January 25, 2009

Cattle farm husbandry – buying and selling cattle

Cattle, farming, husbandry, buying & selling, options, where to seek help, animal status declaration (ASD) forms, how to use them.

By Dr Clive Dalton

Cattle heading for the sale ring. What they make will depend
on one person wanting
them that little bit more than the under bidder.

Buy cheap & sell dear
  • Buying and selling are the keys to success or failure in farming cattle.
  • 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 after purchase and greed to make more money if prices drop.
  • 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 dear.
  • Many decent 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:
A "grass market"
  • Prices rise when the grass grows in spring and everyone panics and wants cattle 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 schedule meat companies pay to procure stock.
Procurement war
  • From time to time you hear about a “procurement war” when South Island meat companies buy in the North Island in competition with local meat companies, and vice versa happens.
  • It defies logic but meat companies need to keep their plants operational as long as possible each season, so they 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 beef farmers!
  • This also defies the basic principles of animal welfare where stock should be killed at their nearest slaughter plant and not have the stress of a long journey.
  • 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
Options – where to start?
This is the environment in which you’ll have to operate in the beef cattle business regardless of your size of farm. Buying and selling to make money will be your constant challenge.

Attending stock sales yourself

An old trick: try to view stock from ground level -
they always look bigger from the catwalk above.

Initially you may want to buy and sell your own stock, especially if you consider that stock companies and their agents charge too much and their service is less than you demand. But before you get too excited consider these points:
  • You will have to attend cattle sales – both the “store” and the “fat” to keep regularly up to date with “the trade” or what current prices are like.
  • The more sales you attend, the more people will find out who you are – which may be a good or a bad thing! They might come to view you as a cunning trader or a sucker!
  • You can also check the sale reports in the local papers, or contact a stock and station agent for comment about the trade at the most recent sales.
  • But remember agents could get fed up with your evening calls, especially if they get no business from you.
  • Public sales are a competition or a battle ground which you are about to enter – usually with little or no experience. But don’t let that put you off – it’s the only place to learn the business.
  • You must register with the office at the saleyards before the sale and get a number that the auctioneer will use to record your identity and purchase.
  • Remember that a bid is an unconditional offer.
  • You don’t pay commission on purchases – vendors pay on stock sold.
  • Check what the commission is going to be – as it can vary depending on your status with the company. They may try to charge you 6-7% but if you are buying a lot you may be able to negotiate it down to 4%. Commission on stud stock can go up to 13%.
  • You may also find you have to pay a proportion of a “yard fee” that normally the vendor pays. In some sale yards a “facility fee” has appeared which seems like another yard fee in a different guise. Watch you don’t have to pay a proportion of that too.
  • Also remember that you’ll be noticed straight away by the sale regulars as a “new chum”. It’s inevitable that you’ll be far too well dressed, as even your old clothes will look far too smart! Borrow some really old dirty overalls and especially a dirty hat and keep looking at the ground a lot, mumbling quietly to any mentors you take along!
  • Don’t take anyone along for advice who is not a genuine farmer, as they’ll stand out like new chums too.
  • If you are going to bid on stock yourself, then your lack of experience will show and you’ll be signaling for all to see. Some new buyers in ignorance and excitement even bid against themselves! Auctioneers don’t mind you doing this - they’ll take all the bids they can get.
  • When looking at cattle at a sale, always inspect them at ground level and not just from the walkway above the pens where you can get an exaggerated estimate of their size.

Getting a stock agent to bid for you

At most sale rings the acoustics are terrible , so make
sure you know what the bid is when you bid
  • Get a stock agent to buy on your behalf. Stock agents will be keen to do this in the hope that when the stock are sold, they and the company will get your business. You don’t pay commission on purchases – vendors pay on stock sold.
  • As stated above, you don’t pay commission on purchases – vendors pay on stock sold.
  • Check what the commission is going to be – as it can vary depending on your status with the company. They may try to charge you 6-7% but if you are buying a lot you may be able to negotiate it down to 4%. Commission on stud stock can go up to 13%.
  • If you have a lot of stock to sell, in these tough times you should be able to negotiate a lower rate.
  • You may also find you have to pay a proportion of a “yard fee” that normally the vendor pays. In some sale yards a “facility fee” has appeared which seems like another yard fee in a different guise. Watch you don’t have to pay a proportion of that too.
  • You must give the agent a very clear brief of what is your financial limit, and don’t be surprised when the agent always goes to that limit.
  • When buying and selling through a registered stock and station agency, your money should be safe and you will get the stock delivered after you have paid for them.
  • But always read the small print in the terms and conditions of a livestock contract. There are no “guarantees”. History shows that in the event of financial problems when companies have had serious financial disasters, farmers are always last to get a share of what little is left.
  • There are also one-person livestock agencies that operate from their home offices. They have lower overheads than the big companies so can be very competitive on charges and offer a very personal service.
  • But check out their financial status before offering them too much business. You may have to wait some days after the sale for your money and your bank manager may not like this arrangement so check it out with him/her before you do business.

Getting a farmer friend to bid for you

If you don’t want to use an agent, you can get a farmer
friend to be your “mentor” and do the bidding for you.
  • You should pay them something for their assistance as then you can ask them again.
  • Don’t stand near them at the sale as you’ll give the show away. Have some means of signaling your approval to them from a distance and when you want to quit bidding.

Buying/selling privately in the paddock.
  • The big advantage here is that you avoid all the hassle of the saleyards and you can take time over the business. This is a big plus if you are not happy at the saleyards.
  • There are no commission or transport costs for you to pay. The purchaser pays the transport costs unless the vendor is feeling very generous.
  • You and the buyer must come to an agreed value in the paddock. You can base this on recent auction reports or Meat Company price schedules.
  • You can keep on bargaining till you agree on a price or the buyer goes home in disgust!
  • There is always the concern over money. Insist on getting the money before you part with your stock.
  • You may need to involve your bank to verify that the buyer’s cheque has arrived in your account before you hand over the stock.

Buying/selling privately on the Internet

Work out what this exercise is costing the company - and the farmer. Cattle are drafted on the farm, then mixed for transport ( often from different farms), then drafted again by the agents at the saleyard. Internet selling avoids all this stress to man and beast - & the cost.
  • There are internet sites now that offer this service with the big advantage that no commission or transport costs are involved. The purchaser pays the transport unless the vendor is feeling generous.
  • You can quote a price or ask for offers or tenders for stock on sale, and take the highest bid by a certain date and time.
  • Websites selling livestock have important requirements about accurate description of stock and payment details. Surprisingly few problems of non-payment have arisen as buyers are often asked to comment on vendors’ integrity with previous transactions.
  • If you have developed a bad reputation as a trader – it’s hard to keep it quiet on the Internet!
  • Current auctioneers hate this idea and say it will never work as buyers always have to inspect animals with their own eyes. Old traditional buyers certainly did, but things are changing fast with much more emphasis on providing documented information on stock for sale.
  • Success depends on accurate description of the stock and there is plenty of space to provide full details on a website on their past history, breeding, feeding, animal health treatments, current weight and even digital photos or video clips.
  • This is a lot more comprehensive than the quick-fire three-second verbal blessing of animals an auctioneer gives each pen at the sale yards.

Selling prime stock direct to a meat company
  • You can sell prime stock ready for slaughter direct to a meat company.
  • This option is mainly suited for large operators who can send in large lines of stock on a regular basis.
  • The company’s livestock agent will come to your farm and estimate what a beast’s carcass weight will be, and hence what it will return to you in dollars when hung up as a carcass.
  • Agents do this by eye appraisal based on experience over many years. Agents have got to learn to do this to retain integrity with farmers and to keep their job.
  • Then after slaughter the meat company sends you the “killing sheets’ with the weights and grades listed, so you can then see how accurate the agent was.
  • Also the killing sheets show any defects or problems that will cost you dollars and be docked off your return, such as bruising or disease defects which may not have been of your doing. This can be very frustrating.
  • There will also be the “killing charge” to come off your return too.
  • Remember you cannot take stock home from the meat works. They die there!

Selling prime stock in the saleyards

Nice prime ox at the saleyard because the vendor thought he'd get
a bit more for them and there would be no killing charges to pay - only commission

  • For small operations that don’t have a regular supply of finished cattle, sending them to the saleyards is the best option.
  • At big centres, prime stock are sold over the scales so you can see the average weight of the pen and price per kg live weight. Always sell where there are scales as it gives you so much more information.
  • Prime stock are sold in the saleyards on the “fatstock” day which is usually the day before the “store” sale.
  • If you don’t like the price then you can always take them home – realising that you will still have to pay the auctioneer’s commission and the transport. There will also be a “yard fee”. All these may be less than the meat work’s killing charges.
  • Some vendors make prior arrangements with their stock agents to sell them on “headage plus 1%” rather than sale yard commission. This works out at about the same as the meat work’s killing charge and is less than the commission charges. But make prior arrangements incase the agent does not like this idea.

How to be a smart meat buyer
If you are starting to get keen on cattle dealing, this is what you need to aim for. Smart operators can do the following while having a chat with their friends or talking on their mobile phones!

Where cattle are sold over scales, the price/head and price/kg liveweight is displayed. The auctioneer sells prime stock per kg liveweight, and store stock on price/head
  • When the cattle come into the sale ring they estimate carcass weight by a quick eye appraisal.
  • They really don’t need the average live weight shown by the scales, but it helps if they need to do a quick Killing Out % calculation.
  • On their pocket calculator or in their head, they divide the estimated carcass weight by the price the bidding has reached, and see if it’s above or below the meat company’s schedule for the week which they have studied.
  • If it’s below they will bid until it gets close, and let a sucker keep bidding if it goes above.
  • No doubt a new generation of portable computers or even mobile phones with appropriate software will appear to make these exercises routine. Competition is a great driver of the acceptance of technology.
  • But it would be a shame if this took the fun out of buying cattle for those who like a bit of a flutter. Maybe someone can design a cattle buying game for poker machines that they can put in a special room at future saleyards – if there are any left!

Watch your language
  • The term “fatstock” is now not fashionable, as the industry is trying to get rid of the concept of “fat” meat because of its poor health image.
  • So we talk about “prime stock”. And we don’t talk about “freezing works” any more: they are “meat processing plants”.

Animal Status Declaration (ASD) form
The ASD form is produced by the NZ Food Safety Authority (NZSFA) and the Animal Health Board Inc (AHB), the former being concerned with overall food safety, and the latter with bovine Tuberculosis (Tb) in cattle and deer herds.

There is now (after 1 January 2006) only one standard form that must accompany the movements of all the stock classes covered by the form. In the past there has been a range of forms in operation.

The information required on the standardised form includes:
  • Supplier’s name, address and farm location.
  • Stock type, tally, description (breed, age, sex, ID or brand) and destination.
  • Animal history – e.g. where born and if you have farmed them for 60 days or more.
  • Withholding periods for any animal health treatments for all animals (adult cattle and calves, sheep and lambs, goats, deer, llamas, alpacas, horses, ostriches and emus) that exchange hands or are sent for processing.
  • Full details of products used, method of treatment and date used – IF they are within the withholding times for the products.
  • Animal history – where animals were born and if under any MAF movement control for residues.
  • Feeding. Have they been fed anything other than milk or pasture in their lifetime? Special concern is if they have been fed any ruminant protein which is now banned.
  • Johnes disease. Have they been vaccinated during their lifetime for Johnes?
  • Hormone Growth Promotants (HGP) full treatment details.
  • Tb declaration – the Tb status of the animals and dates when last tested – for cattle or deer only.
  • An Animal Health Board herd number or a Livestock Improvement MINDA number – for cattle or deer only.
  • You then have to sign the form and hand it to the person who is transporting or receiving the stock. Remember this form is required by law so take its accurate completion seriously.

Where to get the forms?
It's best to get the forms from the saleyard office as they'll be clean. Books kept at these kiosks have often been rained on and vandalised
  • If you are a client of a meat company they will send you books of duplicate forms (self-carboning) to keep and use as needed.
  • From stock and station agents’ company offices. They will only hold single copies so if you turn up with stock which are not accompanied by the forms, then you will have to complete two forms as the agents will not provide photocopying facilities or carbon paper.
  • From any stock agent or transport operator. They may carry single copies of the form so you will have to make two copies by hand.
  • Download a form from the NZFSA website along with a fact sheet: www.nzsfa.govt.nz/animalproducts/pubications/forms/statements-declarations/asd This will be a single form so you will have to make a copy.
  • The Animal Health Board will mail books of duplicate forms to all owners of cattle or deer who are registered on the Tb control database (i.e. have AHB herd numbers). If you own cattle or deer but do not have this registered with AHB, please go to www.ahb.org.nz to order or download ASD forms and update AHB with your details.

When and how are ASD forms used?
  • NOTE: All stock on the move must be accompanied by a completed form or forms from the start of their journey.
  • The practice of turning up at sale with no forms and completing then there may prove very inconvenient, depending on the stock and station company’s system.
Situations that you may meet:

Stock moving from seller to agent to buyer
  • Seller completes two copies and gives the original to the agent.
  • Seller keeps the duplicate copy – and files it for 1 year.
  • The agent endorses the original copy before it is passed on to the buyer.
  • Some agents may keep a copy of the form.
  • The buyer files the copy for as long as they keep the stock plus 1 year.

Stock moving from private seller to private buyer
  • The seller completes two copies and hands the original to the buyer of the stock.
  • The seller files the copy for 1 year.
  • The buyer files the copy for as long as they keep the stock plus one year.

Stock moving form private seller to meat company
  • The seller completes two copies and gives the original to the meat company with the stock.
  • The meat company files the form for 4 years.
  • The seller keeps the copy and files it for 1 year.

Buying different lots of stock at a saleyard.
If you buy stock out of different pens at a sale, (i.e. you take a pick of a pen and the rest are re-auctioned), this will happen:
  • You will have to get a form for each animal (or animals) you bought from each pen.
  • The stock and station company will have to provide these forms for the number of stock you bought.
  • They will photocopy the original for the total group and give each separate buyer a copy with the tally altered accordingly. This will avoid the agents having to fill in separate forms.
  • The seller will have to file the form for 1 year.
  • The buyer will have to file the form (or forms) for as long as they keep the stock plus 1 year.

Be aware of food safety issues

Calves being checked by officer from 'AssureQuality' for correct Tb tags

  • Today there is a long list of chemicals that are not allowed to be present in meat for human consumption and this even includes pet food.
  • So take special note of any “withholding” times on any animal remedies you treat stock with, so their milk or meat is not marketed until that time has passed.
  • All animal remedies must have been licensed by the Agricultural Chemicals and Veterinary Medicines (ACVM) Board.
  • Check the label to look for a license number and seek advice from your veterinarian if in doubt.
Animal welfare act & saleyards
Under the Saleyard's Code of Practice, it's the responsibility of all farmers not to send any animal to a sale that is "unhealthy, emaciated, injured, lame or unfit", and it's the responsibility of the stock and station company to send them back home, and refuse to sell them. The notice below could not be more clear. Sad to say this is not always the case

The law is very clear

Disclaimer This material is provided in good faith for information purposes only, and the author does not accept any liability to any person for actions taken as a result of the information or advice (or the use of such information or advice) provided in these pages.

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