Market Morsel: Computer says yes
The Australian Bureau of Statistics (ABS) continue to publish their cattle slaughter figures on a quarterly basis instead of the monthly figures they used to release.
This means we have to wait until May 2022 before we can get a picture of how the herd rebuild is going in Australia for the first quarter of 2022 by referencing the female slaughter ratio (FSR). The FSR is simply a measure of how many female cattle are culled as a proportion of total slaughter volumes and historically it has been able to show if we are in a herd rebuild or liquidation phase.
In February 2021 we released a predictive model of the FSR that uses saleyard price spread information to predict how aggressive restocker activity is, allowing us to have a leading signal for the actual FSR and providing a window into what is happening to the herd.
Back in February 2021 the model suggested that the FSR would head towards 42-43% into the second or third quarter of the year. As it turned out we got to this level in the final quarter of the year. The modelled FSR can lead the actual FSR by up to 6 months.
Taking a look at the current modelled FSR it suggests that we are currently sitting sub 41%, which would be the lowest the FSR has been in over three decades, on an annual basis. MLA estimated the herd growing by 6.1% in 2021 and has a forecast of 4.2% growth for the 2022 season. Two successive years of solid herd growth is consistent with an FSR in the low 40% region.