Changes in the Sheep Industry in the United States Making the Transition from Tradition (2008) / Chapter Skim
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4 The U.S. Lamb Industry T he largest downstream component of the U.S.
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170 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES industry to the U.S. agricultural economy and the potentially industrytransforming changes currently in process, such as the emergence of direct marketing, growth in ethnic demand, and other market forces creating some optimism about the future of the industry.
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THE U.S. LAMB INDUSTRY 171 12,000 600.0 10,000 500.0 8,000 400.0 1,000 head Pounds 6,000 300.0 4,000 200.0 2,000 100.0 0 0.0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 years Slaughter Average liveweight Production Fig 4-01.eps FIGURE 4-1 Lamb slaughter, production, and average liveweight, 1970– 2004.
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172 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES 120 100 Number 80 60 40 20 0 1980 1985 1990 1995 2000 2002 2003 2004 2005 Year Packers Non-Public Markets Plants Non-Public Markets Packers Public Markets Plants Public Markets FIGURE 4-2 Number of lamb packers and plants by market type.a aNonpublic includes all sources except terminal markets and auctions. Public includes terminal markets and auctions.
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THE U.S. LAMB INDUSTRY 173 or boxed primals of carcass equivalents to breakers for further processing into consumer units.
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174 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES addition, leg conformation score was eliminated as a yield grade factor, and the fat thickness range in each yield grade was shifted and narrowed (USDA, 2007d)
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THE U.S. LAMB INDUSTRY 175 Before 1992, yield grades determined the amount of proportional trimmed meat in comparison to fat and bone in the carcass.
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176 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES reduction in carcass value (Field et al., 1963; Carpenter et al., 1964; Garret et al., 1990; Harris et al., 1990; Fritz et al., 1995)
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THE U.S. LAMB INDUSTRY 177 particularly since carcasses are not ribbed, which allows the collection of loin eye area measurements.
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178 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES both producer and processor. According a to validation study by Cunha et al.
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THE U.S. LAMB INDUSTRY 179 technology is simple, affordable, nondestructive, portable, and a useful tool in live animal and carcass evaluations.
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180 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES lean, fat‑free lean, dissected carcass fat, and composition of whole body. A number of researchers (Edwards et al., 1989; Garrett et al., 1990, 1992; Berg et al., 1996, 1997)
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THE U.S. LAMB INDUSTRY 181 force.
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182 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES have followed suit, adopting improved slaughter facilities that embrace the Australian and New Zealand design. Many lamb slaughter plants have implemented multiple hurdle systems to minimize pathogens.
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THE U.S. LAMB INDUSTRY 183 Processing to Enhance Value According to a recent survey (Harris Interactive, Inc., 2007)
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184 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES in the home. The following are three areas where additional research and development are needed.
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THE U.S. LAMB INDUSTRY 185 to dedicate to the required preparation.
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TABLE 4-4 Top-Selling Lamb Subprimals, 2003–2005 186 Total North- Mid- Great South SouthSubprimals U.S. Sales California east South Lakes Plains Central east West Total Ave.
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THE U.S. LAMB INDUSTRY 187 TABLE 4-6 Nutritional Comparison of Animal Protein Sources, 3-oz Cooked Serving Trimmed of Visible Fat Calories Total Fat (g)
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188 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES LAMB MARKETING In any market system, consumers send signals through various channels regarding the quality, quantity, and value characteristics of the products they wish to purchase. How well the signals are received through the system depends in large part on the market structure, including the number of levels through which the product must pass, the number and types of groups involved at each level, and the functions each group performs at each level.
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THE U.S. LAMB INDUSTRY 189 to a study by Williams et al.
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190 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES Lamb Retailing and Foodservice Lamb retailers vary widely in type and include large national chain food stores, local chain and independent food stores, local butcher shops, and foodservice groups such as hotels, restaurants, health care and similar institutions, and even the government. Little recent, publicly available data on retail lamb sales are available.
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THE U.S. LAMB INDUSTRY 191 less, the large portion of thighs, wings, and whole birds held the total share of boneless chicken packages to 42 percent.
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192 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES arrangements, procurement or marketing contracts, packer ownership, custom feeding, and custom slaughter. In 2005, 42.2 percent of slaughter lambs were procured by packers through formula pricing arrangements, 39.4 percent through auction markets, 12.0 percent through negotiated pricing agreements, 4.9 percent as packer-owned animals, and 0.8 percent through contract production.
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THE U.S. LAMB INDUSTRY 193 Spot or cash market Alternative Arrangements • Auction barns • Video/electronic auctions • Dealers or brokers • Direct trade Pricing methods Lambs owned by the Lambs not owned by the Packer-owned producer producer operations • Public auction • Sealed bid • Forward contract • Custom feeding, • Packer feeding • Marketing agreement Shared marketed by the • Individually • Custom slaughter b ownership producer negotiated pricinga • Custom feeding, marketed by the feedlot Pricing methods Pricing method Pricing methods • Formula pricing with • Fee for service • Internal transfer one of the following (feeding)
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194 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES Alternative Arrangements Spot or cash market • Direct trade • Dealers or brokers Pricing methods Meat products sold by the Meat products transferred by packer the packer • Individually negotiated pricing a • Forward contract • Internal company transfer • Sealed bid • Marketing agreement • Custom slaughter b • Price list Pricing methods Pricing methods • Price list • Internal transfer pricing • Formula pricing with one using one of the of the following bases: following: –plant average price –reported market –plant average cost of prices production –internal production –USDA publicly cost, with or without reported price profit margin –retail price • Fee-for-slaughter –subscription service service price Possible pricing practices •Two-part pricing •Volume discounts •Exclusive dealings •Bundling FIGURE 4-4 Marketing arrangements for sale or transfer of lamb meat products by packers. 4-04 new.pdf aIndividually negotiated pricing is often benchmarked against reported prices.
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THE U.S. LAMB INDUSTRY 195 processes)
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196 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES bargaining on price with large retailers and large foodservice buyers that buy in volume. Packers must operate at as close to full capacity as possible to be efficient in their operations and must move their processed lamb soon after slaughter and processing or face spoilage losses.
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THE U.S. LAMB INDUSTRY 197 service purveyors operate as monopolistic competitors in various local areas facing a large number of consumers.
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198 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES successful in enhancing the demand for lamb and increasing the number of lamb consumers, the volume of lamb moving through the marketing system will increase, which, in turn, will provide increased marketing opportunities and competition at each level in the marketing chain. With larger lamb volume flowing through the system, the firm size and share of the market needed for efficient operation as well as capital investment requirements would be lowered.
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THE U.S. LAMB INDUSTRY 199 impact of increased costs back down to the producer in the form of lower live animal prices.
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200 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES fect competition. In this case, price competition is avoided and nonprice competition is the main strategy.
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THE U.S. LAMB INDUSTRY 201 of any industry.
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202 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES World War II, however, per capita lamb consumption dropped by more than half to only 1.4 kg in 1951. Following a slight recovery over the next decade to 2.0 kg in 1962, U.S.
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THE U.S. LAMB INDUSTRY 203 a window for growing imports.
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204 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES sheep feeding and processing industries has been geared to reducing costs by maintaining volumes in fewer and fewer operations. Thus, declining domestic inventories have placed significant pressure on firms to consolidate or exit the sheep feeding and processing industries in order to remain competitive.
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THE U.S. LAMB INDUSTRY 205 Cross-price elasticities of demand refer to the percentage change in the consumption of one good due to a 1 percent change in the price of another good.
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206 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES TABLE 4-7 Estimated Elasticities of U.S. Per Capita Lamb Demanda Cross-Price Per Time Period Own Import Capita Study of Analysis Price Lamb Beef Pork Chicken Income RTI (2007)
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THE U.S. LAMB INDUSTRY 207 efforts.
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208 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES the promotion of lamb, were phased out in 1996–1997, an unsuccessful effort was made that year to pass a mandatory checkoff program through a producer referendum. The only funds made available for lamb promotion after the phaseout of the Wool Incentive Program in 1995–1996 and the establishment of the current lamb checkoff program in 2002–2003 was through a special grant resulting from a complaint based on Section 201 of the Trade Act of 1974.
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THE U.S. LAMB INDUSTRY 209 (and lamb sales at fixed prices)
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210 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES Demographic Factors Affecting Lamb Demand Williams et al.
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THE U.S. LAMB INDUSTRY 211 Lamb Market Penetration • An average of about 9.7 percent of all households purchased lamb each year over the period; • Market penetration jumped from an average of 9.2 percent in the 3 years prior to the implementation of the lamb checkoff program to an average of about 10.5 percent in the two years of the dataset when the ALB began promoting lamb demand with checkoff dollars; • Market penetration is highest among households with the following characteristics: (1)
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212 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES year and then calculating the percentage change in per capita consumption from the base period to the current period using the real retail price of lamb and a measure of the own-price elasticity for lamb. Then, using the assumed own-price elasticity and the calculated percentage change in per capita consumption, the corresponding percentage change in price is calculated.
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THE U.S. LAMB INDUSTRY 213 TABLE 4-8 Lamb Demand Index with Alternative Elasticities, 1980 = 100 (Base)
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214 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES 120 100 Index (1980=100) 80 Lamb Demand Index 60 Beef Demand Index 40 20 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Years FIGURE 4-7 Comparing beef and lamb demand indices, 1980–2006.
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THE U.S. LAMB INDUSTRY 215 the level of domestic production.
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216 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES 14,000 12,000 1,000 Pounds 10,000 8,000 6,000 4,000 2,000 0 Jan-06 Apr-06 Jul-06 Oct-06 Jan-04 Apr-04 Jul-04 Jan-03 Apr-03 Oct-04 Jan-05 Apr-05 Jul-03 Jul-05 Oct-03 Oct-05 Jan-07 Australia New Zealand FIGURE 4-9 Lamb imports from Fig 4-09.eps Zealand, January 2003–January Australia and New 2007. (1 pound (lb)
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THE U.S. LAMB INDUSTRY 217 metric investigation used monthly data from January 1981 to May 1994.
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218 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES 20,000 290 270 1,000 Lbs. 16,000 250 230 $/cwt 12,000 210 8,000 190 170 4,000 150 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 Lamb Imports Gross Carcass Value FIGURE 4-11 Relationship between imports and U.S.
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220 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES impact on the demand for other types/sources of lamb. However, when relative prices change, frozen lamb is more likely to be replaced with chilled lamb than the other way around (Muhammad et al., 2007)
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THE U.S. LAMB INDUSTRY 221 0.85 USD/AUD and 0.80 USD/NZD 0.75 0.70 0.65 0.60 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 Mar-07 USD/AUD USD/NZD FIGURE 4-14 Exchanges rates between the United States and Oceania over the period January 2004–March 2007.
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222 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES 20,000 18,000 16,000 1,000 Lbs.
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THE U.S. LAMB INDUSTRY 223 travel to reach ocean ports.
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224 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES Thus, the American sheep industry has some advantages in producing sheep in terms of a natural resource base and a strong cadre of supporting industries. However, it faces strong international competition from countries that are at least as well suited for producing sheep, have much stronger domestic market bases for their sheep industries, and have well-organized marketing efforts.
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THE U.S. LAMB INDUSTRY 225 TABLE 4-9 Uses for Sheep and Lamb Byproducts Pelt and Wool • Lanolin • Rouge base • Felt, carpet • Clothing • Insulation • Footwear • Drum heads • Rug pads • Woolen goods • Yarns • Asphalt binder • Baseballs • Artists' brushes • Textiles • Upholstery • Sports equipment • Ointment base • Pelt glue • Fabrics • Tennis balls • Paint and plaster binder • Pelt products • Worsted fabric Fats and Fatty Acids • Explosives • Rennet for cheese • Dog food • Solvents • Industrial oils • Protein dog food • Chewing gum • Industrial lubricants • Mink oil • Paints • Stearic acid • Oleo • Makeup • Cosmetics • Margarine • Ceramics • Antifreeze • Oleo shortening • Medicines • Crayons • Herbicides • Shoe crème • Floor wax • Shaving cream • Dish soap • Tallow for tanning • Protein hair conditioner • Tires • Chemicals • Protein hair shampoo • Paraffin • Rubber product • Creams and lotion • Chicken feed • Insecticides • Biodegradable detergents • Candles Intestines • Sausage casings • Surgical sutures • Tennis racquet strings • Instrument strings Manure • Nitrogen fertilizer • Phosphorus • Minor minerals • Potash Bones, Horns, and Hooves • Syringes • Bone jewelry • Bone charcoal for high• Gelatin desserts • Bone meal grade steel • Rose food • Emery boards and cloth • Plywood and paneling • Piano keys • Ice cream • Shampoo and conditioner • Marshmallows • Laminated wood products • Dice • Potted meats • Horn and bone handles • Collagen cold cream • Pet food ingredients • Collagen/bone for plastic • Crochet needles • Bandage strips surgery • Cellophane wrap and tape • Bone charcoal pencils • Bone china • Glycerin • Gelatin capsules • Wallpaper/wallpaper paste • Photographic film • Adhesives/adhesive tape • Dog biscuits • Fertilizer • Phonograph records • Steel ball bearings • Neatsfoot oil • Combs and toothbrushes • Malts and shakes • Abrasives • Buttons
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226 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES Rendered Byproducts Over time, the rendering industry has developed to dispose of nonedible portions of the slaughtered animal. One-third to one-half of each animal produced for meat, milk, eggs, and fiber is not consumed by humans (Meeker and Hamilton, 2006)
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THE U.S. LAMB INDUSTRY 227 "Lamb meal analogs," made of other protein meals, were rumored to have entered the market but tight controls due to BSE and scrapie issues and new DNA‑typing technology (see Kremar and Rencova, 2003)
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228 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES 15 10 US $ 5 0 2000 2004 2005 2003 2002 2001 1990 1996 1999 1998 1994 1995 1992 1993 1997 1991 FIGURE 4-16 Pelt prices, average of fall clips (No.
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THE U.S. LAMB INDUSTRY 229 in medical research (Adelaide Bio News, 2005)
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230 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES governmental regulations typically affect either directly or indirectly various aspects of the marketing system (McCoy, 1981)
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232 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES Country-of-Origin Labeling (COOL) In 2002, Congress mandated COOL for beef, lamb, pork, poultry, and fish.
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THE U.S. LAMB INDUSTRY 233 improve food safety, to extend shelf life in the retail meat case, and to create more convenient products; and (2)
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234 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES spent in meal planning and preparation. Partially or fully prepared retail meats are on the rise.
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THE U.S. LAMB INDUSTRY 235 Although lamb may be well suited for organic production, limited capacity and availability of processors who handle organic lamb products may play a role in limiting the growth of the market for certified organic lamb.
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236 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES in the eyes of the consumer indeed presents opportunities to increase the demand for lamb. • Better positioning of lamb in the U.S.
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THE U.S. LAMB INDUSTRY 237 an automated system will have to fit into current plant designs and must be in keeping with current processing plant line speeds.
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238 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES Another problem with the reported data on per capita lamb demand is that the data do not differentiate between American lamb and lamb from either Australia or New Zealand. The imported share of lamb in the U.S.
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240 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES Anderson, D
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THE U.S. LAMB INDUSTRY 241 Capps, O., Jr., P
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242 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES Heitmann, B
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THE U.S. LAMB INDUSTRY 243 Menkhaus, D
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244 CHANGES IN THE SHEEP INDUSTRY IN THE UNITED STATES Schweigert, B
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