Lean protein popularity an opportunity for Ontario lamb

Ontario lamb producers could benefit from increased consumer demand for lamb and mutton, but import and production challenges remain.

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Lamb demand increased by 12.4 per cent in per capita consumption last year, according to Ontario Ministry of Agriculture, Food and Rural Affairs chief economist Steve Duff.

Why it matters: Ontario sheep producers could see continued price strength due to increased consumer demand and ample lamb and mutton, though a price decline is predicted in the United States.

“I don’t expect that that would continue. By my calculations (year-to-date numbers) are down about three per cent right now,” Duff told those at the Ontario Sheep Farmers annual meeting last month.

In Ontario and nationally, lamb and chicken have sustained year-to-year growth in per capita demand over the last decade, at 1.2 and 1.8 per cent respectively, despite lamb’s recent uptick.

Though it mirrors the United States’ decrease in flock numbers and pricing, Ontario’s sector could realize growth based on an increased lamb-consuming population and competitively priced products.

“(The U.S.) is expecting lamb production to fall about three per cent in 2023 and another one per cent in 2024,” Duff said. 

Ontario’s replacement ewe numbers fell four per cent following a two per cent increase in 2020 lamb and mutton slaughter.

According to Duff, regional USDA lamb data from St. Joseph, Missouri, a significant auction hub, shows U.S. and Canada’s prices moving closer together, a rare occurrence outside of seasonal fluctuations.

“Generally speaking, the U.S. and Ontario prices are following each other pretty closely, where the Ontario price has fallen and the U.S. price has risen. It doesn’t happen very often. It’s quite an anomaly.”

Ontario moves lamb products inter-provincially and through wholesale, and imports fill the gap.

Estimating demand, not production, is problematic in supply management because adjusting production levels requires time, said Duff.

Australia is well positioned to fill the volume demand gap for major retail chains, he added. 

A six per cent decrease in imports, primarily from Australia, and flattening numbers for other countries, along with a $1 per kilogram decline in import value, reflect current challenges in market and availability, Duff said.

Despite intense import competition, Ontario lamb and mutton hold consumer choice against New Zealand frozen and Australian fresh products, with farm-level prices moving better than retail.

“Ontario fresh lamb is available in more stores more regularly,” Duff said, pointing to recent retail sales tracking. “The combination of quality and freshness, etc. Ontario lamb presents is significant with a fairly consistent price difference over time.” 

Needed: more processing capacity

Provincial plants are a pivotal piece of Ontario’s lamb and mutton equation.

Twenty-one provincial abattoirs have halal lamb slaughter protocols and practices, but capacity and labour shortages have contributed to a 20 per cent year-to-date reduction in processing.

“Those plants represent about 80 to 85 per cent of all the lamb slaughtered in Ontario,” said Duff. “So, you have to assume they’re doing a bit of both (halal and regular).”

In 2020 and 2021, the beef industry processed 25 per cent more without adding new processing plants, despite being told conventional slaughter was at capacity.

“There oftentimes is slack in the system,” said Duff. “Sometimes the capacity is there and year-to-date overall for the province, the slaughter of lamb achieved an increase of about 11 per cent.”

Feed costs

Feed cost control remains the paramount concern and it’s critical to monitor U.S. weather patterns to assess the impact on corn and soybean production, especially from a feed margin point of view, said Duff.

According to the U.S. drought monitor, varying levels of drought are affecting approximately 60 per cent of the country’s corn and soybean production acres.

“It affects where we’re going in terms of production harvest, and it predicts how grazing patterns, etc., are going to extend over the U.S. winter, particularly in the south,” he said.

Duff predicted drought effects on standing crops will likely impact quality and tonnage, trigger some livestock sector liquidation and create feed price volatility.

A predicted decrease in overall U.S. crop production, except corn and wheat — slated to rise by seven per cent — could provide a feedstock price break.

“For those of you on the corn-fed side of things, that’s a really positive thing from a feeding margin point of view,” said Duff. “But again, if somebody grows corn and soybeans, it’s less of a positive thing unless they’ve taken advantage of some of the contracting opportunities that have been out there.”

In the last two decades, Ontario’s corn and soybean industries shifted from the occasional crop contract to foreign contracts and fully contracted products, creating a disconnect between market and cash prices.

In 2022, corn was contracted at higher than current market prices, and 2023 contracts show corn flatlining with potentially lower prices in late fall.

“That hopefully provides a little additional relief from the purchase point of view compared to the competitive prices,” he said.

“In terms of overall farm and operating expenses … we’re expecting overall farm costs (to increase) about three per cent for 2024.”