Market Morsel: Swings and roundabouts
After chatting to a respected Ag journo this week about the difference in the cattle cycle in the USA compared to Australia I decided to run some long term numbers on the Australian cattle herd annual change with a contrast to the USA annual cattle herd change.
The US cattle cycle moves from rebuild to liquidation in a much more measured fashion than Australia, resulting in lower volatility in change to herd size over the years. Analysis of the annual change in the herd in each country shows that the USA has a more stable transition between rebuild and liquidation phases compared to Australia. It is likely that Australia’s higher reliance on pasture based finishing and the extreme variation we experience between drought and “grass fever” phases has a marked impact on the volatility in annual herd change.
Herd data from 1905 shows that the USA herd doesn’t often see variation in annual change beyond plus/minus 5%. Meanwhile the annual change in the Australian cattle herd is much more erratic, swinging between rebuild and liquidation in a much more dramatic fashion (particularly evident in the last few decades). Indeed, the annual change in herd in Australia more frequently extends beyond the plus/minus 5% threshold, and has occasionally extended beyond a 10% variation of herd decline or rebuild.
The long-term average of annual change in the cattle herd in the USA is 0.4% growth and historically the annual change in the herd has spent about 70% of the time between a range of 2.7% decline to a 3.4% rebuild. In contrast the long-term average of annual change in the cattle herd in Australia is 1.2% growth and historically the annual change in the herd has spent about 70% of the time between a range of 3.4% decline to a 5.8% rebuild.