Restock, rebuild
The Snapshot
- The June quarter FSR came in at 44.3%, up from 40.8% in the March quarter.
- The annual average FSR currently sits at 42.6%, which is the lowest this ratio has been since 1990.
- The last time we saw an annual FSR close to current levels was in 2011 and the herd increased by 7.4% that year.
- MLA are projecting a herd increase of 5.6% in 2022.
The Detail
The recent release of ABS quarterly cattle slaughter figures for June 2022 allows us to take the pulse of the current herd rebuild phase in Australia. The female slaughter ratio (FSR) is a measure of the proportion of female cattle processed as a percentage of total slaughter and when it is below 47% it usually means we are in a herd rebuild phase.
The June quarter FSR came in at 44.3%, up from 40.8% in the March quarter. This brings the annual average FSR to 42.6%, which is the lowest the annual ratio has been since 1990. In 2021 the annual average FSR was 45.2% and the herd increased by 6%.
A look at the historic relationship between the annual average FSR and the annual change to the herd highlights that the 47% threshold is a pretty good indicator of the status of the herd rebuild/liquidation phase. In 2019 and 2020 the FSR was well above the 47% level at 56% and 52.5%, respectively and the herd declined each year by 7% (2019) and 6% (2020).
The last time we saw an annual FSR close to current levels was in 2011, after a couple of years of great seasonal conditions thanks to La Nina, and the herd increased by 7.4% that year. In their June cattle industry outlook MLA have pegged the herd rebuild for 2022 at 5.6%, bringing the herd up to 27.6 million head by the end of the year.
There is a moderately strong relationship between the annual average FSR and the change to the herd each year, although it isn’t as strong as the sheep turnoff ratio is for the annual flock change, which sits at an r-squared of 0.7296. A scatter plot line of best fit of the annual FSR to herd change shows that an FSR near 42.7% would suggest a herd rebuild circa 3.3% this year. However, at an R-squared of 0.4151 there is a little wriggle room for the actual herd change to come in higher or lower than this level.
The last four times since 1990 that the annual average FSR was near to 42.7% we saw herd growth of 2.2%, 2.5%, 5.5% and 7.4%. An average across these four events is a herd growth of 4.4%, so that’s as good a guess as any I’d suggest.
