Cash versus contract marketing in the U.S. lamb industry

Abstract

Lamb operations in the United States are experiencing unfavorable market conditions, such as declining breeding inventories, stagnant domestic lamb consumption, and increasing competition from imported lamb. To more effectively compete, some operations may turn to nontraditional marketing arrangements, such as use of contracts, to purchase and sell lambs. To determine the extent of alternative marketing arrangements (AMAs) use in the U.S. lamb industry, we conducted a nationally representative mail survey of lamb producers and feeders. We received 302 completed surveys (53 percent weighted response rate). The survey collected information on purchases, sales and pricing methods, reasons why operations use their choice of marketing arrangements, and operation characteristics. We compared small and large operations, as well as Eastern and Western U.S. operations. Primarily U.S. lamb operations use cash-marketing methods to purchase and sell lambs. However, there appears to be a slight trend away from auction markets toward other types of cash-market transactions, such as direct trade. Large operations are more likely to use AMAs than small operations. Likewise, Western U.S. operations are more likely than Eastern operations to use AMAs. Large operations use AMAs to reduce risk, while small operations use AMAs to sell their lambs at higher prices.