Maximising Livestock Prices in Australia

Why is the sale of livestock so different from the sale of shares listed on the Australian Stock Exchange? e.g. for BHP, Comm Bank, NAB, Rio Tinto, etc ?

Wouldn’t it be niece (ideal?) to have 21 million potential purchasers (or more) eyeing your livestock off and bidding on its price.
Well, why doesn’t this happen? Can it happen? If so, how?

Currently, in a nutshell, shares are displayed for the World to see and their owners and agents (or stock brokers) go about marketing them to their clients.  They are then sold (by brokers in a competitive market) and their last price (and price history) is displayed for public consumption from anywhere in the World. Livestock on the other hand is a very disorganised marketplace – and as the analysts tell us, there is money in confusion.

A head of livestock is the pure embodiment of a ‘stock’ because what you see is what you get. You can know its breed and age, have it weighed, you can see its color and muscling, know the region it was grown in and its feed for the past 100 days, etc A share on the other hand is representative of the company in which it has ownership. While you can know a lot about a ‘share’ too, it has a lot more information underpinning it and its information is much more easily obtained or ‘transparent’ and there are so many more analysts crawling over its data and advising the market of its profile.

For livestock, there are:
Direct sales from the farmgate where the owner (producer/farmer) has to guess whether they are getting a fair deal,

Direct-to-Processor sales where producers transport stock to abbatoirs who kill and process them and then decide what the carcass is worth, paying the producer once that is done. (An interesting phenomenon to grow stock for 380 days and then have someone else decide what price its worth AFTER they cut it up!). This certainly doesn;t leave a lot of room for price control or negotiation. 

Physical saleyards is the other major sales method, where stock generally won’t come home at any price offered otherwise transport and fixed (non-success-based) selling costs are incurred. Frequently there are few competing buyers at saleyards. Stock here are at the mercy of event management. 

Online selling is currently very old-fashioned emulating a physical saleyards and almost mandating agency intervention at inflated fees. However, at least it does enable stock from various regions to be placed on the one market and have buyers from anywhere compete for the purchase. It still has a way to go until it mirrors the ASX’s 24×7 abilities and agents competing for work if at all (like eBay), but stay-tuned this is not far away.

So, the really big defining difference between the two stock markets is that shares are displayed for the World to see their profiles and prices and to be bought and sold 24 hours a day, 365 days of the year and all buyers must operate through their listing market, be it new York, ASX, Newcastle, London or Dubai. Livestock on the other hand is a confused market where prices for the same animals can vary significantly on the same day in the same town!

Hold your hats, people! In a global World of cost-savings, more powerful online marketing and more savvy producers, this situation is going to change and change appreciably!

4 Comments »

  1. While retailers and processors have been benefiting from increased meat prices producers haven’t seen a corresponding benefit.

    In an ABC interview the MLA’s Don Heatley said that the MLA’s tax levy of $5 per head equates to a fee similar to what producers pay at saleyards and it represents terrific marketing value to producers. He explained that this is illustrated by recent retail prices not resulting in a corresponding fall-off in consumer demand. He didn’t explain how producers benefit from this scenario; though it seems to obviously be good for processors and retailers.
    Is there an argument that the MLA has increased it support for its member processors at the cost of its producer members?

    Excerpt of ABC interview with MLA’s Chairman Don Heatley Listen here

    Does the MLA have a conflict of interest in representing both producer vendors and buyer processors?

    Who do you think is currently best served by MLA?

  2. World Cattle Prices Soar but Australia’s fall. It is Time for a full Judicial Inquiry Into The Beef Industry

    ABA Chairman, Brad Bellinger is calling for a full Royal Commission into Australia’s beef industry.

    He said ‘US cattle prices are approaching record levels and their feeder steer is bringing over 40% more than its Australian equivalent. UK prices are at record levels and rising fast and Brazilian prices for forequarter beef have almost doubled since October’.

    Australian prices have FALLEN 15% in the past year and we now have the lowest prices in the developed world. Australia is not suffering from oversupply, as we won’t go near filling the US beef quota. Brazil is shipping many times Australia’s tonnage into Russia, yet Australian cattlemen are being paid 15% less than they were a year ago.

    Mr Bellinger continued, ‘We are paying almost five times the US producer levy to an unrepresentative and unaccountable MLA, plus we are paying hundreds of millions of dollars for a failed NLIS system that was meant to see us lead the world in market access and despite this, we are coming last’.

    He said, ‘ABA research and our submission tendered to the ACCC Inquiry into Groceries have shown that the Australian supermarkets have by far the highest mark-up in the world, as they rort Australian consumers and producers.’

    He continued, ‘I know that we live in the land of Ned Kelly and unregulated corporate price gouging is rampant but this time they have gone too far and are killing the ‘Goose that lays the Golden Egg’.

    Australia is surviving on the sale of public infrastructure, the sale of businesses and our minerals; – when these run out, we will find we have destroyed our agricultural industry and end up with nothing; – similar to Nauru. Farms are up for sale Australia wide, while the MLA and the Government have failed us badly.

    ‘Considering the above facts, we call on Minister Burke to establish a Royal Commission into the Meat Industry,’ stated Mr Bellinger. ENDS

    For more information please contact Brad Bellinger on 02 6725 4282 Mob 0401 233 421

    Linda Hewitt 07 4987 6794 Mob 041 978 9211

  3. Mac said

    Producers need to begin to act more like marketers in the rest of the civilised World. i.e. They need to use sites like http://www.Saleyards.com.au to gain more marketing control and exposure for their product. Producers can now begin to create some competition for their product in order to get out of the price taking rut. Without national marketing exposure how can a producer know just what their product is really worth?

  4. sandrar said

    Hi! I was surfing and found your blog post… nice! I love your blog. :) Cheers! Sandra. R.

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