Deborah Courtney, Benalla
There are a range of options available when it comes to marketing stock. To choose the most appropriate option producers need to know the advantages, disadvantages, costs and likely returns of different marketing options. This Agriculture Note addresses some of these options and includes a simple financial comparison.
Stock are inspected on the vendor's property by the buyer and are sold straight out of the paddock. Price is generally negotiated on a dollars per head ($/hd) basis.
- Minimal selling costs;
- Minimal transport and handling;
- Buyers know in advance the number and type of stock to be delivered to the abattoir.
- Limited competition and carcase feedback;
- Inefficient for buyers if small numbers are to be sold;
- Potential for difficulties in agreeing on weights for example due to unregistered scales, non defined curfews.
At present most cattle are sold through the saleyards auction system. Usually this is on a cents per kg (c/kg) liveweight basis, or on $/hd for store sales.
- Wide competition and accessiblity;
- All stock types and lots of any size can be sold;
- Vendors can set a reserve price and can compare quality and price;
- Payment is guaranteed by the agents.
- Transport cost, saleyard dues and weighing fees must be paid;
- Possibility of buyer collusion and no negotiation between buyers and vendors;
- Limited feedback for the vendor, no carcass feedback;
- Generally the vendor has to accept the price on the day because of the level of costs incurred whether or not the cattle are sold;
- Meat quality can be reduced by stress caused by transport and handling.
Over the hooks sales
With over the hooks sales, stock are delivered directly to the abattoir. Stock may be sold with or without an agent. Change of ownership takes place at the abattoir scales. The terms of sale will vary between different abattoirs. Generally the producer will pay transport to the abattoir and the transaction levy. The producer is not paid for condemned carcases or bruise trim.
The actual carcase weight measured at the abattoir can vary depending on the carcase trim used, and whether it is a hot or cold weight. The carcase is weighed at the end of the chain while it is still 'hot'. If the abattoir trades on cold weight, 3% is deducted from the hot carcase weight to provide the cold weight. The actual deduction for shrinkage varies from 2-4% to account for the water weight loss during cooling in the abattoir. It is mandatory for all AUSMEAT accredited abattoirs to pay on hot weight and AUSMEAT standard carcase trim. They must also provide carcase feedback.
For abattoirs that are not AUSMEAT accredited the vendor needs to check the conditions they will be trading on. Stock are sold on an agreed c/kg carcase weight or via a price grid where premiums and discounts are calculated for different carcase attributes.
- Subjective appearance values do not affect the price received;
- Producers receive clear market and price signals relating to carcase quality and are provided with feedback;
- Minimal transport and handling;
- Female carcases of the same quality as male carcases can achieve the same price/kg.
- Lack of competition unless selling on CALM (Computer Aided Livestock Marketing);
- Unless AUSMEAT accredited, variation exists between abattoirs for carcase trim, hot or cold weight and feedback.
CALM began in the 1980s as a method of selling livestock by description. CALM combines the best features of the saleyard system while allowing direct consignment to the abattoir or buyer. The sale is on farm, with animal details entered into a computer. Producers do not need to own or be able to operate a computer to sell on CALM. The animals are assessed prior to the sale by an accredited CALM assessor who describes the cattle to the buyers. Cattle can be sold on the basis of $/hd, c/kg liveweight or c/kg carcase weight or on a grid. Sales are weekly and bids can be taken by telephone or computer nationally. Transport costs are paid by the buyer and transit insurance is provided by CALM.
- Suits geographically isolated producers;
- Large range of buying and selling options;
- Producers can set a reserve price and competition is nationwide;
- No transport costs for producers;
- Payment is guaranteed;
- Feedback is provided to producers for c/kg and grid sales;
- Minimal transport and handling damage.
- CALM is relatively new and needs to gain the confidence of buyers and sellers;
- Buyers have to adjust to using a computer and not viewing live animals;
- Vendors and buyers need to have confidence in the CALM assessors.
Comparing associated costs may assist you in determining the best option for selling your stock. The calculations presented in Table 1 compare the different marketing options and the associated costs. The following assumptions have been made:
|Steer liveweight on property||400 kg|
|Liveweight loss at saleyards||5%|
|Cold carcase weight adjustment||3%|
|Base price offered at saleyard||$1.20/kg|
- Marketing costs are calculated using the same gross price paid when sold by different methods.
- The selling system with the lowest cost does not always return the highest prices as other systems may stimulate higher prices by more competition.
- Sales without an agent have no guarantee of payment. The agent's commission should be considered as a fee for service cost.
- For all slaughter cattle other than calves, the Transaction Levy is charged at $3.50 per head. The Cattle Compensation Duty is charged at 0.02c per $20 of the animals sale value. All animals valued over $1,981 are charged a duty of $2.00 per head.
- When selling calves the Transaction Levy and the Compensation Duty are reduced ($0.90 and $0.07 respectively).
- Yard dues and weighing fees vary by district.
- Transport distances from the farm gate to the saleyard and the farm gate to the abattoir are assumed to be the same.
Table 1. Marketing Costs Comparison
|Paddock||Saleyards||Over the hook||CALM|
|Calculation of weight|
|Liveweight on property||400kg||400kg||400kg||400kg||400kg||400kg||400kg|
|Liveweight at saleyards||380kg|
|Carcase weight at abattoir||212kg||212kg||206kg||206kg||212kg|
|Calculation of price received|
|Equivalent price paid||$456||$456||$456||$456||$456||$456||$456|
|Price paid ($/kg LWT)*||$1.14||$1.20|
|Price paid ($/kg HSCW)*||$2.15||$2.15||$2.15|
|Price paid ($/kg CCW)*||$2.21||$2.21|
|Costs of selling|
|Yard dues and weighing fees||$2.50|
|CALM listing fee||$2.50|
|Industry cattle levy||$3.50||$3.50||$3.50||$3.50||$3.50||$3.50||$3.50|
|Net farm gate price||$429||$418||$420||$443||$420||$443||$411|
|Total selling costs||$27||$38||$36||$13||$36||$13||$45|
|Selling costs as a proportion of gross return||5.90%||8.40%||7.85%||2.85%||7.85%||2.85%||9.95%|
|* Key for Table 1|
Hot Standard Carcase Weightght
Cold Carcase Weight
The advice provided in this publication is intended as a source of information only. Always read the label before using any of the products mentioned. The State of Victoria and its employees do not guarantee that the publication is without flaw of any kind or is wholly appropriate for your particular purposes and therefore disclaims all liability for any error, loss or other consequence which may arise from you relying on any information in this publication.