Foreign competition, low prices drive some ranchers out
KETCHUM, Idaho - On a chilly October Sunday, the police cleared Main Street here, and the Faulkner family trailed 1,500 sheep through town. People from all over, among them about 125 residents of the tony Sun Valley resort - bundled in synthetic fleece coats - lined the sidewalks to watch.
The sheep drive capped off a weekend of festivities for the fifth annual Trailing of the Sheep Festival, a nostalgic celebration of the time in the early 20th century when Ketchum was the second-largest sheep-exporting town in the world. Sheep ranching is still a real deal here - the Faulkners' sheep had been grazing in the adjacent Smoky Mountains for the summer, and it was time to trail them home to the low country for the winter.
But it was a bittersweet moment for ranchers like John Faulkner, who are facing some of the lowest prices ever for lamb and wool. Lamb prices have plummeted from 95 cents per pound in June to 40 cents or less. The break-even point for Faulkner's operation is 80 cents per pound.
The U.S. sheep ranching industry, which is centered in Texas and the Rocky Mountain West, has been in a downward spiral for more than a quarter-century. Since 1977, the number of sheep raised in the United States has dropped from 12.7 million to 6.9 million, largely because of foreign competition, low prices and increasing labor costs. In the meantime, Australia and New Zealand sheep producers have seized greater control of the world market, and a strong U.S. dollar gives them a decided advantage in export sales.
With the Australian dollar currently worth only about 50 cents U.S., a sale of lamb for 45 cents U.S. per pound nets 90 cents Australian, which bumps an Australian rancher's earnings into the profit zone. This year, a huge surplus of cheap foreign meat has driven prices down and brought the U.S. sheep industry close to the breaking point.
"In June and July, New Zealand was really dumping meat," says Faulkner, who winters his flock in Gooding, Idaho. "There's a big surplus." According to the Livestock Marketing Information Center's Steve Meyer, the U.S. imported 81 million pounds of lamb and mutton in the first half of this year, about 37 percent of the country's total supply.
"I've heard people say they've never seen it so bad," says Rochelle Oxarango, a sheep rancher from Soda Springs, Idaho. "If things don't improve next year, it's going to put a lot of people out of business."
Over a barrelThe surplus has ballooned to the point where some ranchers can't even sell their lambs. Feedlots are full, as are meatpackers' freezers. Wool prices are so low that ranchers take a loss paying laborers to shear the sheep, and then they must throw the wool out, or perhaps save a few fleeces to make wool sweaters and hats for the family.
A number of Idaho sheep ranchers sold off their herds and left the business this year, including Brad Little, an HCN board member and grandson of Andy Little, who was the nation's largest producer of lambs in the early 1900s.
Little, recently appointed to the Idaho State Legislature, has been raising sheep for 18 years. "The plunge in price was the straw that broke the camel's back. I would have been ahead last year if I'd just shot all of my sheep."
The situation is exacerbated by the fact that three large meatpackers - Superior Farms, ConAgra Beef and Iowa Lamb * have such a large market share that they can control the price.
Superior Farms still buys about 75 percent of its lamb product from domestic suppliers, says spokeswoman Teddie Crippen. But due to a shrinkage in domestic supply, Superior has to buy lamb from Australia to meet customer demand during the summer months, she says.
Jeff Lyons, vice president and general merchandise manager of fresh foods for Costco Wholesale Corporation, says his company forged an exclusive relationship with Australian sheep producers when Monfort Lamb, a now-defunct ConAgra subsidiary, reduced its operations. "That situation left us in a lurch," Lyons says. Other domestic packers could not provide the specific cuts of lamb that Costco wanted at a competitive price and quality; now Costco does $1 million a week with Australian producers.
Lyons says Costco likes to support domestic food producers when it can. But its mission of providing food "at the highest possible quality at the lowest possible price ... forces us to look for the best values around the world," says Lyons. "Would I complain if I were a rancher? You bet. But price consistency and product availability have been the problem."
John Peavey, a third-generation sheep and cattle rancher from Carey, Idaho, who is married to writer Diane Josephy Peavey, says he is caught in the middle. "We work 24-7 all summer long to go more in debt," he says. "It's crazy. But it's in our blood."
Buy AmericanOxarango, the Soda Springs rancher, thinks American consumers should be putting pressure on restaurants and grocery stores to sell domestic lamb. "Considering what's going on with our country right now, you'd think people would be more interested in buying domestic product," she says.
John Faulkner is more blunt: "If the foreigners ever get a monopoly on our food supply, we're in deep shit."
Consumers can make a difference, says Peter Orwick, head of the Englewood, Colo.-based American Sheep Industry Association (ASI). After Safeway announced that it had forged an export deal with a New Zealand producer, pressure from consumers in Texas forced the grocery chain to provide domestic lamb in their local stores, he says.
In the meat aisle, however, it's almost impossible for customers to tell where their lamb comes from. The U.S. Department of Agriculture places its "USDA Choice" seal on all imported and domestic lamb. ASI is working to change that practice so only domestic lamb receives a USDA seal, Orwick says.
Another problem is advertising. When Congress repealed the National Wool Act in 1995, the U.S. sheep industry lost a $7 million annual marketing budget to promote its products in the United States. That leaves it up to individual producers or regional cooperatives to run their own marketing campaigns to counter the growing advertising efforts of countries like Australia.
In the hope of reducing exports from Australia and New Zealand, U.S. sheep producers have pushed for trade-protection measures. A program instituted by the Clinton administration in 1999 required foreign producers to pay a 3 percent tariff on sales of under 74 million pounds, and a 24 percent tariff on sales exceeding 74 million pounds for a period of three years. But ASI officials say the currency exchange rate has wiped out the relief offered by the program, and the tariff was to be lifted early * on Nov. 15 * to comply with World Trade Organization rules.
Back in Carey, Idaho, John Peavey is looking for local solutions. He's been pushing Ketchum and Sun Valley restaurants to buy Peavey lamb and tout a locally grown Idaho product. He's gotten a few takers, including Evergreen Restaurant, Warm Springs Restaurant, Piccolo and Ketchum Grill.
Louise Wagenknecht, a small sheep producer in Leadore, Idaho, is also pursuing markets close to home. She sells her lamb directly to consumers at the farmers market in Butte, Mont.
"This year, it's the difference between getting 50 cents per pound for a live lamb or $8 a pound for a rack of lamb," she says. "You still have to pay for the slaughter and cut and wrap, and the transportation to Butte, but we're sure doing a lot better than we were before, and we're doing it with fewer sheep."
Stephen Stuebner frequently contributes to High Country News from Boise, Idaho.
YOU CAN CONTACT ...
- The American Sheep Industry Association, 303/771-3500 or see www.sheepusa.org;
- The Trailing of the Sheep Festival, Diane Peavey, coordinator, 208/788-2850.