Supply/demand lamb?

[lovetree]

I attempt to be certain that our 'neer do wells' quickly go to slaughter and not back to the country.' Back to the country' for culls frequently does not build a positive reputation for the source flock.

Agree, it was the buyers for the ethnic market that were doing the purchasing.

[Don Hausser]

Mary,
I ship to Equity's lamb pool at Johnson's Creek. Ewe lambs in pool consignments go to slaughter and cull ewes will also go to slaughter if requested when delivered to auction barn.

[cjhiemke]

Stan, Paul, and Dog: thank you for offering your thoughts. Your comments bring up many interesting points.

Domestically, though small, we have a very diverse lamb consuming public…young foodies, old stand-bys, and many different ethnic cultures. I have always wondered what the best way is to determine the target lamb for each of those specific groups. (challenge #1).

Once determined, how do we take our various production environments to produce the right kind of lamb? Can we raise grass-, grain-, and crop residue-finished lambs to be at the same quality level? What role do genetics play in this? (challenges #2 and #3)

Then comes the question of how to measure what that target lamb is from the subtle few indicators presented from a hanging carcass (challenge #4). I recall listening to Barry Carpenter, then with USDA, at the ASI meeting in San Antonio when he proclaimed that the CSU/Vision System exceeding the USDA Graders ability to determine cutability of carcasses. He challenged the group with the next step of figuring out how that machine will do a better job of Quality Grading. After his talk I asked Barry how quality should be defined, same as the current definition of quality?

The USDA lamb quality grading system is set up after the beef model, seemingly as an afterthought. A USDA Prime lamb is effectively a lamb that should have been shipped two months before and gorged itself in the meantime. Does all that extra age and fat render a better eating experience? (pun intended)

The ALB, through Tri-Lamb, has been working to get lamb’s nutritious message out to dieticians and has been very effective. The next step to this program is consumer advertising, but this next step is a contentious one. There is much anxiety about using American Lamb Board funds with AUS and NZ $ to promote lamb generically, rather than using our limited funds for branded American programs.

The program I manage produces what I think is a quality lamb. I work with regionally specific producers to assure the lamb is less than 10 months of age (younger lamb resulting in a mild yet indicative lamb taste, avoiding the 13 to 14 month old “mutton that broke”). I pay the growers on a grid to reward them for a consistent style of lamb. We market our lamb through high-end channels along with our other extremely high quality proteins and provide full traceability and stories about where the lamb comes from. I am fortunate to work with medium to large farmers, and not many of them, that offer the ability to maintain this structure and high quality. I pay a premium to our growers and pass that cost along to our customers.

This appears to be a microcosm of what could be a good model for the US industry, but the reality is that our domestic industry is not nearly as “simple” as what I do with Niman Ranch. Our flock sizes are across the board, and map. Our customers are too.

I’m not offering any solutions to the questions here, only some observations. Admittedly, the points I bring up are bigger picture items and don’t have much affect on how many of us do successfully marketing our lambs direct to consumers off the farm. Answering these questions with the goal of sustaining and improving upon our domestic industries’ infrastructure takes some high level calculus.

I know that Stan’s upcoming term on ALB is going to be fun! I look forward to working with you, Stan, and also addressing some of these tough questions wherein our group can deal with some of the issues. I can assure you that, although the bulk of our ALB funds come from the “traditional” US industry we are also reaching out to the non-traditional ethnic part of the industry.

[Tom Nichols]

Cody and Stan,
For some reason, and I can't begin to understand the reasoning behind it, there seems to be a number of producers whom think that since lambs are at a high price and in short supply that we no longer need to promote lamb. Call me greedy, short sighted or any thing else you want, but when you go to the ALB meeting I want you to only be talking promotion, promotion, promotion. I want to see the ALB and the ALB funds working like hell to support this new price plateau so that when supply conditions change we have the ability to maintain this new price plateau, or at least something very close to it.
With these higher prices we have all seen signs of expansion which tells me that price is the first roadblock for this industry, so let's concentrate on promotion and let the numbers and quality take care of themselves.
Tom

[dog]

There is much anxiety about using American Lamb Board funds with AUS and NZ $ to promote lamb generically, rather than using our limited funds for branded American programs.

I can understand this however there are two seperate areas - one is to advertise sheep meat to increase the demand and one is to get people to buy local product - in the start it really does not matter who's lamb they start eating as long as they increase (or start eating) their intake of sheep meat - once that happens then you can start telling them how better the local product is - the problem of local buying is not just a sheep meat problem it covers a whole range of products so basically you use AUS/NZ money to increase demand use taxpayers monies to move people to buy local product. Imported sheep meat into the USA will only kill off the domestic industry if that industry is ineffecient or does not meet the comsumer requirement - if the aus/nz imports are returning profit to the aus/nz producer then that simply means that they are meeting a demand that is not being taken up by the domestic producer.

The first thing I would do is to survey lamb customers and find out why they are buying imported lamb the results of such a survey would give a good working plan as to how to increase the domestic share.

ps: we do not have republican or democrates down here generally we are liberal or labor - lean to the right or lean to the left - basically both parties lean to the center at present neither of the parties do any thing of great benefit to the rural sector (basically neither party is actually doing anything at present due to a hung Parliament), the livestock industries support things like marketing, research, disease control etc by levies taken from our pastorial protection rates and by levies at the sale yard when we sell our product. If we want to increase the advertisement then we would expect to pay a higher levy. Generally Australia has changed to a user pays system via levies or flat payments by the producers.

[lovetree]

Mary,
I ship to Equity's lamb pool at Johnson's Creek. Ewe lambs in pool consignments go to slaughter and cull ewes will also go to slaughter if requested when delivered to auction barn

Thanks for your input Don,
The culls went for slaughter, I just had never had the name of our farm announced before..I believe that since it was Christmas week the regular guy wasnt there.

[Muleflock]

Very good insight by all.

ps: we do not have republican or democrates down here generally we are liberal or labor - lean to the right or lean to the left - basically both parties lean to the center at present neither of the parties do any thing of great benefit to the rural sector .

Et tu, Brute?"

[Stan Potratz]

Tom,
Your vote that the ALB focus on promotion and allow numbers and lamb quality to take care of itself nicely illustrates what some call 2 opposing poles of marketing philosophy,
1. That an improved product will, by it's own virtues, command a higher price point. Therefore focus on product improvement and not on sales.
2. That, particularly with such a variable product as US lamb, simply focusing on consumer awareness is that which is needed - in other words, sell, sell, sell.

Now the 2 views don't have to be opposed. The recent story of Apple (computers, phones, et al) is one that appears to include remarkable skills at both product improvement and brand enhancement/awareness by very clever marketing.

However, both seem to be difficult tasks for ALB...

Their only way to change product quality involves informing the producer & feeder to make changes -- and to do so infers that the folks responsible for promotion don't think the current product is great as it is. I can't see entrenched producers tolerating that message!

Yes ALB can do what they can to support the demand of lamb. I think ALB to date has done much better than I ever anticipated. But what is the size of their task? Consider the ratio between the value of all the lamb produced in the USA at today's consumer's prices and ALB's budget. Say 4 million lambs at $250 apiece to the consumer?. That's $1000 million. ALB's budget is less than $2 million? That's a ratio is 500 to 1. If my firm had to abide by that ratio (sales to marketing) all booklets and adv. would have to cease immediately! We would live or die by the internet-- and product development? Forget it.

[cjhiemke]

ALB's budget is less than $2 million?

Correct, $2 million. This figure is linked to per-head and per-pound assessments on producers and packers. As the value of the lamb sold increases the ALB budget remains unconnected to that value.

Very good observation, Stan, on the opposing view point.

I can understand this however there are two seperate areas - one is to advertise sheep meat to increase the demand and one is to get people to buy local product - in the start it really does not matter who's lamb they start eating as long as they increase (or start eating) their intake of sheep meat - once that happens then you can start telling them how better the local product is - the problem of local buying is not just a sheep meat problem it covers a whole range of products so basically you use AUS/NZ money to increase demand use taxpayers monies to move people to buy local product.

The issue the ALB has using AUS/NZ$ is two-fold: 1) we have an extremely limited budget to promote lamb consumption and it isn't sure if that money is best used in a branded campaign or leveraged with AUS/NZ$ in a generic campaign and 2) since this is a domestic producer- and domestic packer-paid checkoff (no $ from the public taxpayer) there is a pride in promoting american product and apprehension in supporting what many producers view as the competition's product. Frankly, the Board has been very evenly divided in whether a generic campaign should be done. I sit in the middle...yes, I think a rising tide raises all ships, but is something lost by taking limited funds away from our very targeted and successful branded campaigns? I need better research to make this critical decision.

I want to see the ALB and the ALB funds working like hell to support this new price plateau so that when supply conditions change we have the ability to maintain this new price plateau, or at least something very close to it.

Tom, the Board and Staff work like hell to promote lamb. Our efforts are to increase and strengthen demand, but I'm not sure it's within our control to support current prices under increased supply. That said, we're very aware of the potential peril of increased supply without increased demand.

[Bill Fosher]

Anyone who has been reading this forum for a while knows that I was strident and outspoken in my opposition to the checkoff, and I believe that ALB is fundamentally addressing the wrong question. The issue has never been that we needed to create demand for lamb, the issue has been that we needed to create and improve domestic sources. Until recent events, creating more demand for lamb in the US just meant increasing the market share for the Aussies and Kiwis.

Now, it would appear, that the unfunded wars in Afghanistan and Iraq, bailouts for AIG and General Motors and anyone else deemed too big to fail, have changed the equation so that the demand for domestic lamb has increased to the point where folks are starting to see the profit potential that they need to expand their operations.

But this is a fragile market signal. As others have pointed out, this price plateau will not last forever. The bubble will burst. In the same sense that all bleeding stops eventually, US currency will inevitably stabilize relative to overseas currency. If we have not established the domestic sheep industry as a vital and robust institution by the time that happens, we will crash harder than the funny money market did in 2008, but no one will put out a big pillow out for us to land on the way they did for Wall Street.

Now, it seems to me, is the time to try to increase demand. For profitability to be maintained in a lower price environment, and where currency arbitrage no longer acts as a tariff to protect us from more efficient production overseas,we must increase the size of the pie that we are sharing with Oz and NZ.

But it's equally important to make sure that we have an industry standing at the other side of this bubble that can compete. That means we need to use the profits that comes from these good times to build extremely efficient enterprises that can continue to be profitable when prices turn down.

The temptation is going to be to move to confinement style, high-input, high-output systems that are extremely profitable when prices are high, but that flame out as soon as input costs go up or lamb prices go down. We saw this in the Northeast in the 1980s when there was a minor bubble -- lots of highly prolific sheep under roofs being bred and managed like hogs or dairy cattle. If there's one of these operations left standing today (other than Cornell's which has the obvious benefit of university support), I'm unaware of it.

As important as the investment in expanding demand will be, it will be orders of magnitude more important to help farmers and ranchers re-learn how to produce sheep at scale with some efficiency, and to build out the infrastructure to get their product from the farm gate to the customer's plate. It's no good building demand for a product you can't supply profitably and sustainably.

I realize that ALB's mandate doesn't extend to these areas. I still think it's silly that it doesn't. But that's neither here nor there. We need some other system to generate this sort of knowledge and distribute it. Would Stan's Commerical Lamb Producers Group idea do it? I like that it's voluntarily self-funded rather than funded by a tax on production and administered by regulation. That allows it to be nimble and respond to the actual needs as perceived by its membership. But the strength is also a weakness. It can easily be blown off course by concerns of the moment, and dues to such organizations are often the first thing to go when belts need to be tightened.

Edited to add: again no solid answers. Just some ideas that have been rattling around in my head.

[Stan Potratz]

John, (an Aussie), is repeating the advice expressed by most Kiwis and Aussies to the US lamb industry about how we Yanks should spend our precious few marketing $$ namely "that the wise thing is simply to expand awareness and desirability for lamb and that other meats are the primary competition for the consumer's attention for US lamb, not imported lamb. Therefore we need work on expanding awareness of lamb, not a particular source of lamb."

But many US folks wish to promote only US lamb. Which is right?

It was at least 25 years ago that I read a highly-regarded marketing book that offered this understanding.

1. If a brand/source has the vast majority of the consumer demand for a product (as Kodak did back in the camera film days with 80% of the market at one time) then it should encourage folks to take pictures (and thus use more film). Kodak should not waste $ trying to persuade folks not to use other film brands. Why? If the number of photos taken/yr. doubled then Kodak would get 80% of a larger pie.
2. If a brand/source has a small portion of the consumer demand (as Fuji and Agfa did) they should spend their marketing $ explaining to consumers why their film is better than Kodak's (Fuji should not attack Agfa by the way)

US lamb accounts for 50% of the lamb consumed in the USA, the Kiwis 25% and the Aussies 25%. (numbers not exact and frankly hard to verify given the increasing % of lamb into "ethnic" channels). So naturally the Kiwis and Aussies wish the US to promote generic lamb - as they are, each, minority sources. And equally sensibly the US folks are reluctant to do so as their share is not very dominant and has, until recently, declined.

It's a very difficult role for ALB when you consider it.

a. Unlike Fuji,Kodak or Apple they don't control the source of the product(s) nor anyone in the chain.
b. ALB's product is extremely varied.
c. There are many "factories" for lamb (60,000 plus) in the US
c Relatively little quality control exists at the lamb "factories". Unlike other factories, very little from the nation's lamb "factories" is rejected and discarded. As Mary Falk and Darroll Grant evidenced in this thread even the best operations produce a % of less desirable (from Mary and Darroll's perspective) lamb that does enter the marketplace and is labeled lamb (save for any diverted to dog food).
d. The lamb factories (producers) often disagree strongly re. what constitutes quality lamb

And, for ALB, there is not 1 single brand. Instead there are many brands of USA lamb (but I rarely see competing brands of lamb on the same store shelf or on the same restaurant menu).

[Island Shepherd]

It's no good building demand for a product you can't supply profitably and sustainably.

Love the discussion, more observations.

I took over an old established business and structured it to be profitable at the lowest points of market cycles, and economy, and so profitable at the high points that I could expand or improve. This is done with low-input medium out-put. The genetics that were used before me were developed when wool was worth $1.50 per lb.(at 1940's-50's dollars) and lambs were worth $5.00 per head! As wool went steadily down and lamb went steadily up I moved to genetics that addressed this, but with a careful eye on traits that balanced lamb survival to slaughter, and consumer approval. If we are going to profitably produce lamb crops from such varied climates as are found in the North America then genetics will be varied. This effects product consistency if it is all just dumped in together so it must be channeled appropriately. But as simplistic as it may sound, we have to have profit to stay in business long term.

I know what Bill is talking about. I still have a 1973 brochure the universities put out called "The Production and Marketing of Sheep in New England." In a nutshell it says: get your sheep out of the pastures and into confinement. Being an island unit it had no application here so we stayed with the same management system but added a mainland component for better finishing. Everyone I know that followed the advice of the best and brightest is now out of business or back on grass. [Not knocking college education or universities, we have some really enlightened people on here that come from that perspective, it was just the advice at the time I think from some who had never raised a sheep themselves.]

The direct market customers we have never cease to amaze me on how they don't care what the price is. They are by and large Lamb lovers. My wife is in charge of marketing. She raised her price .50c per lb this year, and not one person complained, or refused to buy. She said that most of the people that buy lambs from her don't even know what the price per lb. is. They just ask how much the total is and make out the check. The only time they start to squawk some is if we start to get up much over 50 lb carcass weights. I want to make more lamb lovers. We have been helped most by word of mouth from friend to friend, cooking shows that feature lamb, restaurants that feature a lamb dish, local buying clubs, and somewhat from advertising. We bend to accommodate this even when it is a pain in the neck sometimes because it pays. You might get one shot at hooking a customer for life so the product better be good.

I watch the grocery store meat case and talk to the meat department manager. There is a different type of consumer than ours here sometimes that does shop by price. When it was all US lamb with pork chop sized lamb chops they would often end up throwing out product. Now that OZ or NZ lamb is offered with smaller cuts they seem to sell better. Some of it appears to be tied to the pricing of the package more than price per lb. Many people don't consume that much meat anymore and when they do it is in smaller quantities. People would prefer an American product over the import but the fact that it was shipped around the world doesn't stop them from buying it.

Don't know if any of this anecdotal info makes any sense, but I am getting a lot out of hearing people's thoughts from around the country and down under so here it is from this region. I so want to see the national industry expand and stay viable. I'm glad we have people (such as those on this forum) who are truly experienced in the various sectors and hopefully selfless enough to want to see this also.

[Muleflock]

But it's equally important to make sure that we have an industry standing at the other side of this bubble that can compete. That means we need to use the profits that comes from these good times to build extremely efficient enterprises that can continue to be profitable when prices turn down.

The temptation is going to be to move to confinement style, high-input, high-output systems that are extremely profitable when prices are high, but that flame out as soon as input costs go up or lamb prices go down. We saw this in the Northeast in the 1980s when there was a minor bubble -- lots of highly prolific sheep under roofs being bred and managed like hogs or dairy cattle. If there's one of these operations left standing today (other than Cornell's which has the obvious benefit of university support), I'm unaware of it.

The best way to avoid that is to know the consumer better. In the end, the consumer is and will be the boss. Fickled as the consumer is, it's going to be the trends that attract them to "our" product now and in the future that need to be determined and acted on. ( For now "our" product being lamb period). Properly assessed and reasonably predicted those trends are what need to be considered if investment in infrastructure is going to allow for sustainability as things fluctuate. Properly positioned, products can retain high market value even in times of economic down turn. When I talk about trends, I'm not necessarily talking about niche marketing trends but overall trends in how the American consumer chooses their food today. Home grown? Confinement v/s range? No antibiotics? No chemical inputs? Yup, I know there's great diversity in the current, overall structure of the US sheep industry and some don't want to know if the way they raise lamb would be offensive to the public at large but they, the consumers are the boss.

Could the ALB assist the industry in accurately predicting these trends or will the producer be left feel their way through this? How has it come to be that we don't even know how much US produced lamb is consumed in the US in the first place? Why? Because we didn't know ten years ago what the market trends would be today and I suspect we have little idea what they will be ten years from now. Aside from investing advertisement dollars in-- our lamb,-- their lamb,-- lamb period, would be wise to get an unbiased assessment of what the consumer trends will likely be. That will be the best way to help producers wisely invest dollars earned now at times of relatively high market prices, in the infrastructure needed to support them in the long haul.

Just another thought.

[lambchop]

Mark,
Lamb consumption is known. I don't have the latest figures in front of me, but approx. 50% of the lamb consumed in the US is imported. Imported lamb is both a blessing and a bane, Without it, we would not have a lamb industry in the US. Just imagine a supply reduced by 50%! People would turn to other protein, since they would be unable to find lamb when they wanted it. Sure, the price may be higher for awhile, but as we lost packers and infrastructure, the only sheep available would be direct sellers and farmers markets. Not a good scenario for the industry as a whole. The bane of imported lamb is the effect on price when supply from off-shore is high and the dollar value is strong, neither of which is true at the moment.

Paul

[Muleflock]

Paul

I was referring to Stans observation that the numbers we produce and consume are hard to verify. The increasing % being siphoned into the "ethnic" channels, and increasing farm to table marketing being a couple of the reasons.