Herd rebuild boosts 2023 slaughter to 7m head

Total slaughter for 2023 was 7.028 million head, up by 20pc on the previous year's 5.8m.

Female slaughter rate (FSR) for the year averaged 46.8pc which suggests the herd has likely concluded its growth phase for the time being and is neither increasing nor decreasing in size. (FSR above 47pc is indicative of herd liquidation/contraction, below 47pc with rebuild/expansion).

Low FSRs of 45.1pc and 42.8pc in 2021 and 2022 respectively point to significant herd growth in those years and this for most part would have underpinned the increase in slaughterings in 2023.

However, had it not been for the Q3 dry pinch, slaughterings may not have reached 7m.

The Q3 dry pinch and the commentary at the time about entering an El Nino phase spooked a lot of people into lightening their numbers. Usually there is an increase in female slaughter numbers between Q1 and Q2 due to first-round musters kicking in around April.

The Q2 female numbers then tend to hold through Q3 before dropping off in Q4 as more male cattle come through in the latter part of the year. This was the pattern in the rebuild years of 2021 and 2022.

Last year started off in similar fashion with a strong step up to 830,000 females in Q2. But then rather than holding at that level they pushed up to 936,000 in Q3 and recorded only a moderate retreat to 866,000 in Q4.

This is reflected in FSRs of 49 and 48pc respectively for Q2 and Q3 before settling just under the neutral 47pc tipping point in Q4 and importantly, the average for the whole year.

Perspective here is important. FSR in the 2019 liquidation year got as high as 58pc while the subsequent rebuild in 2022 saw it fall to 42pc.

Some analysts are inclined to call herd expansion or contraction on small variations around the 47pc figure, but in a narrow context of one or two quarters, that would seem to run the risk of sending misleading market signals. For example, USDA's Foreign Agricultural Service Global Market Analysis issued in January 2024 says prominently in its beef summation that "Australia continues herd liquidation".

Overseas traders and end users rely heavily on information suppliers for their reading of the market. As we saw last year with the reliance producers placed on weather outlook, things can go badly when expectations and outcomes are strongly divergent.

Important therefore that expectations are built on good foundations.

CONTINUING the theme of forecasting, USDA conducted its 100th Annual Agricultural Outlook Forum on February 15 and 16.

The livestock analysis presented obviously has implications for Australia hence the following summary of key points.

Cattle inventory: Marked its fifth year of contraction in 2023 with the number of cattle and calves on January 1, 2024, at 87.2 million head, down 2pc on last year and the lowest inventory level since 1951.

The beef cow herd was estimated at 28.2m head, 2pc smaller than 2023 and the lowest since 1961. The 2023 calf crop was estimated at 33.6m head, about 2pc smaller than the 2022 calf crop. The US cattle inventory will likely decline further in 2024.

Slaughter: Cow slaughter is expected to decline during the year, but reductions may also reflect improved forage conditions and strong calf prices which would support retention of cows as a precursor to any herd rebuilding.

Cattle on feed: Total cattle on feed on January 1 was 14.2m head, 2pc higher than 2023 while the number of cattle outside of feedlots was about 4 percent below a year ago.

This points towards lower placements and declining feedlot numbers during 2024. Feeder cattle prices are forecast higher, and this may provide incentives to increase imports of cattle. Imports are forecast at 2.05m head in 2024, up from 1.98m head in 2023.

Although the demand pull from the US will be strong, imports will likely be limited by tighter supplies of cattle in Mexico and Canada.

Beef production: Forecast to fall by 3pc to 26.19 billion pounds in 2024. As the year progresses, marketings will decline as feedlot numbers diminish.

Additionally, cow slaughter is expected to decline due to lower inventories and possible retention of cows later in the year.

Heavier cattle weights, reflecting increased times on feed and a decreasing proportion of cows in the slaughter mix during 2024, will only partly offset lower slaughter numbers.

Beef exports: Declined 14pc in 2023. Exports to Japan, South Korea, Canada, Taiwan, and China were lower, although exports to Mexico and Hong Kong increased.

High US beef prices limited competitiveness while economic sluggishness in several key countries dampened demand. Total beef exports are expected to decline to 2.79b pounds in 2024.

Beef imports: Were 10pc higher in 2023 as tighter supplies of domestic cow beef increased demand for imported beef trimmings.

Imports are forecast at record 4.13b pounds for 2024, almost 11pc higher than 2023.

UNTIL now, works have had enough cattle in front of them to keep downward pressure on prices but as one operator said, it is a bit shaky getting bought cattle out with the storms that are occurring.

In the past fortnight, 20c has come off Qld grids with YP ox this week quoted at 560-565c/kg and heavy cow at 500 but that may change with tighter supply in the south driving up rates.

Overseas, US domestic 90CL has pushed up to US 310c/lb as domestic non-fed slaughter continues at historically low levels.

Just as those US domestic retailers and foodservice operators who depend on fresh product are being forced to pay more, others who rely on imported frozen product are facing increasing availability primarily from Oceania which is moderating any tendency for imported to catch up to domestic fresh price levels. Indicative price last week for Aust/NZ 90CL FOB was US265c/lb.