Cattle prices in Australia have reached record levels. One of the most referenced indicators is the Eastern Young Cattle Indicator – or EYCI. This indicator is used to describe animals on a 7-day rolling average. Based on the reports from 25 major saleyards across Australia it is expressed as cents per kilogram carcase (or dressed) weight (¢/kg cwt).
While the EYCI shows the general trend for young cattle, it is important to remember that there is a fair range of cattle that are assessed to make up this indicator. Cattle which are assessed as part of the EYCI include vealer and yearling heifers and steers. These cattle are assessed for average muscle and are within the range of fat scores 2 – 3. The weight range extends from 200kg up to yearling steers over 400kgs.
The role of the EYCI is to describes the general movements in cattle market prices. And while it generally closely reflects the physical prices offered for cattle, not all animals fit into the range described by the EYCI. So, while being closely reflected in physical sale prices, it is sometimes unrealistic to expect the price paid for your cattle will exactly match the reported EYCI value for the date of your sale.
The other area that often cause disappointment for producers at sale time is the issue of selling costs. While it is accepted there is a cost in selling, it is important to be sure these costs are clear and explained up front to ensure transparency at sale time.
In most cases producers who sell cattle through a licensed saleyard will have series of costs to consider. In the first instance there is a transport cos to move animals from farm to sale yard. This is generally charged at a kilometre rate. Transporters will set their fees depending on the size of the truck and the distance to travel, as well as the number of animals to be moved.
It is possible to use a transport calculator, developed by NSW DPI to calculate the cost per head once you receive a quote. This can be useful in ensuring your gross margin calculations are as accurate as possible.
At the sale yards there is a general cost charged per head, based on the use of the yards. These range anywhere from $6.70 / head to $10.70 /head depending on location. In addition, the yard operators (either the private company or the local council) will also include a NLIS scanning fee which ranges from $2.30 to $3.20/hd and possibly a weighing fee which may be around $0.50/hd. As well as these costs, each animal is charged an MLA transaction levy of $5.00 for use in marketing and research for the industry.
The other cost is the commission charged by the livestock agent to market the animals (generally by open cry auction) and ensure the transaction is carried out and the purchaser pays for the animals. Agents operate on a commission paid on the sale price of the lot – before the fees are deducted. Commission is charged anywhere from 3.5% to 5.5%
“ it is important to be sure these costs are clear and explained up front to ensure transparency at sale time.”
The combination of the fixed selling costs (yard fees, transaction levy and scanning fees) along with the variable fees associated with transport and commission can often be a surprise to producers.
One strong suggestion is to conduct a gross margin analysis using a template such as that provided by NSW DPI. This can allow a producer to factor in the costs of sale and use a series of support and lower price thresholds to determine the actual return to the business.
Weighing & scanning are often fixed fees
Some questions that are worth considering include sale method. While local saleyards do offer a degree of competition, demand is often determined by buyer attendance. The ACCC investigation into the cattle market identified that competition for cattle purchase typically takes place within 400km of the point of sale. This could mean that competition for cattle will depend on what processors, feedlotters or other purchasers are likely to exist in this radius and attend the sale.
How animals are marketed in advance of a sale is also important to determine demand. It is worth asking the agents who you could engage how they will market, advertise, and generally build interest and demand for cattle ahead of the sale.
Sale methods don’t have to rely on physical sale yards. Auctions Plus is the major online platform for cattle and sheep sales. The opportunity with Auctions Plus lies in the cattle being sold on farm, and the purchasers will pay the cost of transport and will be responsible for the scanning and transfer of the animals on the NLIS data base.
As a seller the costs are in listing fee - $7.00hd, the transaction levy and the agent commission. The agent commission should include the pre-sale assessment and listing as well as being on hand for the delivery of the cattle to the new owner. Often this online listing increases the radius for potential buyers and increases demand.
Ask your agent how they will market and promote your cattle ahead of the sale
However online listing also lends itself to more pre-sale marketing – especially if the agent chosen to undertake the sale is engaged in finding new buyers. It also allows vendors to set a realistic sae price. This may not be exactly to the same height as the EYCI currently is but can be a realistic one that reflects the cattle being sold.
The new LivestockBI platform can give you and your agent confidence in setting a realistic price
Auctions Plus have introduced a new platform to help agents and their clients set realistic reserve prices. LivestockBi considers the description of the animals, their property location and calculates a recommended sale price. This is based on similar types of cattle and location as well as showing the high and low process offered in the recent past for those animals. If you work with your agent to use this information, you can set a realistic sale price and ensure that your variable costs as well as those fixed costs are managed and don’t surprise you when the sale is done.