Herd rebuild to smash slaughter rates

Meat and Livestock Australia (MLA) last week released their Cattle Industry projections. Despite only marginal changes in herd projections, expected slaughter rates have been pulled well back. There will be some compensation from increased record carcase weights in the coming years.

MLA expect the cattle herd hit its low in 2020, with a June 30 figure of 24.62 million head.  The Australian Bureau of Statistics (ABS) is yet to release official numbers for last year (due in May), so the 2020 herd could still change, but given the female slaughter levels of 2019-20 it’s hard to argue with herd decline.

We are also still waiting on the December quarter slaughter figures, due on Wednesday, which will give a pointer towards female slaughter and the beginning of the rebuild.

Figure 1 shows the 2020 herd is expected to show a 6% fall for the second year in a row, but the rebuild is to begin by June 2021.  The herd increase is expected to be mild, gaining 2.3% this year, and a further 2.7% in 2022 and 2023. 

In the recent past we have seen stronger numbers than this, with 4.2% in 2017 and 7% in 2011, but that was when the herd was coming from a larger base.  MLA’s figures suggest it will be four or five years before the herd is back to the 2018 level of 28 million head. 

On the slaughter front, MLA lifted their 2020 and 2021 numbers marginally and stripped 1.6% and 4.6% out of 2022 and 2023 respectively.  This year is still expected to mark the low for slaughter, with a 2.6% decline on 2020. 

Figure 2 shows that 2021 slaughter is expected to be a 25 year low, before a 3.6 and 3.9% recovery in 2022 and 2023.  Even with the recovery, cattle slaughter isn’t expected to get near the 10-year average of 7.9 million head in the next three years.

Despite lower slaughter, Australian beef production is actually expected to increase by 1% in 2021.  MLA is forecasting a 3% lift in carcase weights this year, with the average expected to break through 300kgs for the first time on record.  Figure 3 shows average cattle carcase weights, with the increase in 2021 through to 2023 being due to fewer females and heavier cattle coming off grass.

What does it mean?

There has been plenty of conjecture around a potential cattle price fall in the near future, but it’s going to have to come from weakening demand if MLA’s numbers are correct.  There is unlikely to be significant improvement in cattle supply in the next year.  As such the price risk comes from deteriorating seasonal conditions, or a decrease in slaughter demand.

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Key Points

  • MLA’s Cattle Industry Projections were released last week, with changes to forecast slaughter.
  • This year is expected to mark the low for both the cattle herd and slaughter rates.
  • Increases in cattle supply are only expected to be small, with price risk on the demand side.

Click on figure to expand

Click on figure to expand

Click on figure to expand

Data sources:  MLA, Mecardo

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