21/1999 11/21/1999 2/21/2000 5/21/2000 8/21/2000 11/21/2000 2/21/2001 5/21/2001 8/21/2001 11/21/2001 2/21/2002 5/21/2002 8/21/2002 11/21/2002 2/21/2003 5/21/2003 8/21/2003 11/21/2003 2/21/2004 5/21/2004 8/21/2004 11/21/2004 2/21/2005 5/21/2005 8/21/2005 11/21/2005 2/21/2006 5/21/2006 8/21/2006 11/21/2006 2/21/2007 Week/Year FIGURE 2-16  Weekly U.S. live sheep exports to Mexico, August 1999–March 2007. Fig 2-16.eps NOTE: These data are not necessarily comparable to official final (monthly) numbers. Source: Data from USDA (released by Agricultural Marketing Service [AMS] based on Animal Plant Health Inspection Service data collection) and compiled by LMIC. Used with permission. the amount conducted by the public sector. Most private companies cannot justify large expenditures on sheep research programs because of the small potential domestic market for products developed by such programs. Land‑Grant Universities The primary research and extension activities of the sheep industry as well as all sectors of U.S. agriculture are carried out by the land‑grant universities. According to Campbell (1995), most universities, both private and public, focused their teaching programs on the basic sciences and the arts prior to 1860. The majority of their students were the children of the wealthy and professional classes. In 1862, the U.S. Congress passed the Morrill Act for the “donating [of] public lands to the several states and territories which may provide colleges for the benefit of agriculture and the mechanic arts.” Under this act, the federal government granted land to each state with the income generated from these lands to be used for the establishment of universities whose primary purpose was the education of the children of farmers and the working classes. These universities became known as land‑grant universities and continue today to offer instruction in agriculture and engineering. Land‑grant universities have grown to include

THE U.S. LIVE SHEEP INDUSTRY 91 comprehensive instruction in the basic sciences, arts, and humanities as well. Many “normal schools” or colleges were established from the early to mid-1800s to train primary school teachers in the existing western and northern states. From 1866 to 1890, several southern states established normal schools to train African American teachers. Although many of these institutions were similar to the land-grant universities established by the Morrill Act of 1862, the federal government was unable to gain coopera- tion from the southern states in the provision of land-grant support to the African American institutions. The passage of the Second Morrill Act by the U.S. Congress in 1890 expanded the 1862 system of land-grant universities to include historically African American institutions. Many of the African American schools were incorporated into this system and became known as “1890 Institutions.” Each of the southern states that did not have an African American college by 1890 established one later under the Second Morrill Act. Several of these 1890 universities have developed small rumi- nant research programs, primarily with meat and dairy goats, but some also include sheep. The Hatch Act of 1887 provided for the continual funding of agricul- tural research at land‑grant universities “to aid in acquiring and diffusing among the people of the United States useful and practical information on subjects connected with agriculture” (Campbell, 1995). Federal funds con- tinue to come to each land‑grant university each year to support agricultural research. The distribution of Hatch Act funds among various research initia- tives at each university is largely at the discretion of each university, within general guidelines from the federal government. Extension services for farmers were added to the mission of land‑grant universities when the U.S. Congress passed the Smith-Lever Act of 1914. The act established the Cooperative Extension Service at land‑grant uni- versities to disseminate the results of agricultural research to farmers. The extension service in each state is cooperatively funded by federal, state, and county governments. Most land‑grant universities have at least one faculty or staff member with full- or part-time responsibility for sheep extension activities in the corresponding state. The sheep extension specialist organizes and conducts educational programs for sheep producers in the state with county livestock or agricultural extension agents located in each county of the state. The agents in county extension offices are an expansion of the land grant university into every county of every state. The U.S. Department of Agriculture The USDA, through its Cooperative State Research, Education, and Extension Service (CSREES) agency, is a major funding source for agricul-

92 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES tural programs at land‑grant universities through (1) joint funding with state and county governments of the cooperative extension services in each state, (2) funding state Hatch Act allocations for agricultural research, and (3) funding special and competitive grant programs in priority research areas. In addition to the cooperative and supportive programs with land‑grant universities through CSREES, USDA has its own in-house research organiza- tion known as the Agricultural Research Service (ARS). The ARS has major sheep research activities at three of its agricultural research stations: (1) the U.S. Sheep Experiment Station in Dubois, Idaho; (2) the Roman L. Hruska Meat Animal Research Center in Clay Center, Nebraska; and (3) the Dale Bumpers Small Farms Research Center in Booneville, Arkansas. Although some sheep research is also conducted at several other ARS stations, those research activities are quite small compared to the sheep research programs at the Idaho, Nebraska, and Arkansas ARS sites. Interaction and collaboration among sheep research and extension ef- forts at different land‑grant universities and sheep research efforts at ARS stations are accomplished through regional research committees. Regional agricultural research, more recently designated multistate research, was authorized in 1946 to fund cooperative research on problems important to multiple states and to avoid duplication of research efforts. A portion of USDA Hatch Act funds going to land‑grant universities is designated for multistate research. In addition to providing funding and a valuable infrastructure for research coordination, multistate research leverages ad- ditional funding (often four to five times depending on the project) from other sources such as state appropriations, private industry, and other federal agencies. There are two types of regional research committees: (1) technical committees that receive funds to conduct a regional research project and to hold an annual meeting for coordination of the project and (2) coordinat- ing committees that do not have a funded regional project but receive funds for an annual meeting to discuss and coordinate individual projects funded from other sources. While there are currently no technical committees deal- ing with sheep, there are two coordinating committees. Western Education and Research Activity 39 (WERA-39: Coordination of Sheep and Goat Research and Education Programs for the Western States) is composed of sheep research and extension personnel from 11 universities. North Central Education and Research Activity 190 (NCERA-190: Increased Efficiency of Sheep Production) is composed of representatives from 14 universities and 3 ARS stations. These two committees coordinate their activities by meeting together every few years, given that five universities and one ARS More information on WERA-39 can be found online at http://nimss.umd.edu/homepages/ home.cfm? trackID=6936 More information on NCERA-190 can be found online at http://nimss.umd.edu/homepages/ home.cfm? trackID=3851

THE U.S. LIVE SHEEP INDUSTRY 93 station are members of both groups. The universities and the ARS stations represented in these coordinating committees account for the majority of the sheep production research activity in the United States. The Role of Sheep Producer Organizations A limited amount of sheep research is also funded by various national sheep producer organizations, including the American Lamb Board (ALB), ASI, National Lamb Feeders Association (NFLA), Dairy Sheep Association of North America (DSANA), and many national purebred sheep breed societies. In addition, there are numerous state and county sheep producer organizations and state purebred breed societies. These organizations ex- ist primarily to service the needs of their members and, thus, are funded through dues of members or fees for services in the case of the national breed societies. Some of these national and state sheep organizations receive fund- ing from producers through mandatory or voluntary deductions on sheep and/or wool sales within that state, commonly referred to as “checkoff” funds. Because most national, state, and regional organizations have limited monetary resources, there is relatively little direct monetary support of sheep research and extension efforts from these organizations. A mandatory na- tional producer checkoff on slaughter sheep sales supports activities of the ALB. While the legislation that created the ALB allows for the expenditure of funds on sheep research, the vast majority of the lamb checkoff funds are allocated to lamb promotion activities. The ASI and its predecessor, the American Sheep Producers Council (ASPC), have played a greater role in sheep research and education activities than have the other sheep organizations. Because of budgetary constraints, research support has never been an important part of the ASI agenda. The main efforts of ASI have been in the area of sheep producer education and legislative/regulatory concerns. Before 1996, ASI spent approximately $500,000 annually on research and education activities (Thomas and Miller, 2001). Since that time, however, annual ASI support for similar programs has declined to only about $250,000 (P. Rodgers, personal communication, 2007). The ASI carries on a number of important functions in the education arena, including the development, updating, and publishing of the Sheep Production Handbook (ASI, 2002). The handbook is used by sheep pro- ducers and is the most widely used textbook in university sheep production courses. The ASI also established and continues to publish the Sheep & Goat Research Journal, an applied research journal. In addition, ASI regu- larly organizes and sponsors numerous national conferences and symposia on topics of current interest to the sheep industry. Every 4 years, ASI pub- lishes a Research and Education Priority List for the U.S. Sheep Industry which is used by a variety of individuals and organizations as decisions are

94 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES made at the national and state levels on agricultural research and extension funding. In recent years, the National Institute for Animal Agriculture has been a major source of print and Internet-based information for producers on the disease of scrapie and the national scrapie eradication programs (NIAA, 2008). Research and Extension Funding and Activities The Current Research Information System (CRIS), a public database maintained by USDA, contains information on public agricultural research conducted by USDA agencies (primarily at the ARS laboratories) and univer- sities, predominantly the land‑grant universities (USDA, 2007d). The USDA agencies receive funding via appropriations from the U.S. Congress, whereas land‑grant universities derive funding from multiple sources, including ap- propriations from state legislatures, Hatch Act funding through USDA, and grant funding from federal agencies (e.g., USDA, the National Institutes of Health, the Department of Energy, the EPA, and the Department of Defense) and private sources, including commodity organizations, direct industry support, and research endowments. Often these multiple sources of fund- ing are combined to support an individual research project at a land‑grant university providing valuable flexibility for research management. Between 1998 and 2005, average annual funding for all public agri- cultural research was $3.9 billion, with average annual increases of 5.6 percent (Figure 2-17). During the same period, average annual funding for livestock (beef cattle, dairy cattle, swine, and sheep) and poultry research was $657 million (16.7 percent of all agricultural research funding) with average annual increases of 2.7 percent, less than half the annual increase for all agricultural research. Funding for livestock research actually declined by 1.5 percent between 2004 and 2005. During that period, sheep research expenditures were the lowest among the livestock sectors at approximately $44.5 million per year or 6.8 percent of total livestock research expenditures (Table 2-10). Funding for beef, dairy, and poultry research increased by an average annual 3.5–4.1 percent over that period, while funding for sheep research increased a modest 0.7 percent per year on average. Funding for swine research actually decreased by –0.2 percent per year during that same period. The CRIS includes summaries of all USDA‑funded research by ARS and at universities. A search of the CRIS system in May 2007 using the keywords of Sheep, Wool, or Lamb identified 1,260 individual active projects in 2005 (USDA, 2007d). Although the search may have missed a few projects with application to the sheep industry, some projects using sheep as a biological model or projects with a very small portion of sheep-related activity may also have been identified. There are likely some additional projects con-

THE U.S. LIVE SHEEP INDUSTRY 95 6.0 5.5 5.0 4.5 Actual Dollars, Bllions 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 1998 1999 2000 2001 2002 2003 2004 2005 Year All Ag Livestock FIGURE 2-17  Public funding for all agricultural and livestock research, 1998– 2005. Fig 2-17.eps Source: USDA (2007d). TABLE 2-10  Average Annual Public Funding of Livestock Research by Type of Livestock, 1998–2005 Expenditure Share of Total Average Annual Livestock Sector ($1,000) (%) Change (%) Beef cattle 205,939 31.3 +3.5 Dairy cattle and milk 168,998 25.7 +3.7 Pigs 118,517 18.0 –0.2 Poultry and eggs 119,258 18.1 +4.1 Sheep and wool   44,540   6.8 +0.7 Total livestock 657,250 99.9 +2.7 Source: USDA (2007d). ducted at universities with state or private funds that do not appear in this information system if the university did not require the reporting to CRIS of projects funded from nonfederal sources. Therefore, a reasonable estimate of the number of sheep research projects at public institutions with applica- tion to the sheep industry in 2005 is 1,300 to 1,500. According to USDA (2007d), 92.4 full-time equivalent (FTE) ARS and

96 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES university scientists were working on sheep research projects in 2005, the lowest number of FTEs associated with sheep research between 1998 and 2005. The highest number of FTEs involved in sheep research during that period was 157.3 and the average was 113.4. The average annual number of scientist FTEs working on other types of livestock and their products between 1998 and 2005 was much higher, including 459.5 for beef, 409.8 for dairy cattle, 324.1 for poultry, and 295.8 for swine. In addition to sheep research efforts reported in CRIS by USDA-ARS and at universities, the Economic Research Service of USDA also conducts economic analyses and compiles market reports important to the sheep in- dustry. Unlike sheep research, quantitative data on expenditures, activities, and personnel involved in sheep extension are not readily available. Al- though virtually every state has someone designated as the sheep extension specialist, their appointment for these duties may vary from 100 percent to 5 percent or less depending upon the importance of sheep to the agricultural economy of the state. Likewise, county agricultural, livestock, and youth extension agents may spend a majority, a minority, or no time at all dealing with sheep extension activities. In counties where sheep are an important agricultural commodity, the county extension agent may be quite knowl- edgeable about sheep and be able to service most needs of local producers. In counties where sheep are not important, however, sheep producers may be referred to the state sheep specialist with their problems. In states where there are very few sheep, the person designated as the state sheep specialist may refer more technical questions to his or her more knowledgeable col- leagues at other universities. Nevertheless, the extension network is in place in every county in the United States so that sheep producers can access the system to get answers to their questions usually at no cost. Most state sheep specialists maintain computer websites that provide both basic and technical information on sheep production. Development of Sheep Research and Extension Programs The individual lead scientist on a project, for the most part, determines the direction of sheep research and extension programs within the corre- sponding university or ARS station. There is no one body or organization that assigns scientists to specific research or extension programs. Some states and some ARS research stations have sheep advisory committees composed of representatives of the sheep industry that make recommendations to individual scientists on the types of research and extension programs they feel would be most valuable to the industry. If a formal advisory committee does not exist to advise scientists on priority needs, there are still generally good informal communications between sheep producers and extension and

THE U.S. LIVE SHEEP INDUSTRY 97 research scientists so that research needs of the industry are well known by scientists. Neither of the two regional coordinating committees for sheep re- search (WERA-39 or NCERA-190) has authority to set research agendas at individual institutions. Participation by scientists in these committees, however, results in their familiarization with the strengths, interests, and current programs of scientists at other institutions. This knowledge results in collaborative projects and prevents unnecessary duplication of research among institutions. Of course, scientists applying for competitive grants at the national level must develop proposals that meet the research objectives of the particular grant program if they expect to be successful. The objectives of most grant programs reflect priorities expressed by the corresponding livestock indus- tries. Even scientists seeking funding for their own research projects from within their organizations (e.g., ARS scientists seeking support for a project within their own research station and university scientists seeking support from their respective university’s Hatch Act allocation) must write a project proposal that is peer-reviewed for scientific worth and potential value to the sheep industry before it is funded. NATIONAL SHEEP ORGANIZATIONS Several national organizations work to strengthen the U.S. sheep and lamb industry. The roles they play in the industry are discussed in some detail here. American Sheep Industry Association, Inc. (ASI) The American Sheep Industry Association (ASI) is the primary national organization representing the interests of sheep producers throughout the United States. A federation of 44 state sheep associations, as well as indi- vidual members and other sheep-related organizations, ASI is organized with a board of directors, an executive board, councils, committees, and of- ficers. ASI and its constituent groups define, develop, and execute policy on issues affecting the sheep industry. Councils and committees include Animal Health, Legislative Action, Predator Management, Public Lands, Research and Education, and Resource Management. The goals of ASI are to: • Develop an industry vision for the future; • Be an advocate of public policy to protect, promote, and support the economical viability of the industry; • Create strong national and international markets for wool through advertising, promotion, and marketing;

98 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES • Advance and coordinate science and technology of production and marketing; and • Promote communication and cooperation between all segments of the industry, related businesses, and government agencies. Funding for ASI work on legislative and membership issues comes from member dues and individual donations. Individual and state member dues are $0.03 per stock sheep and $6 per member and must be renewed annually. American Lamb Board The American Lamb Board (ALB) was authorized by the U.S. Secretary of Agriculture to administer the Lamb Promotion, Research, and Informa- tion Order established under the Commodity Promotion, Research, and Information Act of 1996 [7 U.S.C. § 7411-7425; P.L. 104-127]. The ALB works to strengthen the domestic lamb industry’s position in the market- place through advertising, public relations, culinary education, and retail promotions. The 13-member board represents all sectors of the lamb meat industry including six producers, three feeders, one seedstock producer, and three first handlers (harvesters and processors of lambs). In effect, the mission of ALB is to increase the demand for U.S. lamb through consumer advertising and promotion programs. The promotional activities of the ALB are funded by an assessment of $0.005/lb ($0.011/kg) on sheep sold by producers, seedstock producers, feeders, and exporters. Also, an assessment of $0.30/head is paid by first handlers. The ALB an- nual budget for 2005 was approximately $2.7 million. The majority of the funds (75 percent) were spent on promotion. The effectiveness of the ALB in promoting increased consumption of lamb is considered in some detail in Chapter 4. National Lamb Feeders Association The National Lamb Feeders Association (NLFA) is a nonprofit organi- zation whose primary purpose is to initiate, sponsor, and carry out plans, programs, policies, and activities that promote, encourage, and improve the production of lambs and sheep. Membership is open to all persons engaged in promoting and improving the production and marketing of lambs and sheep. Funds for NFLA activities come primarily from membership dues of $25 for associate, nonvoting membership, $100 plus $0.10/head for full voting membership, and $500 for industry associate membership (such as packers and breakers).

THE U.S. LIVE SHEEP INDUSTRY 99 National Sheep Improvement Program The National Sheep Improvement Program (NSIP) is a computerized, performance-based program designed to identify sheep of high genetic merit for economically important traits. The NSIP uses the most modern, scien- tifically proven technology to transform production records into estimates of genetic merit called EPDs. This technology has been used extensively in the dairy, beef cattle, and swine industries for many years, and is only now being implemented in the sheep industry. National Sheep Industry Improvement Center/ American Sheep and Goat Center The USDA National Sheep Industry Improvement Center (NSIIC) was approved by the U.S. Congress as part of the 1996 Farm Bill. Its mission is to assist the U.S. sheep and goat industries in enhancing the production and marketing of sheep, goats, and their products and to strengthen the infrastructure of the U.S. sheep and goat industries through grants and low‑interest loans. The NSIIC was privatized in 2006 and became the American Sheep and Goat Center (ASGC). The ASGC manages funds that are used in direct loans, loan guarantees, cooperative agreements, equity interest, investments, repayable grants, and grants to eligible entities either directly or through an intermediary. National Livestock Producers Association—Sheep and Goat Fund The National Livestock Producers Association (NLPA) maintains the Sheep and Goat Fund, a revolving fund established within NLPA to encour- age innovation and efficiency in the sheep and goat industries by providing credit to eligible and qualified entities to make capital available for enhanc- ing production methods and services; improve marketing efficiency, product quality, and industry infrastructure; and create opportunities for adding value to sheep and goat products. The fund was established as a result of a joint effort between NLPA and NSIIC. The ASGC now has oversight responsibility for the Sheep and Goat Fund, including budget approval and membership on the NLPA Board. Dairy Sheep Association of North America The Dairy Sheep Association of North America (DSANA) represents the interests of dairy sheep producers and sheep milk processors in the United States, Canada, and Mexico. A major activity of the DSANA is sponsorship of the annual Great Lakes Dairy Sheep Symposium, which rotates between the three major areas of dairy sheep concentration in North America: (1)

100 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES Wisconsin and Minnesota; (2) New York, Vermont, New Hampshire, and Maine; and (3) southern Ontario and Quebec. The organization is funded through member dues. North American Hair Sheep Association The North American Hair Sheep Association (NAHSA) is composed of both purebred and commercial hair sheep producers, with the majority of the membership in Texas. Some goals of the organization are to develop high-value markets for meat and hides from hair sheep and to sponsor production sales of hair sheep and educational forums for the membership. The NAHSA has received a number of marketing and product development grants to further assist hair sheep producers. National Sheep Breed Associations Most of the more than 50 breeds of sheep in the United States are repre- sented by a breed association or society whose purpose is to maintain breed purity through the maintenance of pedigree records of registered animals and to promote the benefits of their breed to the industry. POLICIES AND REGULATIONS RELATED TO THE LIVE SHEEP INDUSTRY A number of policies directly impact the production of live sheep. Many other policies affect live sheep production and feeding indirectly through their effects on lamb, wool, and other lamb product markets. This section focuses on those policies directly impacting the live sheep industry. Other policies affecting the industry through their effects on other segments of the sheep and lamb supply chain are discussed in Chapter 4. Policies Related to Eradication of Scrapie Scrapie, a transmissible spongiform encephalopathy (TSE), has been a major concern in the U.S. sheep industry for over 50 years. Although differ- ent from bovine spongiform encephalopathy (BSE), the emergence of BSE as a possible human health hazard has renewed emphasis on eradicating scrapie as well as BSE. Information on scrapie, its clinical signs and trans- mission, and testing methods and strategies for eradication are discussed in depth in Chapter 3. The U.S. Congress has committed substantial fund- ing to the USDA Animal and Plant Health Inspection Service (APHIS) to eliminate scrapie in the United States by 2010. Concerns relating to scrapie transmission have resulted in restrictions on live sheep exports from the

THE U.S. LIVE SHEEP INDUSTRY 101 United States, nonuse of rendered byproducts from sheep for use in certain animal feedstuffs, and a national scrapie initiative through APHIS. Require- ments of the national scrapie program include: (1) routine testing of sheep at slaughter, (2) official identification (ID) to facilitate traceback of posi- tive sheep found at slaughter, (3) movement restrictions and the removal of certain risk animals from infected and source flocks, and (4) a certified scrapie‑free flock program that requires unique flock and animal ID and pedigree information, as well as annual inspection of the flock for 5 years, recording all causes of death, and postmortem diagnosis of any suspect cause of death. Certified Scrapie Free flock status may be achieved in 5 years through this program. Although some countries are requiring more than 5 years for certification, certified status may permit the export of live animals for breeding purposes. Since research studies have documented that scrapie is not transmitted through semen, several countries have accepted the import of semen from rams that meets their protocols and testing requirements. The ASI and other sheep organizations support the scrapie eradication program. Chapter 3 provides more details on the current status of scrapie and other disease issues for the U.S. sheep industry. National Animal Identification System (NAIS) Currently a USDA APHIS-administered voluntary program, the Na- tional Animal Identification System (NAIS) was initiated as a result of concerns regarding TSEs and other diseases, quality assurance for safety and security of the U.S. food chain, and compliance with international re- quirements for the export of meat and other animal byproducts. The sheep ID requirements for scrapie are currently accepted as meeting the NAIS goal of enhancing animal traceability. The long‑term goal of NAIS is to require individual animal ID that will comply with international standards utilized by all major livestock‑producing nations. The sheep industry currently sup- ports the NAIS goals. Predator Management Programs Administered at the federal level by the USDA APHIS Wildlife Services Agency, predator management programs are financed by federal appropria- tions; by state departments of agriculture; by sheep, goat, and cattle produc- ers; and by state departments of wildlife. The extent of economic costs and animal losses due to predation is discussed in depth in a previous section in this chapter titled Predation Management. Animal damage control pro- grams funded and implemented by Wildlife Services, and supported by state agencies and producers, are vital to the survival of the U.S. sheep industry.

102 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES Endangered Species Act (ESA) The general public, including most livestock producers, support the protection and recovery of threatened and endangered species (TES). The Endangered Species Act (ESA) is administered by the USDI Fish and Wild- life Service (FWS). Specific examples of issues of concern that affect sheep production, especially on public lands, include the designation of the Sierra Nevada Bighorn sheep as a unique distinct population segment protected by the ESA, as well as other bighorn populations in Idaho, Wyoming, and Montana considered to be “threatened” by the presence of domestic sheep; the ESA protection of grizzly bear populations in the U.S. Intermountain States in the past; and the release of ESA‑protected wolf subspecies in several regions of the northern, intermountain, and southwestern regions of the United States. The major concerns of the livestock industry with respect to the ESA are threefold. First, the survival of TES should be critical if the risks to survival of a species are caused by humans (e.g., hunting of whooping cranes to near extinction for their plumage). The wisdom of TES designation is in question, however, if a species decline is caused by natural processes. Second, although ESA mandates that TES designation and recovery plans must be determined on the basis of best available science, some scientists and livestock producers question whether the FWS has been objective in select- ing the science on which decisions are based. This concern was discussed in more detail in the previous section titled Wildlife Interactions. Finally, TES designation often results in management for a single species, which is not consistent with established principles of ecosystem management. Minor Use and Minor Species Act of 2004 The Minor Use and Minor Species (MUMS) Act of 2004 (P.L. 108-282, 108th Congress) facilitates the development, approval, and use of animal drugs intended for less common animal species or those with less common conditions (AVMA, 2005). Given the critical shortage of such drugs in the United States, veterinarians, animal owners, and livestock producers have had limited options for treating these animals if they become ill. The short- age of approved drugs results in animal suffering, loss of animal life, and financial loss to those who raise the animals. The designation of sheep as a minor species under the MUMS Act makes more medications legally available to veterinarians and sheep producers to treat sheep, particularly for uncommon diseases. The MUMS Act provides pharmaceutical companies innovative options for overcoming the financial roadblocks they face in bringing limited-demand animal drugs to the mar- ket. Before this legislation, pharmaceutical companies could rarely afford to bring to market such drugs because the markets were too small to generate an adequate financial return.

THE U.S. LIVE SHEEP INDUSTRY 103 The law modifies provisions of the Federal Food, Drug and Cosmetic Act (21 U.S.C. § 9) to provide sponsors of a veterinary drug for sheep at least three new ways of bringing their products to market, including (1) “conditional approval” to make and keep the product on the market for up to 5 years while collecting the required effectiveness data; (2) request- ing the Food and Drug Administration (FDA) to add the drug to an index of legally marketed but unapproved new animal drugs when the potential market for the drug is too small to support the costs of the drug approval process, even under a conditional approval; and (3) approval as a “desig- nated” drug for which 7 years of marketing exclusivity are granted so that the sponsor faces no competition in the marketplace for the approved use of the drug for that time. Public Land Policies, Regulations, Fees, and Management With an estimated 25–30 percent of U.S. sheep grazing on public land allotments, public land grazing permits are critical to the sheep industry. Public lands are managed primarily by the USDI BLM and the USDA For- est Service, as well as the Department of Defense, the USDI National Park Service, and various state agencies that manage state-owned lands. Grazing allotments are normally for a single livestock species. Grazing fees are de- termined on an animal unit basis annually by a congressionally mandated formula. Grazing allotment permits are generally renewed for 10 years but may be reviewed earlier if noncompliance or other environmental concerns (such as fire, floods, and TES designation) arise. The National Environmental Policy Act (NEPA) of 1969 (P.L. 91-190, 42 U.S.C. §§ 4321-4347, January 1, 1970, as amended by P.L. 94-52, July 3, 1975, P.L. 94-83, August 9, 1975, and P.L. 97-258, § 4(b), Sept. 13, 1982), was landmark legislation passed by the U.S. Congress to ensure that public lands were protected and conserved for future generations. The act requires environmental assessments (EA) and more in-depth environmen- tal impact analysis (EIA) based on best available science in more sensitive situations. NEPA embraces multiple use concepts, including appropriately managed livestock grazing, and public inputs to the decision‑making pro- cess. Although the legislative intent of NEPA is sound, certain public interest groups opposed to livestock grazing have used NEPA to legally challenge agency decisions that permit continued livestock grazing when permits are reviewed for renewal. When bighorn sheep were released in the northern Sierra Nevada mountain range over 20 years ago, commitments were made to sheep producers by the U.S. Forest Service and California Fish and Game that their grazing permits would not be affected. A lawsuit filed against the An animal unit is defined as one cow and her calf or five ewes and their lambs.

104 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES U.S. Fish and Wildlife Service (FWS) in 2004 by the San Francisco‑based Center for Biological Diversity challenging all grazing permits adjacent to the designated Sierra Nevada bighorn habitat has resulted in reduction of grazing allotments for sheep producers, and the FWS has now responded to this lawsuit by designating over 400,000 acres as Sierra Nevada bighorn habitat for the current population of less than 100 bighorn sheep. The Cen- ter for Biological Diversity and the Idaho‑based Western Watersheds Proj- ect recently filed a lawsuit against the USDA ARS U.S. Sheep Experiment Station over grazing sheep on federal land. The research station has been grazing federal lands for over 90 years and is frequently used as a model for land stewardship by the U.S. Forest Service. The lawsuit was settled to the mutual agreement of USDA ARS and the plaintiffs in February 2008, and sheep grazing will continue on experiment station lands and lands with grazing permits. Even though a primary use of public land is for wildlife habitat, federal agency land managers have little or no control over this use since wildlife on public lands is managed and controlled by state wildlife agencies. If wildlife numbers, such as elk, become overpopulated in a multiple use area with livestock grazing and the state wildlife agency is unwilling to manage the elk population, then the only option available to the public land man- ager is to reduce livestock grazing. Properly managed grazing systems on private lands optimize livestock and wildlife in harmony with the forage and habitat resources. Although invasive and nonnative plant species are widely acknowledged as the most serious threat to rangeland health on public lands, public man- agement or control of invasive species is limited. Congress has recognized this concern through legislation but has not appropriated sufficient funds to begin even limited control measures on public lands. As discussed in an earlier section, targeted sheep grazing can be an effective part of the land manager’s efforts to control many of the invasive plant species. Mandatory Price Reporting Before 2001, information on livestock and meat market transactions reported by USDA was based on data voluntarily submitted by market participants. However, an increasing number of livestock transactions were being made under long-term marketing arrangements (LMAs) that set sales terms well before delivery of the animals for slaughter (Perry et al., 2005). Because the terms of LMAs were not reported during that period, USDA livestock price and volume data were increasingly based on a declining number of transactions. Concerns emerged that the cash market prices re- ported by USDA did not reflect an increasing share of livestock sales. Along with growing concentration in the meat packing industry at the time, the

THE U.S. LIVE SHEEP INDUSTRY 105 increasing lack of transparency in livestock transactions fueled concerns of packer manipulation of markets. The Livestock Mandatory Reporting (LMR) Act of 1999 (P.L. 106- 78) was the legislative response to these concerns. The LMR Act required major meatpackers to report all transactions covering hog, cattle, and lamb purchases and commitments to USDA. The act also required packers to report the details of fresh wholesale beef and lamb transactions. In imple- menting LMR, the intent was to facilitate price discovery in the industry. Initial producer response to the LMR Act was negative primarily because of implementation problems that severely reduced the amount of price and volume data reported. At the same time, the data did not show that contract prices were higher than cash prices as many in the industry expected. The recent study by RTI International (2007) found that for the lamb industry, the primary effect of the LMR Act has been to reduce price risk rather than to influence the level of the price paid for slaughter lambs. The study found that implementation of the LMR Act in 2001 increased the slaughter lamb price by only 0.129 percent. Further, the study concluded that LMAs have had only a small effect on slaughter lamb prices. They found that a 10 percent increase in slaughter lamb purchases through formula pricing increases the slaughter lamb price by an estimated 2.54 percent. In contrast, a 10 percent increase in slaughter lamb purchases through cash markets increases slaughter prices by an estimated 2.68 percent. On the other hand, they found that a 10 percent increase in packer ownership reduces slaughter lamb prices by only an estimated 0.23 percent. Federal Slaughter Inspection and Food Safety The federal regulatory agencies that administer inspection and food safety programs include the USDA APHIS, Food Safety and Inspection Service (FSIS), FDA, and the EPA. The FSIS is responsible for ensuring that packing plants adhere to the Humane Methods of Slaughter Act (USDA, 2007e), and veterinarians employed by FSIS enforce the requirements for humane treatment of all animals prior to slaughter. Employees of FSIS in- spect all sheep on the harvest floor of a processing plant. The FSIS is also responsible for governing the Pathogen Reduction/Hazard Analysis and Critical Control Point (HAACP) final rule (USDA, 2007f), which enforces safety, sanitation, handling, and processing requirements of all federally in- spected slaughter and meat processing plants. Federally inspected plants are inspected and evaluated prior to the start of a production day and during all hours of production, and a follow-up inspection takes place after the closing clean-up is completed. All plants that ship meat and byproducts across state lines (interstate commerce) are federally inspected. State inspection is imple-

106 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES mented in smaller local operations; however, their products are currently restricted to intrastate markets. An increasing number of state‑inspected facilities are used by direct marketers providing lamb to local markets and private customers. The HAACP is further discussed in Chapter 4. Animal Welfare Regulations There are no specific animal welfare or humane handling regulations for sheep. Sheep, however, are covered under two federal humane/welfare regulations: (1) the Humane Methods of Livestock Slaughter Act and (2) the 28‑Hour Law. Various state regulations also address animal welfare issues. Humane Methods of Livestock Slaughter Act The Humane Methods of Livestock Slaughter Act (7 U.S.C. §§1901– 1907) provides the requirements for the humane handling of livestock be- fore and during the slaughter process. Included are provisions for holding and transportation of certain animals prior to slaughter and a separate sec- tion for the handling and holding of nonambulatory or “down” livestock. The regulations promulgated under the act outline requirements for the specific method of slaughter such as captive bolt and electrical current. The regulations emphasize the minimization of “excitement and discomfort” to the livestock prior to slaughter. Under this act, only two methods of livestock slaughter are deemed hu- mane and, therefore, legal: (1) rendering the animal “insensible to pain by a single blow or gunshot or an electrical, chemical or other means that is rapid and effective, before being shackled, hoisted, thrown, cast, or cut”; and (2) slaughtering “in accordance with the ritual requirements of . . . any other religious faith that prescribes a method of slaughter whereby the animal suf- fers loss of consciousness by anemia of the brain caused by the simultaneous and instantaneous severance of the carotid arteries with a sharp instrument and handling in connection with such slaughtering. . . .” Twenty‑Eight‑Hour Law of 1877 The 28‑hour law (49 U.S.C. § 80502) addresses the transportation of animals, including those raised for food or in food production, across state lines. The statute provides that animals cannot be transported by “rail car- rier, express carrier or common carrier” (except by air or water) for more than 28 consecutive hours without being unloaded for 5 hours for rest, water, and food. Sheep may be confined for an additional 8 consecutive

THE U.S. LIVE SHEEP INDUSTRY 107 hours without being unloaded when the 28-hour period of confinement ends at night. State Welfare Regulations Few states have specific regulations regarding farm animal welfare. New Jersey enacted regulatory standards for the humane handling, housing, treat- ment, and care of livestock and poultry. It is the first and only state currently to have such broad provisions related to livestock and poultry welfare. Ewe Lamb Replacement and Retention Program The Ewe Lamb Replacement and Retention Payment Program (ELR- RPP) operated through the Farm Service Agency (FSA) of the USDA pro- vided producers direct payments in 2004 and 2005 to help them replace and retain ewe-lamb breeding stock. The ELRRPP intended to strengthen the lamb industry by providing the financial ability to invest in larger and genetically improved breeding stocks. The program paid eligible opera- tions $18 for each qualifying ewe lamb retained or purchased for breeding purposes. The ELRRPP legislation continues to exist, but funding has not been provided since 2005. Wool Price Supports and Incentive Payments The National Wool Act of 1954 established an incentive payment program for growers to be paid out of wool tariff revenues (USDA, 1999). The incentive portion included the establishment of a target price for raw wool and a payment to producers on the basis of the percentage difference between the national average market price and the target price. When the National Wool Act was repealed in 1992, wool production declined mark- edly and the wool share of total revenues from sheep production fell to only about 10 percent compared to 20 to 25 percent in years when the Wool Act was in force (calculated from data in Meyer et al., 2006). The Farm Security and Rural Investment Act of 2002 reinstated wool price supports through marketing assistance loans (MALs) and loan deficiency payments (LDPs) for the 2002 to 2007 crop years. The wool LDP program is designed to support wool prices approximately at comparable price differences for similar grades of wool in the international marketplace. Current LDP pay- ments to producers for nongraded wool, for example, are $0.41/kg. The only payment differentiation from nongraded wool is for less than 18.6-mi- cron staple length wool, which has varied from $1.76/kg to over $2.20/kg. Although the market price varies substantially for graded wools, the LDP does not provide an incentive to growers for marketing graded, table skirted,

108 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES and classed wools other than the superfine grade of less than 18.6 microns. Chapter 5 has more details on the current wool policy. MAJOR ACCOMPLISHMENTS, OPPORTUNITIES, AND CHALLENGES OF THE U.S. LIVE SHEEP INDUSTRY The U.S. sheep industry is often described as an industry in decline. More appropriately, perhaps, the U.S. sheep industry could be described as being in “transition.” Without question, U.S. sheep inventories have de- clined dramatically since the 1940s along with the number of sheep produc- ers, sheep ranches, investments in research and extension, and government support. A closer look at the industry, however, shows that myriad forces of change—from the growing competition of lamb and textile imports to the changing dietary and fabric preferences of consumers—are honing and transforming the industry toward a potentially more efficient and competi- tive future. The signs of the transition taking place are already beginning to appear, such as the recent slowing of the long-term decline in inventories in many range sheep states and the modest growth in many farm flock states. Other signs of the industry’s transition include the growth in direct marketing, the growth in importance of hair sheep breeds in several regions of the United States, and the emergence of the dairy sheep industry. The transformation is the result of numerous accomplishments of the industry in adjusting to the forces of change. Even so, the future survival of the industry will depend critically on the extent to which the industry recognizes and embraces the available opportunities for growth and change and how the industry chooses to respond to the many challenges it continues to face. Major Accomplishments of the U.S. Live Sheep Industry As the scale and competitiveness of the industry have diminished over time, the sheep industry and the supporting federal and state research and extension network have worked together to enhance the productivity and profitability of sheep production. A few of the more important accomplish- ments in this regard include the following: • Increased productivity. The number of kilograms of lamb weaned per ewe has increased approximately 120 percent in the last 60 years. This has been achieved through genetic progress and improved nutrition, health, and management practices that have increased both the number of lambs weaned per ewe and harvest weight of lambs. The genetic potential exists to further increase productivity within the various production systems. A number of industry programs have facilitated these productivity increases. The land‑grant tradition of research programs to develop new technolo-

THE U.S. LIVE SHEEP INDUSTRY 109 gies combined with extension programs to provide producer education on uses of existing and new technologies was adopted by the sheep industry over 30 years ago through the Sheep Industry Development (SID) program, which is now a part of ASI. With the assistance of university and industry leaders and industry financial support, SID published the Sheep Production Handbook, which is now in its seventh edition and is the standard textbook for education programs and producer reference handbook throughout the United States. In addition, SID, and now ASI, have sponsored numerous symposia and published their proceedings to highlight new technologies and to identify continuing research and education needs. The industry continues to seek increased funding to support sheep research and education programs that will further increase lamb and wool productivity. • Improvements in lamb processing and merchandising. Over 60 per- cent of lamb carcasses are further processed to retail‑ready or HRI (hotel, restaurant, and institution)‑ready products at the slaughter plant level, which is higher than for other red meats. Oxygen-free packaging systems have increased the shelf life of fresh lamb. These breakthroughs have in- creased merchandising opportunities, especially in low‑volume markets. Shelf-ready lamb products historically included legs, shoulders, loins and racks or loin and rib chops, and lamb shanks, with remaining portions of the carcass often used for pet food products. Product development programs initiated by ASI representatives, meat research scientists, and lamb meat industry teams have developed value-added products that have improved consumer acceptance of lamb. Examples include sirloin chops from the traditional leg of lamb that are merchandised at more than twice the price of legs, dividing the remainder of the leg into butt and shank portions to reduce product package size to more desirable consumer amounts, further processing lamb shoulders into steaks and shish kebab products, further processing rib cages into products such as Denver ribs and lamb riblets, processing the remainder of the carcass trim into ground lamb, and more. New product developments have been promoted with industry checkoff funds and cooperative promotions with lamb processors and retailers. • Increased cull ewe market value. Cull ewes historically were sold for $8–$12 per ewe. Emergence of the demand for cull ewes for slaughter in Mexico has increased their sale price to $40–$60 per ewe, depending on quality and weight. Domestic demand for cull ewes (mutton) has increased in recent years with the increased Hispanic and Asian immigrant populations in the United States. With an average 5- to 6‑year productive life, reduced depreciation costs have increased profit potential for sheep producers. The marketing of cull ewes to Mexico has largely been developed by producers and industry entrepreneurs. The domestic market has been developed by cull ewe processors and marketers that serve growing U.S. ethnic markets. • The use of sheep and goats in vegetation management. The use of

110 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES sheep and goats for targeted or prescribed grazing has been well documented in the last 10 years by researchers and practitioners. Sheep are used, for example, to control invasive and nonnative weed, grass, and small shrub species. Goats are also effective for weed control and are the preferred ani- mal species for heavily infested brush control. Sheep are also used to graze firebreaks to protect ecologically sensitive areas and residential areas near the urban/wild land interface and to control competing vegetation in new tree plantations. The American Sheep Industry Association has published a handbook on targeted grazing (Launchbaugh, 2006). • Mapping of the sheep genome. Scientists in U.S. and international laboratories are seeking gene markers for the major economically important traits of sheep such as larger litter size, lean meat production, superfine wool production, internal parasite resistance or tolerance, reduced seasonal breeding for year-round lambing, and foraging behavior. Although these state‑of‑the‑art genetic technologies are in their infancy, future potential could accelerate genetic progress. • Sheep breed and genetic improvements. The number of available sheep breeds has increased substantially in the last 40 years. Several of the new breeds perform at higher levels than breeds that were available before their arrival. Some notable examples are the high litter sizes of the Finnsheep and Romanov, the high milk production of the East Friesian and Lacaune, and the increased muscle mass of the Texel. The relatively recent increase in breeders of hair sheep offers a genetic resource for expansion of the U.S. sheep industry in the southeastern United States, where wool sheep are poorly adapted and sheep numbers have been historically low. Also, the NSIP has developed one of the most advanced programs for genetic improvement in the world. It utilizes state-of-the-art genetic technology to help producers genetically improve their flocks for reproduction, growth, and wool production. The NSIP calculates across-flock EPD based on the animal’s own performance and that of its relatives, which producers use in their selection, mating, and culling decisions. The increased use of artificial insemination (AI) practices has also enhanced the availability of genetically superior sires and improved the market potential for superior germplasm. • Sheep research and extension support. The generation of sheep re- search results and the transfer of these results into practice on U.S. sheep farms is accomplished through the cooperative funding of sheep research and extension by federal, state, and local governments and the integration of extension service and research scientists within land‑grant universities. Over $40 million is spent annually on 1,300 to 1,500 sheep research projects conducted at ARS stations and at land‑grant universities. State sheep exten- sion specialists and county extension agents interact directly with research scientists and assist sheep producers in the transfer of research results into practice. Although sheep producers provide few funds for sheep research,

THE U.S. LIVE SHEEP INDUSTRY 111 their national organizations such as ASI, support valuable educational func- tions and influence sheep research and extension activities conducted by public institutions. • Improvements in sheep-environment interface. Research on forage feeding has developed new types of forages that use the land resources wisely. For example, research on the use of brassicas in a cropping system as a second crop is allowing producers to plant a cover crop that may re- duce soil erosion and will provide nutritious feed for ewes and lambs when pastures normally are dormant. The discussion on targeted grazing earlier in this chapter emphasizes the current and future potential of sheep to con- tribute to environmental and rangeland health. • Improvements in lamb feeding and nutrition. The National Academy of Sciences (NAS) recently published a revised edition of the nutrient re- quirements for sheep included in the report, Nutrient Requirements of Small Ruminants (NRC, 2007). A cursory review of the historical editions clearly demonstrates that nutrient requirements have increased to meet the nutri- ent demands of the significant increases in reproductive efficiency and lamb growth rates in the last 50 years. Research reported in the current edition of the NAS publication documented the increased needs of both macro- and micronutrients to support current levels of productivity. Educators have developed and producers have implemented new feeding regimes for both forage-based and concentrate-based feeding regimens that recognize the current nutrient demands for reproduction, lamb growth, and wool produc- tion. Producers now have a better understanding of how the nutritive value of certain feedstuffs will contribute to reproduction, lamb growth and feed efficiency, and product quality to the consumer. Major Opportunities and Challenges of the U.S. Live Sheep Industry Key opportunities for enhanced efficiency and competitiveness of the U.S. sheep industry include the following: • Continued productivity improvements. The potential clearly exists to continue the momentum to improve productivity and production efficiency through continued improvements in the genetic, nutrition, animal health, and management programs that have contributed to the dramatic increases in kilograms of lamb marketed per ewe in the last 60 years. Realizing the potential, however, will require continued public support of research and education programs, as well as industry leadership and producers who are prepared to meet the challenges of change. • Targeted or prescribed grazing. Using sheep and goats for specific vegetation management practices is an important tool available to land man- agers. Chemical and mechanical means, controlled burns (fire), and manual

112 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES labor are other options, all of which are expensive and often not acceptable to the public. Producer practitioners have been paid to implement targeted grazing or have been provided grazing at no cost, suggesting that this could be a potential supplemental income source or a means of reducing produc- tion costs for sheep and goat producers, and at the same time providing a public good for communities and society. • Forage finishing for competitive advantage. Lambs can be grown postweaning on high‑quality forage pasture or crop residues to slaughter weight or to weights that minimize grain feeding in feedlots. With current high feed grain costs and the likelihood of continued increases, forage finish- ing could enhance lamb’s competitive position relative to other red meats. Forage‑feeding systems have historically been lower cost than concentrate feeding, suggesting that they could be more price-competitive with imported lamb products in the retail meat case. • Emerging ethnic markets for lighter‑weight lambs. The emerging and rapidly expanding ethnic markets for lamb present a particularly important opportunity for greater direct marketing of lambs. Ethnic markets for high- quality, lighter-weight lambs at current market premiums could potentially revolutionize lamb production, marketing, feeding, and processing systems. Lambs from the hair sheep breeds are generally smaller framed and lighter weight at slaughter, and fit well with the demands of many ethnic markets. Highest priority should be to invest in research to better understand this market and its implication for the U.S. sheep industry. • The sheep genome and gene biotechnology. Completion of the map- ping of the sheep genome is a major breakthrough in the potential for genetic improvements. Australia and New Zealand are already merchandising gene markers for superfine wool production and internal parasite resistance, and continue to invest in the development of additional gene markers for genetic improvement in lamb and wool production. Although there are currently only limited funding resources for sheep genomics research in the United States, the potential use of these new technologies for genetic improvement clearly suggests that this should be a high‑priority investment. Gene biotech- nology, including molecular genetics and gene therapy, have the potential of providing more effective vaccines and medications to protect against animal diseases and to correct gene deficiencies and dysfunctions. Research using sheep as the biological model for human biomedical research has developed the technologies for direct use of gene therapies and molecular genetics to address sheep genetic deficiencies and dysfunctions. However, little support is available for this research opportunity. Despite the opportunities, the U.S. sheep industry faces a number of key challenges that must be overcome to achieve sustainable growth and economic competitiveness, including the following:

THE U.S. LIVE SHEEP INDUSTRY 113 • Critical mass. A major challenge facing the industry is the decline in sheep numbers, which has resulted in the decline of industry infrastructure, including lamb and wool market outlets, sheep slaughter and processing facilities, low volumes of product for available markets, lack of qualified sheep shearers and wool classers, reduced market providers of the supplies and equipment essential for sheep production, and reduced state and federal support for sheep research and education faculty. While these changes in infrastructure and markets have been forced by the reduction in the scale of the industry, the consequence is that the sheep industry today has a weak platform from which to maintain the transition underway, let alone to launch significant and rapid industry growth and development. • Predation. The continued management (control) of predator popula- tions by USDA Wildlife Services, as well as state and producer‑supported programs, is critical to the survival of the U.S. sheep industry. Increased predation problems in wildlife populations in many states indicate the need for sheep industry alliances with wildlife agencies and interest groups. • Livestock, wildlife, and threatened and endangered species manage- ment. Management programs will need to recognize the importance of eco- system management based on the best available science rather than specific species management plans or practices that exclude appropriate multispecies management systems. • Price determination/price discovery. The Mandatory Price Reporting (MPR) system has resulted in more price reporting for live lambs and has generated more information on imported lamb carcass prices. Even so, the lack of information on prices due to confidentiality issues continues to be a primary challenge in feeder and slaughter lamb markets. Also, relatively little public data are available for assessing relative prices between domestic lamb carcasses and imported lamb carcasses. At the same time, most slaugh- ter lambs are now being priced using formulas or are packer fed so that the lamb price discovery process is now based largely on carcass or cutout values. Consequently, price is determined by negotiation or formula related to carcass quality. As a result, a significant amount of the risk is shifted from the buyer to the seller, especially for pricing based on quality. • Adjustment to emerging markets for lamb. While continued growth of ethnic-based markets for lighter‑weight lambs may have a potentially positive impact on lamb demand and prices, the existing industry infra- structure must respond sufficiently to accommodate the potentially major changes this market opportunity may require. Changes in sheep industry leadership policies and programs may be required. • Adoption of genetic improvement technology. Compared to breeders of dairy cattle, beef cattle, swine, and poultry, purebred breeders of sheep lag behind in the adoption of genetic improvement technology, with decisions

114 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES often based on show ring performance rather than commercial efficiency criteria. Only a small number of sheep breeders are using accurate estimates of genetic merit and performance‑based criteria for economically important traits in their selection decisions. The result is less than optimum genetic improvement in the entire U.S. sheep population, which may ultimately result in sheep being less competitive with other livestock species. Increased enrollment of purebred flocks in the NSIP could be helpful in this regard. • Sheep and wool research funding. Sheep and wool research receives the smallest amount of funding of any of the livestock sectors, resulting in less development of new technology and educational support for the sheep industry relative to other livestock sectors. The lack of new technology for the sheep industry relative to other livestock species will likely result in the sheep industry being less competitive, leading to further decreases in sheep numbers, further reductions in sheep research and extension efforts, even less new technology, and continued negative pressure on the competitiveness of the industry. • Sheep research and extension at land‑grant universities. A decreased emphasis on sheep research is already evident at land‑grant universities. For example, in most departments of animal science there is at least one research scientist working in each of the core areas of nutrition, reproduc- tion, genetics, and product (meat, milk, or eggs) with each of the livestock sectors of dairy cattle, beef cattle, pigs, and poultry. However, there are few departments that have three or more scientists working in the sheep area. Most departments have two or fewer. The main focus of the sheep research program at a particular university or ARS station most often is in the core area of the sheep scientist’s training, resulting in a deficiency of work in other areas. Some sheep scientists try to become generalists and cover all areas with highly applied research efforts. This approach is effective in the short term in generating useful information for producers but does not result in the generation of new basic knowledge for the development of new technologies for application in the future. A possible solution to this downward spiral is the formation of several sheep research and extension consortia among land‑grant universities and ARS stations. Three or more neighboring states with similar types of sheep production systems could form a consortium. Land‑grant universities and ARS stations within those states could each agree to cover certain specific sheep research areas so that all major areas important to sheep production in the region are covered by at least one effective research program. The results of all research programs would be readily available to sheep extension personnel in all states for ap- plication to sheep producers. By necessity, several informal arrangements of sharing expertise across states have evolved among sheep scientists. There is now a need, however, to formalize such arrangements in order to gain the most benefit out of limited sheep research and extension resources.

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The U.S. sheep industry is complex, multifaceted, and rooted in history and tradition. The dominant feature of sheep production in the United States, and, thus, the focus of much producer and policy concern, has been the steady decline in sheep and lamb inventories since the mid-1940s. Although often described as "an industry in decline," this report concludes that a better description of the current U.S. sheep industry is "an industry in transition."

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