What are my options for selling livestock? What are the advantages and disadvantages?

All this week on Table Talk we are covering the theme of Livestock Marketing.

In this series we are focusing on:

  1. Am I a marketer or seller of livestock?
  2. What are my selling options for livestock?
  3. Livestock Marketing Tools and Frequently Used Terms

In our last post we looked  into the concept of marketing livestock, part of which includes the process of sale and selling method. Today, we focus  specifically on this step and the various options available to us when selling stock.

What selling options are available to you as a livestock producer?

There are both direct (buyers purchase livestock directly from producer) or indirect (movement of livestock involves the use of an intermediary, who usually receives a commission or percentage of the sale) channels.

Selling options include:

Saleyard auctions

In saleyard auctions, livestock travel to a central location, are bid on in a live environment and sold to the highest bidder on the day. As the auction takes place in a live environment, prices on the day reflect supply and demand in the market. This used to be the most popular and traditional form of selling livestock. In ‘A Review and Analysis of Saleyard Marketing in Australia’ the author explained:

In the 1880’s nearly every village had its own set of saleyards where animals were sold and often killed in the backyard of the local butcher. Saleyards were often beside a pub for farmers to refresh themselves on market day, which was a big social event. On market day the women came to town, did their shopping and met friends and relatives.

Now, smaller saleyards have given way to larger regional livestock exchanges. The ABC reported in 2017 that giant saleyards are a ‘gamechanger’ for consumers, farmers and animals. Co-director Brendan Abbey of the Western Victoria Livestock Exchange told ABC, “We have an undercover area that is bigger than the MCG, to keep the animals out of the elements, so they’re not exposed to the sun or freezing cold winds. On arrival, the cattle are immediately on a soft floor and they stay on soft flooring the whole time until they’re trucked out again.” (Bridget Rollason, ABC Rural, 10 December 2017)

MLA 2017 commissioned report Sheepmeat market structures and systems investigationstated that saleyards remain the preferred selling channel and saleyards are generally efficient, especially the major selling centres. MLA regularly reports prices of 41 saleyards, leaving approximately 120 salesyards unreported (ACCC).

The Cattle and beef market study — Interim report by the ACCC stated that small scale producers have a greater reliance on saleyards generally, particularly in Southern Australia, where saleyard auctions account for up to two-thirds of beef cattle. It stated current issues involving saleyards including:

  • Concerns among many producers that there is collusion among buyers
  • Conflicts of interest are common in saleyards. Livestock agents may represent both buyer and seller, and commission buyers commonly represent multiple customers.
  • Concern in the industry, mainly from cattle producers, about pre-sale versus post-sale weighing for saleyard auctions

The Australian Livestock Markets Association is the peak industry body for livestock and property agents.

Find Sales dates in our Boost database.

Image: RLX

Paddock sales

Paddock sales refers to when stock are inspected by a buyer or agent on the vendor’s property and then sold directly from the property. Buyers tend to buy on $/head or c/kg lightweight basis and usually larger lines of stock, but prices for paddock sales aren’t often publicly reported.

ACCC reported that “live exporters primarily source cattle through paddock sales, whereas major processors tend to purchase over the hooks (OTH), and major supermarkets predominantly use paddock sales and forward contracts.”

Over the hooks (OTH)

Over the hooks sales refer to those whereby livestock are transported directly straight to the abattoir, with or without the use of an agent. The producer is paid on a price grid and usually the ownership of the stock changes hands at the abattoir scales. Roger Sneath notes that generally transport to the abattoir and the transaction levy are paid by the vendor, and you are not paid for condemned carcases or bruise trim (FutureBeef).

Direct relationships whereby a producer deals directly with a processor is growing in value and importance across the industry. Why? As Brett Johnstone, a prime lamb producer from Woodstock NSW explained to the Australian Poll Dorset Association:

I’m convinced we get a premium for our lambs. We also have built up a rapport with the processor and are getting paid for what we produce. Producing a very consistent product means a very high percentage meet required specifications. We pride ourselves on the lambs we are producing now.

AUS-MEAT accredited abattoirs can be found at AUS-MEAT.

AuctionsPlus

Farmers swore it would never work, that there was no way they would ever buy their precious sheep and cattle via a website on the internet without actually seeing, touching and inspecting them first (Sue Neales, The Australian, March 24, 2018).

AuctionsPlus (originally CALM – Computed Aided Livestock Marketing – developed in 1987) is an online sales platform. Real-time electronic auctions take place that “combine the best features of the saleyard system and allow direct consignment to the abattoir or buyer”(MLA). Stock are assessed by accredited assessors and buyers must register with the system to place bids.

The Australian reported in March 2018 in the article “Online livestock trading takes over from saleyards” that:

“In the past three years, Auctions Plus has soared from a little known e-commerce internet company, set up three decades ago as an experiment in Computer Aided Livestock Marketing by the former Meat and Livestock Corporation, to one trading more than three million sheep and 400,000 cattle annually via online matching of buyers and sellers.

The value of livestock sold last year through Auctions Plus — which is now owned by the three biggest rural service companies Elders, Landmark and Ruralco — was $834 million, up 8 per cent on 2016 and tipped to exceed $1 billion in 2018.

Last year Auctions Plus also achieved another milestone. Against the early odds, it is now Australia’s largest livestock marketplace, selling more cattle in the year than even Australia’s largest cattle saleyard at Roma, and more sheep and lambs in total than at either the weekly Ballarat or Wagga sheep sales.”

Find Auctions Plus sale dates in our Boost database.

What’s on Auctions Plus today?

Other online options

Additional online forms of buying and selling livestock include:

  • Cattlesales: Nationwide advertising portal space solely for cattle. Be sure to check out the article on founders Woods and Parker in Graziher.
  • Livestock Connect: Part of the Farm Online suite.
  • Online Livestock: Online livestock classifieds built by producers Phill and Kylie Moores.
  • Farm Tender: founded by former Farmer, Dwain Duxson in 2011 and has evolved from a platform focussed on farm inputs. Did you catch our chat with Dwain?
  • The Herd Online: website and app for marketing livestock, machinery and auctions.
  • Facebook and Gumtree: Rachel Gordon of Livestock Biosecurity Network outlines the risks of buying livestock on social media and buy, swap, sell platforms.

The internet, and in particular social media, has brought with it a new method of buying and selling livestock. Buy, swap, and sell groups on sites such as Facebook, or ads on sites such as Gumtree are now a popular way to trade goods, including livestock. This ease in trading does come with certain risks though, and it can increase the opportunity for unwanted pests, diseases, and weeds to be inadvertently spread around the country. In some cases, vendors and buyers are simply unaware of their responsibilities, particularly if they are not used to trading livestock. Perhaps they just want to have a few ‘grass eaters’ in the backyard.

Direct to Customer

Marketing a product directly to the end consumer has risen in popularity in the last decade as the Paddock to Plate movement, amongst others, have been front of mind for both consumers and producers. Farmers are now selling branded produce direct to restaurants, through Community Supported Agriculture, at farm gate and through farmers markets.

As noted by the WA Country Hour (2017):

…Livestock producers are cutting out the middleman and doing it for themselves to market their own meat direct to the public.

A combination of specialist abattoirs, social media and farmers’ markets has enabled producers like Sara and Keith Wilson from Kulin in the state’s Great Southern region to have complete control over how their produce makes its way into consumer and restaurant fridges.

When speaking to the Conscious Farmer’s Derek and Kirrily Bloom, Farming Ahead noted that ‘Switching from being commodity producers to direct marketers of a specific beef
product requires guts, determination and the ability to think and adapt quickly.”

The topic of direct marketing deserves an entire week focused on the theme, so stay tuned!

Additional options

Other selling methods for livestock producers are outlined by Meat & Livestock Australia:

  • Meat Standards Australia (MSA) eligible sales: Cattle can only be sold only through MSA licensed saleyards or livestock exchanges. Producers and agents must be registered.
  • Forward contracts: A contractual agreement between a seller (eg producer) and buyer (eg processor) to supply a given product at a future point in time for a given price. In some cases the price is fixed, thereby reducing the producer’s exposure to a fall in market price.
  • Producer alliances: A group of producers working together to service market place requirements.
  • Value-based marketing:Based on the principle of being paid for the inherent value (quality and quantity) of the product to the buyer and the end user, such as systems that provide clear feedback from the consumer to the producer and has a pricing system supporting these signals.
  • New selling options: A payment system based on lean meat yield is available in two Australian and eight New Zealand processing plants. It rewards those producers who carefully manage stock for optimum weight , muscle and fatness of their slaughter lambs.

Advantages and disadvantages of selling options

We have discussed both advantages and disadvantages of each option in the commentary above. FutureBeef outlines the following advantages and disadvantages of different selling options in this handy table:

Source: Roger Sneath, Department of Agriculture and Fisheries (FutureBeef)

MLA state that “Remaining open to and aware of alternative market options is crucial. There may be a better price to be achieved through a different option or a better match for the range of product specifications a producer can supply”(Selling Options, Meat and Livestock Australia).

 


In our next post we suggest some useful Livestock Marketing Tools and walk through some Frequently Used Terms.

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