Overview

Sheep farming is a relatively minor part of Canadian agriculture. In terms of size, it is less than 3% as large as the swine industry. The market for lamb in Canada is about 37,000 tonnes/yr or just over 1 kilogram per capita. About half is domestically supplied, the remainder is imported: 61% from New Zealand and about 39% from Australia. Exports are virtually non-existent, with the total being about 3,000 slaughter lambs sent live to the U.S. in 2006.

Structure and size of the Market

Lamb production is centred in the more marginal land in Quebec and Ontario, as well as in Alberta. Returns on lamb production are small and many producers operate their sheep enterprise as a part of a diversified livestock and crop farm, or along with employment off the farm. There is no significant difference in ewe herd size across Canada, with the exception of Quebec (see Table 1) which has the largest average herd size.

Table 1: Distribution of sheep farms and lamb production by province

Source: Statistics Canada July 2006, Sheep Statistics, Cat #23-011-XIE Vol5#

Most of the markets for lamb are in major urban centres (e.g. Montreal and Toronto) where there are large immigrant populations from countries where lamb is a significant part of the diet. Some live lambs are moved from Western Canada for processing in Ontario.

Market Characteristics

Ewes naturally give birth (lamb) in late winter and early spring. With the market demanding a steady year-round supply, along with specific peaks at certain holiday times, this birthing pattern poses a challenge for producers to have fresh lamb to meet general and specific market demands.

Typically, the supply of lamb increases and prices decrease beginning in mid-June and peaks in August and September. To some extent, management practices can help spread the marketing of a producer's lambs for a higher priced period.

In Canada, 80% of the lambs are born in the first half of the calendar year, but there are regional variations. Quebec, which produces about 27% of the lambs in Canada, managed in the past year to have 31% of their lambs born in the second half of the year. Ontario producers managed to have 24% of lambs born in the second half of the year.

Lamb that is sold out of province or for export must be processed at a federally inspected plant. Lamb that is to be sold within province may be processed at a provincially inspected plant. Most small country processors are provincially inspected.

Marketing options

Lamb producers generally have the following options:

• Auction markets;
• Brokers, dealers, order buyers;
• Sell direct to a processor;
• Sell direct to consumers; and
• Sell light lambs to a feedlot.

Auction markets - lambs are often sold by means of the local auction market. These are located throughout rural areas with regular sales. Auction markets offer a package of key services such as trucking, presorting by size and/or breed and overnight feeding etc. These services will vary by auction outlet. Auctions may hold special sales, e.g. feeder lamb sales at peak times, or on behalf of production clubs that offer special-quality lambs.

The major advantage to auction selling is the opportunity to expose your lambs to a number of buyers. Further it allows the sellers to take their lambs back if prices are unsatisfactory (although in practice this rarely happens). Prices are set in an open bidding process which is transparent and widely reported in local news outlets (radio, newspaper, and electronic media).

Some provinces have co-operative marketing agencies that participate directly in lamb marketing. Other marketing boards and agencies provide pricing or market updates, assist in arranging sales and transportation, provide referral services and promotional materials. There is a small fee for these services, usually collected as a check-off at the sale facility or processor.

Brokers, dealers or order buyers – these intermediaries are an alternative to dealing directly with a processor or a feeder. Lambs are purchased with certain weighing conditions and price before they leave the farm.

Sell direct to a processor - direct sales to a processor are generally contractual in nature, i.e. a producer delivers a certain number of lambs at certain times throughout the year. Pricing may be on a live weight basis with specified weighing conditions, or on a carcass weight basis. Direct selling lowers transaction costs and reduces some of the market risk for both processor and producer.

Sell direct to consumer - direct-to-consumer sales of lamb can be profitable but requires a great deal of effort to develop customers and attention to the details of delivery. Lambs must be slaughtered at an inspected facility. Product may be delivered, sold from facilities at the farm, or at a local farmer’s market.

Lambs to a feedlot - selling lambs to be finished at a feedlot is a prevalent practice in Western Canada, but rare in Eastern Canada. Producers may not have feed or facilities to finish lambs, but find it difficult to market them efficiently. Producers with a small number of lambs may have only a few ready to be marketed at any one time, making marketing costs prohibitive. Selling lambs as feeders may be a good alternative.

Selling directly to a feedlot may also be the best alternative if there is not a good feeder lamb market in your locale. Satisfactory individual sale arrangements can be made with the feedlot owner without an intermediary. Developing a good relationship with a feedlot will provide a producer with a long-term market for lambs.

Dealers can also arrange lamb sales to a feedlot. They may be able to arrange better prices and more economical transportation, if they can sort lambs from several producers into groups to suit various buyers. There are markets for feeder lambs of all weight categories. Lambs destined for feedlots should be castrated at birth.

Key Changes or Recent Issues

The BSE crisis in 2003 has had an impact on the lamb markets, although it was not as severe as the cattle disaster. Closing the border to the U.S. ended the export of feeder and slaughter lambs, which was a substantial business in 2002, with 140,000 lambs exported. Since then the exports have not recovered. Federally/provincially inspected slaughter rose in 2004-2005 to accommodate the numbers that had been exported, but has since dropped slightly.

The Canadian Sheep Identification Program (CSIP) requires all sheep to be identified before they can leave the premises. In Quebec a Radio Frequency Identification (RFID) ear tag is required, whereas in the rest of Canada approved non-RFID tags are acceptable. The CSIP is enforced by the Canadian Food Inspection Agency (CFIA).

Food safety programs continue to be a concern. Strict regulations regarding the handling and disposal of Specified Risk Materials (SRM) are in the process of being implemented in 2007. SRM refers to certain parts of ruminant offal associated with BSE health risks. These new regulations will impose significant increased costs to the industry and may lead to rationalization of lamb slaughtering capacity, particularly in regard to smaller provincially inspected plants.

Price Discovery

Prices are established at local auction markets, where larger numbers of lambs are offered to buyers and sold by a process of competitive bidding. Most of the lamb in Ontario is purchased by small processors catering to neighbourhood specialty markets. Lamb markets have sufficient buyers and lamb supply to establish a credible price discovery mechanism. Quebec and Alberta have larger federally inspected processors which are major buyers.

Prices are to some extent influenced by retailers’ pricing of imported product from Australia and New Zealand. While most lamb from these countries is shipped frozen and boxed, improved hygiene and logistics means that high-quality chilled imported lamb is available. Since local lamb is available fresh, it does not compete directly with the frozen imported product, and usually commands a premium.

Key Quality Issues

Size does matter. There are a variety of markets for lambs and each demands a specified size range that is quite specific. The sale price for lambs is typically higher for lambs that are sold for specific weight categories.

Consistency within a market is also important to the consumer. In Canada with its small herd sizes and variety of breeds, this is a challenge. As well, good breeding is important. Producers should be aware of preferred breeds and/or cross breeds. Feeding regimens will produce lambs with the desirable finish for a particular market. Over fat lambs are discounted.

Castrated and non-castrated lambs have particular markets, i.e., light lambs for certain holiday markets must be intact.

There is no significant preference for meat from wether (female) lambs over ram or ewe lambs, all other quality criteria being equal. However, ram lambs are leaner and generally have a better rate of gain compared to wether lambs. There may be an economic advantage to keeping ram lambs intact if they are finished on-farm at a young enough age.

Risk Factors

Lamb is a premium product, and tends to be a special occasion treat rather than everyday fare. Demand for lamb is fairly stable, and is not as influenced by the price of other meats.

Disease is a constant threat, although as a direct threat it is low compared to other countries because of the cold climate, and the low density of the sheep herd. However the BSE scare showed that disease can have far reaching effects.

Drought can cause short-term market disruptions. Lambs may be slaughtered prematurely or moved to areas of adequate feed supplies. Breeding herds may be culled.

Other Factors

Successful lamb marketing starts with breeding. The ewe flock should have desirable production traits – multiple births, out-of-season breeding, milk production, grazing ability, hardiness, and also traits that contribute directly to lamb marketability. Most lamb markets want lambs that finish at 100 to 110 pounds (45 to 50 kg.) live-weight throughout the year. Many breeds of sheep are able to produce these weights although some breeds tend to be smaller.

Most breeds give birth (lamb) during the spring, late winter or early summer. A breed or breed cross that can lamb out-of-season should be considered if the producer wishes to take advantage of the higher prices available for lambs finished in the winter and spring.

The Easter lamb market is a high-priced specialty market for young 40 to 55 pound, live-weight lambs that are finished by this key date. Easter lamb production requires a breed or breed cross that has some ‘finish’ at this live weight.

Deciding to sell feeder lambs should be part of an overall management plan. To keep the alternative of selling feeder lambs open, they must be docked and castrated soon after they are born. Producers who decide to sell their lambs as feeders should shop around for the best time and market to sell them in.

Deciding whether to sell feeders or feed them on-farm will depend on the size and type of operation, the availability and cost of feed, and the producer's time and management skills. Feeding practices can vary widely for early and late-born lambs, and lambs that are not finished by the end of the pasture season.

Closing Comments

Overall, the market for lamb in Canada remains opportunistic in light of the low consumption rates and the significant supply of imported product. However, product quality, timing and the ability to supply consistent volumes are critical factors to consider when planning entering this market.

A well planned marketing strategy will increase a producer’s profit potential. Lamb producers should take steps to ensure that they have done everything possible to maximize profit by assessing their marketing options well in advance of when lambs are being sold.