Too early or visionary?
Market Morsel
Several times last year we published items looking at the US cattle cycle, and more specifically, if the US herd had entered into rebuild or not. These analysis pieces were prompted by several local market commentators and analysts stating rather emphatically that the US herd had entered into rebuild phase. Each time the data and analysis proved to the contrary. The US cattle herd remained in liquidation for the 2024 season.
As recently as January the United States Department of Agriculture (USDA) issued their estimates for the herd in 2025 and it showed they had tipped over into the 6th straight year of herd decline as at the start of 2025. Similarly, just last week a respected US market analysis team from Oklahoma State University stated that while heifer retention was increasing the prospects for US herd growth in 2025 was “limited” and that “limited supplies of replacement heifers also suggests that the beef cow herd may get smaller yet in 2025 or, at best, stabilize at very low inventories.”
However, a recent piece from Farm Online in Australia suggested that the US herd had now begun its rebuild phase – at least according to the Rabobank team. Historically, I have found the Rabobank analysis to be worthy of proper consideration, especially when compared to other local commentators/analysts who appear to prefer a “headline over the data”. So we returned to our tried and true method at looking at the US cattle herd cycle by checking the status of the female slaughter ratio (FSR).
USDA data that allows us to measure the FSR is only available to the end of December 2024. As the seasonal chart highlights, above, the FSR was lower in 2024 than in 2023, indicating the pace of the liquidation has weakened during 2024. But the data shows that they are still in liquidation. Specifically, we look at the FSR level, below about 48% would denote a move into rebuild phase.
The annual average FSR in the USA as at the end of 2024 was 49.9%, while the trend is clearly moving towards the tipping point into rebuild we aren’t there yet. Perhaps we need to wait until the USDA monthly slaughter data is available for January or February to see if we have moved into rebuild in the USA.
A look at the long term annual average FSR in the USA versus the annual change to their herd shows just how reliable the FSR is at indicating which phase of the cattle cycle they are in. More than 90% of the time over the last four decades the FSR was accurate in showing whether the US herd was rebuilding or liquidating. Indeed, only 3 years since 1986 did the indicator prove wrong as the scatter plot below clearly shows.
Personally, I think we may see the US move to rebuild this year but I am betting it won’t come until the second half of 2025 or maybe early 2026. Either way, we won’t be pre-emptively calling it until the data shows that it is there.