Selling options for beef cattle

You may be able to improve your profitability depending on the selling systems you choose. Methods for selling beef cattle include:

Paddock sales

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) or cents per kg liveweight (c/kg) basis. Obviously if the sale is by weight the animals have to be weighed. This can be done on the property but is sometimes done on scales at a saleyard.

Saleyard auction

At present most cattle are sold through the saleyards auction system. Many larger saleyards have scales and sell on a liveweight basis. This usually involves a curfew where cattle have to be at the saleyard by a specific time before the sale. Cattle that do not make the curfew time are sold on a $/head basis. More information is available from the Australian Livestock Markets Association.

Over the hook sales

With ‘over the hook’ 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 transport to the abattoir and the transaction levy are paid by the vendor. You are 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. Initially, the carcase is weighed at the end of the chain while it is still ‘hot’. If the abattoir trades on cold weight, around 3% is deducted from the hot carcase weight to provide the cold weight. The actual deduction for the shrinkage varies from 2–4% to account for the water weight loss during cooling in the abattoir. A list of AUS-MEAT accredited abattoirs is available from AUS-MEAT.

AuctionsPlus

AuctionsPlus began as CALM (i.e. Computer Aided Livestock Marketing) in 1987 as a method of selling livestock by description. Cattle sales are held weekly and bids can be taken through your preferred agent or home computer nationally. The sale is on farm. Stock are assessed prior to sale by an accredited AuctionsPlus assessor who enters a description of the cattle including photos into a computer-based catalogue. Potential buyers must register and receive a usercode and password that allows them to view the catalogue. AuctionsPlus combines the best features of the saleyard system – access to a wide range of buyers – while allowing direct consignment to the buyer. Selling livestock on AuctionsPlus is through your preferred Livestock Agent. Cattle can be sold on the basis of $/hd, c/kg liveweight or c/kg carcase weight or on a grid. Transport costs are paid by the buyer and transit insurance is offered by AuctionsPlus.

Forward contracts

A standard forward contract is essentially a contractual agreement between a producer and a processor for the producer to supply a given product at a given time for a given price. The contract includes details of:

the number, age, sex, breed type, weight range and fat range of the contract cattle;
the fortnight during which they will be delivered;
pricing arrangements.

Alliances

An alliance brings together some or all of the individuals involved in the beef supply chain from breeder to customer. The purpose is to improve the returns to all parties usually by supplying a consistent, high quality product to the consumer. For this to occur:

the quality of the product needs to be accurately assessed (chiller assessment/yield);
the price paid needs to be directly related to the quality of each product (value-based marketing);
feedback on price and quality must be communicated from the consumer to producer.

Selling costs

A transaction levy of $5/head is paid to Meat & Livestock Australia on all cattle sales.
Agents can assist with all forms of sales with commission up to 5%. Using an agent includes del credere insurance which guarantees payment.
Saleyard fees range from around $4 to $7.50 per head. Additional charges apply for non-reader or replacing lost NLIS devices.
AuctionsPlus has a listing fee of $5.90/head. (Contact agent for assessing or agent fees)
AuctionsPlus delivery is farm gate and the purchaser pays the freight unless offered.

	Advantages	Disadvantages
Paddock sales	Minimal selling costs. Minimal transport and handling. Buyers know in advance the number and type of stock to be delivered.	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.
Saleyard auction	Wide competition and accessibility. 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 costs, saleyard dues, weighing fees and commission must be paid. Possibility of buyer collusion and no negotiation between buyers and vendors. Limited feedback, no carcase feedback. Generally the vendor has to accept the price on the day because of the costs incurred whether or not the cattle are sold. Subsequent animal performance or meat quality can be reduced by stress due to transport, handling and time off feed.
Over the hook sales	Subjective appearance values do not affect the price received. You receive clear market and price signals relating to carcase quality and are provided with feedback. Minimal transport and handling costs and possibly no commission costs.	Lack of competition unless selling using AuctionsPlus. Unless AUS-MEAT-accredited, abattoirs will set differing conditions regarding carcase trim, hot or cold weight and feedback.
AuctionsPlus (formerly CALM)	Competition and exposure is nationwide. Vendor can set a reserve price; stock do not have to leave the property until it is met. No transport costs for vendor. Payment is guaranteed. Large range of buying and selling options. Particularly suits geographically isolated producers, although this method can be used anywhere with any numbers. Feedback is provided to producers for c/kg and grid sales. Minimal transport and handling damage.	Buyers have to adjust to using a computer and not viewing live animals. Vendors and buyers need to have confidence in the AuctionsPlus assessors for accurate stock description.
Forward contracts	Provides a guaranteed price therefore eliminating the risk of price fluctuations. Enables the producer to confidently plan the purchase of store cattle and feed. Enables the producer to implement appropriate feeding and grazing management strategies. A guaranteed return can be of assistance in negotiating loans and managing financial arrangements. Processors are able to clearly communicate their precise requirements to both producers and agents. Processors can guarantee continuity of supply and maintain the reputation and integrity of their product brands.	Producer needs to have a high degree of control over the production system, supplying the specified product at the specified time (unforeseen circumstances may make this difficult). If the cattle cannot be supplied as specified in the contract, the producer is required to supply the shortfall with an equal number of animals from an alternative source within seven days of notification.
Alliances	Price fluctuations are reduced. A consistent premium price can be achieved for a consistent premium product. Price reflects the retail value of the carcase, not supply and demand. Objective feedback from the consumer to the producer benefits breeding/selection decisions. Having a known outlet and likely returns provides security for the producer.	Producer needs to have a high degree of control over the production system, supplying the specified product at the specified time (unforeseen circumstances may make this difficult). Higher or lower prices elsewhere test loyalties.

Roger Sneath, Department of Agriculture and Fisheries.

Topics	Business decision tools Business management Marketing Commercial beef businesses Small area landholders