The new Australian Bureau of Statistics (ABS) calculation of the size of the cattle herd has caused plenty of headaches in spreadsheets and given rise to plenty of questions. The publicity around herd size has also seen some queries arise as to where the herd is headed.
The first
question we have to answer was whether using a female slaughter rate (FSR) of
47%, as the tipping point between herd growth and liquidation was still
appropriate.
The FSR is
simply the number of female cattle slaughtered, divided by the total. Historically, an FSR of over 47% shows when
cattle producers are turning off females, and maintaining or liquidating their
herds. A low FSR indicates producers
holding on to females in order to build their herds.
Figure 1
shows the FSR along with the year-on-year change in the herd for the old and
new ABS numbers. The difference in the
ABS numbers is due to the inclusion of cattle businesses with income of under
$40,000.
We can see
in Figure 1 that the year-on-year change in the herd is not much different
under the new calculation, compared to the old.
The one exception is in 2016, when the old herd numbers had a very large
fall of 9%, compared to 2% for the new numbers.
Interestingly, the FSR in 2016 was right on 47%, so the new herd number
fits better.
The other
question we had was whether we are slaughtering enough cattle to see the
projected steadying or fall in the herd.
Figure 2
shows the herd and cattle offtake.
Offtake accounts for total slaughter and live export. The 2024 offtake number is based on Meat and
Livestock Australia’s (MLA) latest herd projection, which was released in
February and is due for an update.
The March ABS
quarter slaughter figures were 17% higher, as are MLA’s weekly slaughter
numbers for the year to date. The MLA offtake
projection was a 12% increase on last year, so we can expect offtake to be
higher than the forecast.
Is offtake
high enough for a decline in the herd? Based
on this limited analysis, current offtake levels, along with a 47% FSR in the
first quarter, looks like a steady to slightly stronger herd, rather than a
decline.
What does it mean?
We know the herd and supply play a big part in cattle prices, and based on this bit of analysis, supply is going to remain strong for some time year. As we’ve said before, the key to stronger cattle prices is increasing slaughter capacity, as this will allow producers to see more of the strong world beef price flow through to them.
Key Points
- The new ABS herd figures have raised questions regarding the herd relationship with slaughter rates.
- The FSR figure of 47% between herd build and liquidation still seems applicable.
- Current slaughter rates are pointing towards a steady to slight increase in the herd.
Click on figure to expand
Click on figure to expand
Data sources: MLA, ABS, Mecardo
