September 22, 2008

Buying and Selling Sheep in NZ - an introduction

Not much is written about the basic task of buying and selling sheep in NZ, and times are changing with a move from saleyards to the internet, and increased legislative control of the process. I've written a knol on this subject as a handy guide to the basics, and how to avoid making a fool of yourself in public!

Buying and selling are the keys to success or failure in farming sheep.
The whole business can be very confusing and scary and it’s very akin to operating on the share market which is driven by fear and greed – fear in case prices drop and greed to make more money. This of course is the attraction for many who love to get a “good deal” over somebody else – especially a good mate or a stock agent!

Now, to make money you are supposed to buy stock when they are cheap, and sell them when they are expensive. Many well-intentioned people regularly seem to get this the wrong way round. There are plenty of reasons for this, so see if you can make head or tail of these:
  • Prices rise when the grass grows in spring and everyone panics and wants sheep when there is a “grass market”.
  • Then prices usually fall in the autumn when everyone wants to get rid of stock before winter when the feed supply drops, so the market is over supplied.
  • As New Zealand is an export country, prices are dictated by the export market and the “price schedule” meat companies pay to procure stock.
  • From time to time you’ll hear about a “procurement war” when South Island meat companies buy in the North Island in competition with local meat companies, or vice versa. Meat companies need to keep their works open as long as possible each season so may cut their margins to ensure this.
  • Remember meat companies mainly exist to return profits to their shareholders by exporting meat. They don’t provide social security to sheep farmers!
  • There might be a high demand from the “local trade” at certain times where local butchers or supermarkets buy a certain type of animal and this increases prices in the short term
Link here to the whole subject on the knol.

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