Liquidation update
Market Morsel
The ABS cattle slaughter data released earlier this week shows that, at least in technical terms, the national herd remains in a mild liquidation phase. The female slaughter ratio (FSR), a reasonably reliable historical measure of the cattle herd cycle, came in at 52.7% for Q1, 2025. This is a slight move up from the 51.1% FSR reported as at the final quarter of 2024.
A reminder that historically speaking an annual average FSR below 47% usually indicates a rebuild phase is underway, meanwhile an annual average FSR above 47% is usually consistent with liquidation. A look at the annual average FSR for 2024 shows a ratio of 51.2% for the entire year, as an average. The Meat & Livestock Australia (MLA) forecast for the herd in 2024 was a 0.1% decline.
MLA have the herd dropping 1.4% in 2025. If the FSR stays around the 52%-53% level for the entire 2025 season this forecast drop in the herd seems a little light on. However the vast contrast between northern wet and southern dry could be playing a bit of havoc with the FSR as a predictor. My gut feeling is that the much wetter results north of Dubbo are encouraging the prospect of rebuild, but the FSR numbers aren’t back it up yet.
An important reminder is that the FSR is a lagged indicator. It is somewhat surprising to see it lift from Q4, 2024 to Q1, 2025 and move further into liquidation territory – particularly given the wet season in northern NSW and Queensland. I suspect in the coming few quarters we may see the FSR drift back towards the 47% threshold and this potential change in trend would begin to support the MLA herd change forecast of a 1.4% drop. Time will tell!