The Disaster that is the Lamb and Wool Markets

As anyone who reads the Foothill Agrarian has probably figured out, I'm a shepherd by avocation. I love the work of raising sheep on pasture like nothing else I've ever done. Being a shepherd is part of my identity; it's who I am. But it's also a business, albeit a part-time business. We have too many sheep to call this a hobby; not enough sheep to make a full-time wage. But it is a business - the sheep have to cover their expenses and provide at least some return on our investments of capital and labor.

For the last several years, we have marketed our wool through a broker that combines our fiber with that produced by other ranchers and offers it at auction. Three years ago, this worked well - wool demand was up, and we actually covered the cost of shearing our sheep and made a little bit of profit. We also offered raw wool to hand spinners and crafters, which increased our net income. Two years ago, we barely broke even - international wool trade suffered from uncertainty, and our "coarse" wool isn't valued as a commodity. Our 2019 wool clip still sits in a warehouse in Southern California - once the trade war with China kicked off, our lower-value wool became no-value wool. We paid the shearer, but we haven't been paid in turn.

We sell our lamb crop in a variety of ways. We sell feeder lambs to folks in our local community who want to turn their own grass into meat - this typically accounts for about 15-20% of our sales and close to a third of our income. We also sell some of our ewe lambs to other producers who value our emphasis on grazing and maternal ability. Most of our lambs are sold to a processor or marketer who focus on local ethnic markets. In all cases, our prices reflect the regional market for feeder lambs; when the market is up, we do well. When the market is down, we do less well. But we generally come out ahead.

When the shelter-at-home orders began to roll out, the lamb market saw a temporary increase - folks started stocking up! The food service (restaurant) trade dropped off a cliff, but producer prices saw a small increase. That has evaporated. Feeder lambs that were worth $2.25/lb just four weeks ago are worth $1.55/lb today. "Fat" lambs - conventionally finished lambs that weight 135-150 lbs - are trading at $1/lb. Who knows where the market will be in late June when we sell our lambs. We budgeted for lamb values at $125/head. At the moment, our lambs will be worth less than $100 per head. Can any of us survive a 20% loss in income? And the June market may be even worse.

While wool is just a small fraction of our income, the market continues to be even more challenging than the market for meat. We're trying to figure out an alternative for this year's wool clip - we're even thinking of ways we can use our wool to add to the insulation in our attic. And wool must be harvested every year - we can't simply decide to leave our sheep unshorn for another 12 months. We'll pay the shearer when he comes next month; we aren't expecting to get paid for this year's wool, either.

I guess the point of this is not to make you feel sorry for us (or for other farmers and ranchers). The point, I suppose, is to help us all understand that even those of us who try to direct market some (or all) of what we produce are tied to larger economic conditions. This crisis, I suspect, will reshape farming and ranching for many years. Our little operation can weather this storm - most of my income does not come from our sheep operation. Similarly, the very large, vertically integrated farming and ranching operations will probably be okay - they have sufficient capital to navigate these challenging times. I'm most worried about the family farms and ranches that are big enough to be full time, but that are likely under-capitalized. My friends who raise cattle and sheep as their full time business are most at risk. I hope they survive this wreck.