Restocker behaviour at the saleyard can give us a clue to the female slaughter ratio and provide notice as to the status of the cattle cycle, such as if we are in liquidation or rebuild phase.
Crunching the numbers on restocker saleyard behaviour for January and the first week of February suggests we are going to see a similar start to the year in 2019 to the average pattern set by the 2014-15 season.
From that perspective, if you’re a cattle breeder with young store stock, current indicators suggest that the majority of restockers across the eastern seaboard are not engaging with the market.
For January 2019, the female slaughter ratio is at 49.1 per cent, while preliminary February 2019 FSR figures are at 51pc.
As we head towards an autumn break in the south, we can use this data as a pre-warning as to what might happen when the herd does start to rebuild.
An annual average FSR below 47pc indicates we are in a herd rebuild, while above 47pc suggests herd liquidation. However, the female slaughter data that allows us to calculate the FSR is released by the Australian Bureau of Statistics is over one month lagged, with the latest December 2018 report showing FSR lifted to 51.2pc.
This ABS data shows that for the 2018 season the FSR posted an annual average of 50.5pc, well above the 47pc threshold and demonstrating that the herd liquidation was well entrenched with no signs we are turning towards a herd rebuild.
The length of this liquidation is fairly significant with some concerns about the ongoing female slaughter ratio, which is significantly depleting the nation's breeding stock.
Although combine a decent autumn break and prospects of a good winter, all this could change. Once Queensland gets past this disastrous flood will also mean grass on the ground and demand to replenish cattle numbers.
The recent Bureau of Meteorology forecast suggests a 50pc split between wetter or drier conditions in autumn-winter – which is fairly average. In the coming weeks we will get further clarity about what we can expect seasonally, which could see producers shift their interest in re-loading stocking numbers.
Buying strength might not be as aggressive as the wet seasons of 2016-17, but even an average season will encourage restocking. An average season in the south could see the Eastern Young Cattle Indicator continue to trade about 470 cents a kilogram carcase weight to 500c/kg cwt – and will continue to see good prices for finished cattle because of the low supply.
If the break turns out to be a lot wetter than a normal autumn-winter, it is possible the annual EYCI average can head well above 500c/kg cwt and up into 600c/kg as a result of the depleted supply.