By Matt Dalgleish | Source: ABS, MLA, Mecardo.
Australian Bureau of Statistics (ABS) monthly cattle slaughter data allows us to measure the level of female cattle slaughter as a proportion of total slaughter. The first few months of 2019 has revealed the impact of the dry season on breeding stock, with implications for herd size and heifer prices once climatic conditions improve.
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The female slaughter ratio (FSR) has opened the 2019 season significantly higher than the average pattern set by the previous herd liquidation phase during the 2014-15 seasons (Figure 1). The annual average FSR for 2019 currently sits at 52.5% which is the highest start to the season on record (data goes back until the late 1970s). The previous highest FSR for the January to February period was 51.7% in 1978.
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There is a clear relationship between the FSR and the growth/decline in the herd. Over the last three decades, a rolling 12-month average measure of the FSR above 47% has been synonymous with herd decline, while an FSR below 47% has seen the herd rebuild (Figure 2).
Correlation analysis of the annual herd change and the annual average FSR since over the last sixteen years demonstrates a moderately strong relationship between the FSR and the movement in the herd size with an R2 of 0.4601 (Figure 3).
Indeed, nine of the last sixteen years saw an annual FSR above 47% with seven of these resulting in a herd decline. In contrast, seven of the last sixteen years saw an FSR below 47% with five of these years resulting in herd growth.
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We spoke more about the elevated FSR on the Mecardo market update podcast last week, dated 26th April, which can be found here.
Key points
* The annual average FSR for 2019 currently sits at 52.5% and is the highest start to the season on record.
* Nine of the last sixteen years saw an annual FSR above 47% with seven of these resulting in a herd decline. In contrast, seven of the last sixteen years saw an FSR below 47% with five of these years resulting in herd growth.
* Maintaining the current level of female cattle slaughter could see between 4.0 to 4.4 million head of female cattle slaughtered by the end of 2019, potentially wiping around 5% off the Australian cattle herd.
What does this mean?
Maintaining the current level of female cattle slaughter could see between 4.0 to 4.4 million head of female cattle slaughtered by the end of 2019. This would potentially wipe around 5% off the Australian cattle herd this season, based on the relationship shown between the FSR and herd change (Figure 3).
Meat and Livestock Australia are forecasting a 3.9% decline in the herd. However, this may be revised up if we continue culling females at the current levels. Furthermore, the impact upon price for heifers and breeding stock once the season turns more favourable will be significant. Stay tuned later in the week for analysis on female cattle price movements when/if the rains come.
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