Saleyard selling — the producer, the agent and the investor

KELLY COUNTRY: IF YOU are expecting a rant about saleyard fees and charges, you are going to be disappointed in reading this.

saleyard fees online artwork page 107

IF YOU are expecting a rant about saleyard fees and charges, you are going to be disappointed in reading this.

While it would be easy to take the emotive position that costs are too dear and getting dearer, there is no definitive outcome if you look at all the arguments that can be mounted from the perspective of producers, stock agents, and saleyard owners.

Let’s start with producers.

In the big scheme of producing an animal — from genetics to feeding to marketing — the cost of putting it into a saleyard is a very small component.

On this page is a breakdown of yard fees for all the major lamb and sheep saleyards in the south, from Wagga Wagga in the NSW Riverina down to Hamilton in the Western District.

Yard fees to sell a $120 lamb or sheep vary from 76 cents-per-head at Bendigo through to $1.34 at Wagga Wagga.

To look at this on a percentage basis, for a lamb that returns $120 to a farmer the yard fees amount to less than 1 per cent.

Consider this alongside shearing costs of $5 to $8, or eartags at 20-70c each.

As one farm consultant bluntly put it last week, farmers who lose sleep over yard dues are “really sweating the small stuff’’.

For farmers who use the Ballarat saleyards, the jump from a flat fee of 61c for sheep and lambs at the old council owned site to yard fees of 75c to $1.05 will doubtless niggle.

But it should be acknowledged that stock should only be in saleyards because it is the best selling option to give the vendor the best result.

From this perspective, having access to multimillion-dollar facilities (and all saleyards whether they are new or not would be valued in this range) that bring buyers together and create competition for less than $2 for lambs and between $10 to $20 for cattle is not that bad a deal.

Now there will be farmers out there saying it is all the small costs that add up and kill agricultural viability.

Such a stance has some validity, but to come to a conclusion that yard fees are too dear is a stretch.

Now to take a look at saleyard fees from a stock agent’s perspective.

Many people would be surprised to learn agents pay what is called a service fee or rent to conduct their business at a saleyard, both council and privately owned.

The fees are applied in many different ways, from a set charge per market day, a yearly fee, a flat fee per animal sold, or in the case of many of the newer privately-operated saleyards a percentage of an agent’s financial turnover.

The new Ballarat saleyards operated by Central Victorian Livestock Exchange will charge agents 0.25 per cent of turnover, which will mark a massive increase on the set fee of 14c per lamb sold and 50c for cattle charged by council at the old site.

On the 0.25 per cent formula, a $120 lamb will attract an agents’ fee of 30c and a $1200 cow or steer a charge of $3.

As the figures in the table show, in the case of lamb it will mean Ballarat agents are paying much higher fees than comparative yards such as Bendigo, Horsham and Hamilton.

From this perspective, concerns raised by Ballarat agents over the hike to their costs can’t be dismissed.

What was telling during research for this article, was out of about a dozen agents who were asked about the fees they paid at various saleyards no one could answer.

It suggests agent’s fees are not that detrimental.

And compared to what they net from commission, yard fees represent a very small component.

On commission of 5.5 per cent, a $120 lamb generates $6.60 while a $1200 steer nets $66.

There is also the argument that increasing agents’ fees is a fairer way to distribute the costs for selling in saleyards.

Ballarat and Wagga Wagga are now neck-and-neck in terms of total fees for selling a $120 lamb, at $1.54 and $1.52. Yet at Wagga Wagga vendors pay the bulk of it.

And at this centre once a lamb returns more than $140 the yard due lifts to $1.49. But the agents pay the same set fee of just 18c.

Finally, from a saleyard perspective.

The assets and infrastructure involved with saleyards is big and costly. The reported cost of the new Ballarat site is $24 million.

CVLX comes under the business arm of Palisade Investment Partners.

The Weekly Times was told investors would be looking for a conservative return of 5-8 per cent on money put into these saleyards.

On paper it means the centre has to generate between $1.2 and $2 million, without taking into account operating costs, which would be additional. Based on last year’s saleyard takings on throughput and published by Meat and Livestock Australia, the Ballarat yards sold 1.3 million sheep and 49,000 cattle.

Accurate figures are difficult to calculate, as the new Ballarat yard fees are based on a sliding scale based on an animal’s value.

To keep it simple, at an average of $1/head in yard dues for sheep and lambs, and an average of $15 for cattle, it amounts to around $2 million.

Then the agents’ fee of 0.25 per cent on an average sale value of $120 for lambs and sheep amounts to $390,000 and cattle at $1200 a head to $147,000. So in round figures it equals $537,000.

The figures don’t appear that extreme based on the claim of a return of 5-8 per cent on asset value.

The verdict overall is that to come to a fair conclusion on saleyard fees and charges you have to wear a lot of different hats.