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Pre-sale vs post-sale weighing: Which is best?

James Nason, 28/04/2016

SHOULD saleyards cattle be weighed before they are auctioned, or after?

The pre-sale versus post-sale weighing issue has been a source of significant unrest in Australia’s livestock industry in recent years.

It was the issue that sparked the current senate inquiry into competition in the red meat processing sector, after a groundswell of producer anger flared in response to decisions by several processors not to buy at a Barnawatha cattle sale 12 months ago.

The buyer withdrawal was interpreted as a processor boycott against the new centre’s pre-sale weighing policy.

Producers saw the move as anti-competitive and an attempt by processors to manipulate the market in their favour, while processors argued that post-sale weighing ensures greater consistency and certainty of dressing percentage which ultimately benefits all in the supply chain, including producers.

The scrutiny on the red meat processing sector has since intensified with the Australian Competition and Consumer Commission announcing it will use its powers to conduct an in-depth investigation into the beef and cattle market.

Beef Central understands the Senate Committee has now decided to push its final reporting date back so the results of the ACCC’s investigation, not currently scheduled until November, can also be included in its final report.

There is some talk Senate Committee may release an interim report as early as this week, although whether that early report would include any recommendations, and what purpose an ‘interim’ report would serve, remains unclear at this stage.

The inquiry has seen numerous producers, agents, saleyard operators and processors add their weight to the pre-weigh versus post-weigh selling debate.

Almost invariably producers who have fronted the inquiry have argued strongly in favour of pre-weigh selling, while processors and some saleyard operators have argued in favour of post-sale weighing.

So who is wrong and who is right? Answering that question in a definitive way, and to the satisfaction of all industry sectors, may well be an impossible goal.

But below Beef Cental has outlined the various arguments offered for and against by different parties during the Senate inquiry hearings.

 

What’s your view? Share your thoughts in the comment box below this article.

In favour of pre-sale weighing

New South Wales Farmers livestock president Derek Schoen said most farmers believed post-sale weighing acted in the favour of processors, particularly in large sales where weighing may not occur until hours after the sale, by which time cattle have significantly hollowed out and lost weight, raising animal welfare concerns and reducing the kilograms for which producers get paid.

Despite the producer resistant to post-sale weighing, most NSW saleyards now operated under post-sale weighing conditions, he said. This outcome had been achieved by “the stealth of the processing industry” he said. “As saleyards have been redeveloped, the processors have put the pressure on—just like what happened at Barnawartha—to get it changed over,” he said. Long curfew periods from the time of loading to the time of post-sale weighing were more likely in larger sales, and could result in carcases failing to grade MSA, instantly costing the producer 20c/kg. “If the size of the yarding is not taken into account—if it is a small yarding and a pretty straight forward sale and the animals get weighed very shortly after the knock of the hammer, then it is not a major problem,” Mr Schoen said. “If you are having a 9 pm curfew and the animals are not getting weighed until four o’clock (the next) afternoon, when they have already been on a truck four hours prior to getting to the sale, then it is becoming a major problem.”

VFF livestock president Ian Feldtmann said pre-sale weighing provided maximum information to all buyers at the point of sale. In giving restocker or private operators the certainty and confidence they needed to compete against professional buyers, it translated into more competition in the market. “That is an important part to bring as many players into the system for competition. That is where producers are coming from,” Mr Feldtmann said.

Under a pre-sale weighing scenario, a buyer will sometimes pay 10c more than he is happy to pay, and will sometimes pay 10c less than he is happy to pay, argued Victorian cattle producer Julian Carroll. “Post­weighing, on the other hand, moves that cost on to producers,” he said.

Post-­weighing was “a very crude and unnecessary solution” to processor concerns about variability in dressing percentages, Mr Caroll said.

It was counter-intuitive to reduce the amount of data available to the market, particular in today’s “information age”, which post-sale weighing did by not allowing buyers to know the weight until after the sale was conducted.

“Worse than that, it gives the professional buyers an unfair advantage over restockers as they can draw on their experience and better live animal assessment skills to acquire the cattle they want without weights published,” Mr Carroll said. “It makes it very hard to buy cattle for a tight weight specification when the buyer does not know what they weigh. It also makes it hard for a seller to ‘no sale’ a result when they don’t actually know how much they will be paid. Pre­sale weighing is fairer for all parties.”

Post-weighing lengthened the time livestock were in a potentially stressful saleyard environments, raising animal welfare and meat quality concerns. The hard work producers invested in raising an animal, particularly to MSA grading standards, was most at risk in the two week period pre-slaughter and the first few hours post-slaughter.

Substantial data was available around how animals lose weight from the time being taken off feed, showing that they lose weight quite consistently over the first 12 hours. Julian Carroll suggested that providing information on pen cards stating where cattle came from, what time they were loaded onto the truck and what time they were pre-weighed at the saleyard, would be enough for professional buyers to accurately assess what their dressing percentage would be.

Can vendors withdraw cattle from sale post-weighing?

A number of witnesses said producers had the option to withdraw cattle from sale after they were weighed if they were unhappy with the weight and their return. Senator Joe Bullock questioned it if really mattered if vendors could withdraw cattle from sale after they were weighed anyway. By that time, he argued, the vendor had already been charged a saleyard selling fee as high as $18 per head, which he would still have to pay in the event of saying “no sale”, as well as the costs of transporting the cattle back home. “Why would you say ‘no sale’ because it is going to cost you more to take it home?” Senator Bullock asked. In the Senator’s view, producers could not effectively exercise their right to exit a sale under a post-weight selling system because of the costs they would incur to do so.

In favour of post-sale weighing

Months before the controversial Barnawatha sale last year, Teys Australia had advised the saleyard’s operators and agents that it would not compete at the centre if only pre-sale weighing was provided. Teys advised that its preferred option was for the new centre to offer both pre- and post-sale options and “to let the market sort out what people wanted to do”.

Brad Teys told the inquiry that post-sale weighing with a curfew gave everybody the best and most consistent results when it came to buying cattle. “At the end of the day we (processors) are buying yield of saleable meat. At the moment the industry buys a carcass. Depending on your carcass yield, if you have a pre-sale weigh you will get are a lot more variability in what that carcass yield will be as against post sale.” He further explained: “I bought cattle in Wodonga for many years and it was pre-sale weighing and you got less yield and less consistent yield, because you are buying a carcass, you are not buying a live animal. The processor buys a carcass, but we should really be buying yield of saleable meat. That is where value based marketing comes into it.”

Wayne Osborne of saleyard operators Victorian Livestock Exchange said the company made approaches to buyers to ask what their preference would be. From the dozen or so opinions gathered, eight to nine buyers “were indifferent, and four favoured post-weigh”, he said.

Operationally, and from an Occupational Health and Safety perspective, post-sale weighing was easiest for saleyard operators, Mr Osborne added. Under pre-weigh systems cattle were generally weighed between midnight and 6 am. “So it can be easily understood that, as a saleyard operator, it is far easier for us to attract employees and far easier for us to meet the OH&S and fatigue management requirements when the weighing occurs in daylight hours, as it does under post-weigh. This might sound like a bit of a flippant issue, but it is a big issue for livestock agents when they have worked from midnight through the wee hours of the morning and done the market and have not headed home until late in the afternoon, and they are facing huge liability and duty of care issues. We are aware of two livestock agents that fell asleep at the wheel of their cars, crashed and died after having worked under those circumstances in pre-weigh saleyards.”

The VLEs Graham Osborne said market forces “always drove everything”, and the best evidence was what was actually occurring: in Victoria, three saleyards were growing (the VLE’s Shepparton, Pakenham and Leongatha centres), all had a format that both buyers and vendors had supported, and all were post-weigh yards. “The vendors have chosen to support them as much as the processors have. There is the most powerful market evidence in Victoria. That is the reality”, Mr Osborne said.

Wayne Osborne said the closer two key events occurred in a sale – the recording of the weight and the recording of the price – “the more fair, transparent and equitable the transaction will be”. Post-sale weighing allowed for those two events to occur closer to each other than pre-sale weighing, he said.

Pre-weigh selling was also open to manipulation of circumstances to sell animals containing worthless gut-fill that buyers had to pay for. “It is not illegal,” Mr Osborne said. “It is not particularly fair, it is not particularly equitable, it is not particularly transparent, but it is not illegal. You can understand that the buyers probably are not too happy about it. Having said that, if I were a farmer selling in a pre-weigh selling system, I would be doing it, and doing it deliberately.”

Australian Meat Industry Council chairman David Larkin said the council’s preference for post-weigh selling was based on experience that it gave “a more accurate and, ultimately, better return to the producer and a more accurate yield to the processor”.

“A better return to the producer is gained by post-weigh selling because you are able to be more competitive. There are fewer areas of doubt,” Mr Larkin said, later adding: “…post-sale weighing will give a better return to producers because processors and people operating at an auction will be able to be more bullish, if you like, in terms of the prices that they are able to bid and bid up to, given that there are less unknowns between a pre- and a post-weigh selling sale.”

 

Negligible difference in returns between pre- and post-weigh: RIPL

One of the largest saleyard operators in Australia, RIPL, which operates saleyards from Victoria to Queensland, was asked if a clear financial benefit was evident for producers under either pre- or post-weigh selling. RIPL’s Gary Edwards said the company’s data, which has been independently verified, showed that pre- or post-weight had little impact on a producers’ financial returns.

“We have done internal testing and data verification that shows that the difference between pre-weigh and post-weigh, providing there is a definitive curfew in the pre-weigh, can be as little as half a per cent. In many instances it does not exceed one per cent, given the nature of how livestock lose weight,” Mr Edwards said.

If processors did not know the actual time the curfew commenced, they were unsure as to whether they were dealing with a six hour or a 12 hour curfew. Post-weighing dealt with that issue, because it ensured a minimum curfew of 12 hours, by which time the bulk of weight loss occurred.

The greatest difference to producer returns and animal welfare in RIPL’s data was caused by the facility itself – such as wether it was covered, had a soft floor or a concrete floor, the type and availability of water, and how the stock are handled throughout that process. “The substantive difference then relates to whether the animals are relaxed and whether they are consuming water. If they are doing that, which they do under the undercover soft floor facilities—and that is the biggest difference between the old facilities and the new ones—then there is a substantial reduction in overall weight loss. In many cases, that reduction more than pays for what the yard fees are for using the facility,” he said.

Several months after the row at Barnawatha, which is owned and operated by RIPL, Mr Edwards added that “the market and buyers” had adjusted to buying post-weigh. “We now have prices that are comparable with any other facility out there.”

 

 

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Comments

  1. T N Bailey, 29/04/2016

    Perhaps the fairest system is for the cattle to be weighed just before the point of sale. As they do in other parts of the world. This necessitates the cattle to be moved to a selling ring and over the scales just before they enter the ring around which the buyers are waiting. It would mean re-organising the system.
    The producers can see their weights and know their margins. They do have the rights to withdraw on the day. The present system leaves too many advantages to the buyers as if they do not have enough anyway. Health and safety factors would have to be paramount obviously. How did the market system develop originally. Was it entirely to facilitate the buyers only? Which is as it is today.

  2. Tony Fleming, 29/04/2016

    What’s been completely lost in this discussion and reader comment is that processors clearly do not pay the same c/kg rate for cattle bought pre and post sale weighing. They have intimate knowledge, based on years of procurement, of the difference in shrink loss in cattle bought through both methods. They simply adjust their pricing mechanisms to suit, as well as factoring-in the greater variability in yield loss in cattle bought pre-weigh. Any meatworks that was simplistically paying the same c/kg liveweight rate for pre-weighed and post-weighed cattle would have gone out of business years ago!!! Specifically in terms of dollars into the producer’s pocket, it matters little whether the cattle are bought pre or post-weigh, because the processors bids will clearly reflect it.

  3. Phil seymour, 29/04/2016

    Store market-weigh before. Fat market-weigh after sale

  4. Loretta Carroll, 29/04/2016

    Mr Edwards and his company RIPL have a very poor record when it comes to communicating with its saleyard users. My cattle have lost between 8% and 10% in weight where pre-weigh was usually 5 to 6% this is an estimated loss of between $30 and $70 per head, to me that is significant. If you than calculate the added cost to the carrier who has to wait for the cattle at the other end due to post-weighing, again a very significant cost. I have also heard of instances where carriers have had to wait till after 5 pm to collect cattle only to realise abattoir is closed and having to leave cattle on truck overnight. What is also significant is that Australia is the only country in the world that does not provide a weight at the point of sale. Also interested to know if Teys is so against pre-weigh selling why they buy cattle out of the Wagga Market where they use pre-sale weighing and where prices are comparable to other post-weigh selling centres.

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