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By Angus Brown | Source: MLA, ABS.
The official April slaughter and beef production figures were released by the Australian Bureau of Statistics yesterday. The public holiday-laden month usually sees slaughter rates decline, and this was again the case, but the trend of herd liquidation was obvious in the data.
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There was a marginal year on year increase in cattle slaughter, but it was less than 0.5% (Figure 1). April was the first time since March 2018 that cattle slaughter has been anything less than 5% above the previous year’s level, so it could be taken as an indication of a slowdown.
Further investigation shows that the lower slaughter rates might just be due to the short month. Again, 58% of cattle slaughtered in April were female (Figure 2). Given the critical level for herd maintenance is 47% female slaughter, two months of record levels suggests producers are still well and truly in liquidation mode.
If female slaughter was much higher, it means male slaughter had to be lower. In fact, there were 11% fewer steers and bulls killed in April than the same month in 2018. We seem to be seeing the impact of the reduction in cow herd flowing through to male cattle slaughter, which for the year to date is down 5%.
For the time being, cattle and beef supply is being propped up by females. When female slaughter moves back under 47% and the herd rebuild kicks off, cattle slaughter is going to have to decline markedly.
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Cattle carcass weights also point to an increase in the pace of herd liquidation. April saw a three and a half year low in average cattle carcass weights, coming in at 280kgs per head (Figure 3). The fall in carcase weight on March was marginal, but they were 4% lower than in April 2018.
Figure 3 shows us that the record numbers coming out of feedlots still have carcass weights running ahead of previous drought levels. In 2014 carcase weights got as low as 270kgs per head, and it doesn’t look like we are going to get there this time.
Key points
* The latest ABS slaughter figures show lower slaughter for April due to fewer slaughter days.
* Female slaughter is still at close to a record proportion of total slaughter, with the herd still in liquidation.
* Finished cattle supplies continue to fall, and when cow liquidation slows there will be strong upward pressure on prices.
What does this mean?
The current round of herd liquidation has been going on since February last year and is showing no signs of abating. The latest three month outlook from the Bureau of Meteorology (BOM) is less than promising for winter rainfall, so cows might continue to come to the market.
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Finished cattle supplies are not going to improve, and steer supply might continue to wane. This will keep slaughter prices at the stronger end, but it will be cows and breeders which will find serious strength if and when seasons improve.
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