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Livestock market transparency – possibility or pipe-dream?

Posted by Robert Herrmann on 24 November 2017
Robert Herrmann
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Debate currently rages about the provision of slaughter data by meatworks; the question processors raise is why should we provide it when it gives our export customers ammunition to reduce their price bids when supply and throughput is high?

Despite the obvious that when supply is low the boot would be on the other foot; that is processors could point to tight supply as a reason to increase meat prices, the question of “What is the value?” to the industry of greater transparency in publishing price or supply figures remains.

Perhaps a look at other similar cattle producing countries can help.

In the USA, mandatory reporting of all aspects of supply and price exists. Each packer processing beef must by 10.00am and again at 2.00pm report to the USDA the price, quantity & quality of every lot sold on the day.

This information is widely analysed and published, with the most significant output the beef cut-out price. The cut-out price calculates the retail value and re-constructs the carcase to identify the retail margin over the original cattle price.ClCmpRmWEAADwfY.jpg

The USDA website contends that “Livestock Mandatory Reporting was developed to facilitate open, transparent price discovery and provide all market participants, both large and small, with comparable levels of market information for slaughter cattle, swine, sheep, boxed beef, lamb meat, and wholesale pork.”

In Australia, the reporting of saleyard activity is transparent, all major saleyards have the attendance of independent NLRS reporters who record sales, and forward these to a central database where their reports are grouped and recorded.

MLA make this information available for all industry participants, and provide or allow further market analysis.

On-line livestock platforms also publish the results of all sales, with the addition of detailed assessments of each lot. In one sense, on-line sales provide more individual lot information, however historical or aggregated prices of similar stock types are not readily available for independent assesment, making price comparison, assessment and analysis difficult. So, while individual lot information is very transparent, market reporting of on-line sales is not.

Food-safety-inspectors-shut-down-meat-processor_strict_xxl.jpgThe other major sales method is direct to meatworks, often referred to as Over the Hooks sales (OTH). This sales information is completely non-transparent. Only the buyer and seller (and agent) of a specific transaction know this result. The mis-match of market power is that the buyer has sales information on all previous OTH transactions they are involved in, the seller only has the current sales information.

In general, a market will benefit from greater transparency. Certainly, the producers or sellers would be better informed if all market information was available. They would have access to all price offers enabling better decision making, as well as historical pricing (sales), allowing analysis of trends and longer run ranges of pricing.

Basic economic theory states that for a market to operate in an efficient manner all participants need to have access to all of the relevant market information for them to compete effectively with other market players. In the long run competitive market pressures between participants will lead to the most optimum allocation of resources according to the laws of supply and demand.

A lack of access to information for some market participants can mean that one buyer or seller, or group of buyers or sellers, can have an advantage over another. While this advantage can lead to a short-term gain for the better-informed participant it can lead to market distortion, reduce competition and ultimately lessen the broader benefit to the industry in general that would flow from having a more efficiently functioning market.

If the livestock industry is to benefit from improved systems and throughput is to be streamlined operating at “best practice”, then greater transparency of price & supply is an important first step.

Topics: Australian cattle industry, Sheep market, Sheepmeat market

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