Processors across the country are slowly coming to terms with the transparency and efficiency concerns that were a major objective of the Australian Competition and Consumer Commission (ACCC) Cattle and Beef Market study conducted in 2016. This comprehensive final report was finalised in March 2017.
The ACCC was concerned about concentration of ownership and competition in all sectors of livestock trading and the review findings and or recommendations were, in some cases, rightly questioned. One reaction from NSW processor Bindaree Beef was swift by taking heed of one of the recommendations contained in the report and making their pricing grids available on the company’s web page for all producers and obviously all competitors to view. Major southern processor Thomas Foods International (TFI) has now adopted the same recommendation, and other processors, I have no doubt, will in time follow suit whether they want to or not.
When we have a stable and/or rising livestock market, this will be a competitive advantage for producers when negotiating with processors. What happens when it is dry, increased numbers are hitting the markets and prices are declining? Will this transparency create an urgency or even a panic to off-load livestock and processors are in a race to the bottom with their pricing?
Take the ASX last Friday (July 6) as an example. Elders shares started the day at $8.26 and by the close of trade were $7.06. A broker/trader was worried by the dry conditions and the pull back on the price of livestock and other commodities and issued an earnings downgrade on the share.
One person’s opinion started driving the price down, other brokers/traders followed suit, and by the end of the day, the share had tanked 15 per cent. The share market overall on the day improved close to 1pc.
Could this happen in the cattle market with this need for transparency with grid pricing? I certainly think it could. Would a processor with ample supply of livestock on hand drop the grid price 30 or 40 cents because they had no need to be in the market and wanted to slow down, or attempt to slow down supply?
Would a processor who has secured larger consignments from a major supplier in a forward contract arrangement be inclined to drop their grid price and in turn have a negative impact on the physical auction market on that day?
These questions need to be considered. When one company increases its grid price, it does not take too long for others to follow. Therefore one would expect the same works in reverse.
For the record, I do own Elders shares.
Andrew Adcock on study tour
Rural property identity, auctioneer, bookmaker, property developer and man about town, and mate, Andrew Adcock is heading on a three-month rural study tour to France with his charming wife Elizabeth.
Andrew started as a rural property sales agent in Charleville in 1989 and transferred to Brisbane in 1999.
He often reminds me that he holds the record for the highest priced property sold at auction under the hammer – Cungellella, for $35.5 million.
I take the chance to remind him that he also sold under the hammer the butchers paddock in Augathella for $30,000.
He had a flamboyant career as a Western Downs bookmaker. Starting in Charleville in 1985 and received a leg up to “The rails” in Roma when noted Roma Hereford breeder and then president of the Roma Turf Club John Galway gave him the nod (so to speak) to field.
One of Andrew’s great mates is another western lad in one Peter Moody of Black Caviar fame. He could not believe that Peter had the great fortune to meet Her Majesty Queen Elizabeth when the mare won at Royal Ascot.
Not to be outdone, Andrew said one of his highlights was doing a property inspection with legendary English cricket commentator Henry Blofeld on a Clyde agriculture property in Western Queensland.
Last century Andrew! Not even close mate.