Selling cattle - are you looking at the costs as well?

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.

Producing Optimal Carcasses

What does it take to produce an optimal carcass?This is a question that producers often ask.While there are a number of things we can do as livestock managers, I think the first step it to actually define what an optimal carcass means.

In my mind, an optimal carcass is one that meets the target specifications for weight; fatness, eating quality – MSA Index and has a high yield of saleable meat. I also think this is something that producers need to do consistently, and do so with the most efficient use of resources.  There are a few steps I think producers focused on optimal carcass production need to consider.

1. Clearly define the breeding objectives for your herd. I’ve often talked and written about the importance of defined breeding objectives. The reason being, these objectives define the type of genetics you need to use to meet your market and to breed cattle suited to your program.

2. Know what you are actually trying to achieve! Markets are well defined for weight, fatness, and eating quality. If you know what these specifications are, you can start to plan on the process of growing to meet these. Specifications are readily available from processors and from feedlots. So you need to get in touch or at least look at the specifications on company web sites and choose realistic options for your program.

3. Focus on what you can control. There are three key areas you control as a producer. These are:

• Maturity pattern: This determines the ability of your animals to meet specifications. It also impacts on productions traits such as fertility, so you need to consider both aspects in order to be productive and profitable.

• Growth rate: Your ability to choose the correct genetics, and to manage nutrition to express those genetics, has a massive impact on optimal production. Using EBVs and feedback from previous sales can help you fine tune growth rates. But you still need to manage pastures, crops and supplements to make that growth happen.

Finally, you need to manage the way you finish and sell animals:  The final stage of production, selling and transport can derail your program.  Stress, poor handling or other factors can impact on your eating quality index and cause you to miss the optimal.  So this final stage should be managed as carefully as your genetic decisions or feeding programs. 

Managing Growth

A large part of optimal carcass production is the management of growth of animals.  This actually starts with your choice of genetics.  The ability to select for growth using EBVs is an opportunity you shouldn’t overlook.  It’s well proven by many research and commercial trials that, EBVs do work and can be a very effective tool for producers.  

However, genetic potential can and is often limited by nutrition.  Growth is a function of the daily intake of energy and protein.  Ensuring your cattle have sufficient to maintain growth paths is the practical aspect of management.  

The CRC for Beef Cattle highlighted the impact growth paths have on carcass yield, fatness and eating quality.  The research showed quite markedly that slow pre weaning growth resulted in cattle that were smaller than normally grown cattle.  

However these slower grown cattle never catch up in weight, even in feedlot conditions.  The simple message being that to meet carcass weights, these cattle had to be grown longer, and this ran the risk of impacting carcass fat specifications or lowering MSA Index values.  Either way, slow pre weaning growth is not ideal

Slow post weaning growth was also researched.  It was found that slower than the optimal 0.7kg / day resulted in cattle that grow faster in finishing programs.  They tended to be a bit leaner and have less marbling.  So if this is an issue for your markets, this may also be a path to avoid.  

The CRC data really suggests we aim for 0.7kd / day for animals up to feedlot entry.  To do this, you should remember that your cattle will need to eat at least 3 – 3.5% of their live weight on a Dry Matter basis each day.  Ideally this feed would have a minimum of: 

• Energy 10.5MJ / Kg

• Crude Protein 14%

• Fibre 30 – 40% NDF

A simple rule to remember is that the faster your cattle grow, the fatter (and slightly more muscular) they will be.

Eating Quality

There are many factors that have an impact on MSA Index values.  As producers, its important to focus on the ones that have a high impact and are controllable on farm.  High impact variables include Marbling and Ossification. 

Your genetic selection and nutritional management will influence your animal’s ability to develop marbling.  It’s a trait worth considering if this can be selected for without compromising your other production traits.  Ossification, can be improved by growth rates and achieving higher weight for age. Again it’s important to balance this with other traits that matter to you, like carcass fatness and marbling.

The amount of Tropical Breed Content will impact on your MSA Index.  But you need to be realistic. If your environment is nest suited to Indicus cattle, then you should use that to your advantage. You can still select for growth, marbling and fatness and achieve MSA Index scores that are quite high if you manage these traits well.

How you sell your animals also has a huge impact on your ability to meet optimum carcass specifications, particularly for eating quality.  The work done by MSA highlights the impact that sale yard stress and handling has on eating quality.  Cattle sold through saleyards have MSA Indexes that are 5 units lower than those sold direct to processors.

Summary

Producing optimal carcasses does require some serious attention across genetics, nutrition, and turn off.  More importantly, if you don’t have a clear idea of what your optimal carcass requirements are, and utilize past feedback to fine-tune your program, you’ll find it a much harder challenge.  Having some clear objectives and using the tools that are now available is the key starting point for anyone determined to consistently hit their targets.  

It’s important to remember that if you are not entirely sure where to start, to seek advice or help to define your goals.  Its one of the services I’ve been delivering over recent years, and it's certainly something you may want to consider in your program.

Connecting with your customers

As food producers do you connect with the broader community?  I know many farmers, and for that matter, people in country Australia feel there is a disconnection between the farm and the plate. 

In some ways there is a huge disconnection.  Society as a whole has changed so rapidly that we are all grappling with the challenges in our daily lives.  People have moved closer to large centers for work.  Increased mechanization and efficiencies on farms mean less people have direct jobs in agriculture.  So somewhere along the way a gap has opened between the farm and the people.

While we often talk about this disconnect, I reckon we often overlook there is a deep interest and support from the broader community for farming.  In my work I’m often asked to speak about farming to the broader community.  I always come away feeling there is a deep desire to understand more about farming, its challenges, its rewards, and more importantly I sense a real value for farming among the people I talk to.

One of the more important roles of the Sydney Royal Easter Show is to showcase agriculture to the broader urban communities. The livestock pavilions and the district exhibits are consistently rated as the most important attractions to the public.

So, as a farming community or as an individual producer, how can we connect to our consumers and meet their interest in our business?  I guess there are plenty of ways that we do this.  I did mention our traditional activities such as the Easter Show.  But its just as important to see the local show as part of this connection. 

Increasingly I see farmers sharing their stories through social media.  There are Facebook pages, twitter accounts, and Instagram posts showing the variety of a day in Australian agriculture.  I personally enjoy the blogs from the contributors from Central Station. 

These are great ways of sharing stories.  However I think the next step will be to show our skills as producers and business operators.  I think this may happen through the connection of our farm data with other data sources. 

If you think of the demand for traceability and food safety, there is a great story for us to share.  The challenge is to link our on farm QA records with our industry systems like the NVD system and with processor information and present it to the consumer as a whole of life story. 

This week a company called Aglive (www.aglive.com) showed me their progress in linking our on farm data with industry QA systems and processor information.  I have to say I think systems like these will be part of how we connect with our consumers.  True I think they will still want to see our stock at the show, read our stories and see our pictures on line. However I reckon these connections will become stronger as they start to see the things we do on farm with the data we capture being used to sow how clean and safe our food systems are.

I think the next few years will be pretty exciting, and hopefully see a narrowing of the gap between farms and consumers as we share what we do in new and engaging ways.

Buying Livestock Online?

Over the last year or so, I’ve been watching the rapid growth of livestock selling on line.  Now, on line selling is not actually a new concept.  In Australia we have had AuctionsPlus that is the largest online seller of livestock in the country.  AuctionsPlus was preceded by CALM – Computer Aided Livestock Marketing.

One of the great developments with the online livestock marketing has been the creation of objective terms to describe cattle and sheep.  The language we use to describe fatness and muscle score was a direct outcome from the move to sell livestock objectively, and more importantly digitally.

So to me, on line marketing of livestock is a standout for the agricultural industry.

I guess I’m not the only one to be excited by the opportunities that on line selling offers.  After all it’s a very inexpensive way to advertise.  You can advertise with pictures as well as written descriptions.  And now with the creation of Internet sites like Gum Tree, you can pretty much buy and sell anything!

At the same time, you only need to browse through Facebook to see any number of pages that range from “Buy, Sell or Swap” to specific pages selling livestock.  Now, I guess that’s not necessarily a bad thing.  At the end of the day, it’s a way for people to sell livestock in a manner that works best for them.  It also means you might find an opportunity to purchase something you’ve been looking for.

But just because you are selling or buying through Facebook or Gum Tree, you still have to ensure you comply with the legislation that exists around livestock sales and movements. 

This means you need to ensure that you comply with the NLIS requirements.  So if you are buying animals, you will need to ensure that the animals are transferred on the NLIS database to your PIC.  If you are selling you have to make sure the animals are tagged with an approved NLIS tag and that you also must complete a current National Vendor Declaration (NVD).  Remember the NVD can be used as your Transported Stock Statement. 

These points are important to remember, particularly if you are a small or new producer.  However your animals are part of the industry, and so traceability is just as important regardless of buying on line from a Facebook page or through the sale yard system.  And in regards to transported stock statements, the legislation means police or stock inspectors have a duty to ask for yours.  So don’t get caught!

The other part of buying on line from various sites is for you to ensure you consider the risks to your business.  In the first instance you need to consider the usual issues of biosecurity. So think about quarantining new livestock to minimize the spread of weeds or parasites. 

I’d also think its pretty important you do your homework on just what it is that you are buying.  In the Auctions Plus system, you have the assurance that an accredited assessor describes all animals.  You can check their status, and if the animals don’t meet the description you can speak to Auctions Plus about the issue.  

In generic sales pages, you won’t have that fall back.  You really are making a choice to accept another person’s description.  So if the animal isn’t what you expect, is lighter, heavier, more stirry than you expected, you have no comeback.  That’s part of buyer beware and I guess it applies to any purchases we make.  But it’s important that you do the risk assessment first, cover all the options and then you can at least feel you’ve done as much as you can.

I reckon on line selling in all their forms, are going to be part of how we do business into the future.  So why not make the most of the opportunities.  Just don’t let the convenience of looking on line become complacency or laziness! If you do your homework and make sure you meet your obligations for identification, traceability and movement restrictions, then I reckon the online world can be another tool in your business toolbox.