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By Matt Dalgleish | Source: MLA, USDA, Mecardo.
The Australian cattle herd isn’t the only mob to feel the weight of higher than normal female cattle slaughter rates this season. In the USA, cattle markets have experienced elevated female slaughter ratio levels since the start of 2019 and if this pattern continues throughout the year may have implications for predicted growth rates in the US herd.
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The female slaughter ratio (FSR), which is the proportion of female cattle slaughtered as a percentage of total slaughter, has been running red hot in Australia this season. A record monthly FSR of 58.1% in March was backed up by a 58% in April, bringing the annual average to 55.3% for 2019.
Analysis of the US herd shows that Australia isn’t the only nation to be culling above average levels of female cattle with the USDA monthly data from January to April showing an elevated trend. The FSR in the USA is averaging 50% for the 2019 season after posting the highest monthly level since November 2009 of 51.6% during March this year (Figure 1).
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Regression analysis between the US annual herd change and the FSR shows that a similar threshold level exists between herd growth and herd decline as is found within Australia. An FSR of 47.5% appears to be the tipping point between herd rebuild or herd liquidation within the USA. Indeed since 1986, an annual average FSR below 47.5% has resulted in US herd growth in 11 out of 13 seasons, while an FSR above 47.5% has seen the US herd decline in 19 out of 20 years (Figure 2).
In their long-term agricultural projections report published in March 2019, the USDA has predicted a 0.6% increase to the US herd for the current season to see it reach 95 million head. However, this may be a tricky hurdle if the FSR in the US remains elevated.
Key points
* The US has experienced an elevated FSR since the start of 2019 with the annual average running at 50%
* An annual average FSR above 47.5% is consistent with herd destocking in the USA, but the USDA is predicting herd growth this season
* In order to grow the US herd as per the USDA forecast, the FSR would need to spend the rest of the season at the bottom edge of the 70% range
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What does this mean?
While it is likely the FSR will ease in the coming months in the US, as per the normal seasonal trough that occurs during the middle of the year, the elevated start to 2019 may mean the annual average FSR will still end up finishing the season between 48-49%. However, if we assume the annual average FSR remains around the 50% level, as it currently stands, this suggests a decline in the US herd of around 2% (Figure 3).
Furthermore, based on the historic relationship between annual changes to the US herd and the FSR, an annual average FSR of around 48% would still suggest a slight decline in the herd of around 0.6%. Realistically we would need to see the annual average FSR closer to 46.5% to achieve growth levels in the US herd like what is being predicted by USDA. This would mean the monthly FSR would need to track along the bottom of the 70% range for the rest of the year.
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