EARLIER this year, at the height of America’s rebuilding of its beef herd, good replacement cows were selling for between AUD$3000-$5000. Is that where Australia’s rapidly diminishing herd is heading?
Mecardo analyst Augusto Semmelroth, who has been assessing the ongoing female slaughter, doesn’t think so - at least not based on historic trends.
Mr Semmelroth has drawn a couple of conclusions from looking at the data: cow prices track the Eastern Young Cattle Indicator (EYCI) to a very precise degree, and cows are always priced at a discount against the EYCI.
It’s the degree of discount that interests Mr Semmelroth. Over the long term, cow prices average about 20 per cent less than the EYCI.
It might be expected that during a herd rebuilding phase, cows would be at a premium and they would sell at much less of a discount to the EYCI.
But Mr Semmelroth has found that the data reports the reverse. In herd rebuilding phases, as the female slaughter falls, cows tend to sell at a greater discount to younger stock.
“That’s because a rebuild phase is always associated with average/favourable seasonal conditions and a revival in restocker confidence, which tends to see young and store cattle outperforming finished lines,” Mr Semmelroth wrote.
It seems that in times of flush after times of hardship, the short-term need for cashflow by turning over younger stock appears a better bet than the 2-3 years required to capitalise on breeding stock.
The beef industry is desperately hoping that the 2015-16 monsoon delivers the widespread rain that ends the two-year liquidation of the Australian cattle herd.
If that’s the case, Mr Semmelroth’s proposition will be tested in early 2016 - or cattle producers will be digging very, very deep for females.
For more visit www.mecardo.com.au