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!