Why the knockdown price in saleyards might not hold

Increased cases of lambs showing up at abattoirs with carcass damage from seed is testing the legal and ethical rules of selling livestock at auction.

Increased cases of lambs showing up at abattoirs with carcass damage from seed is testing the legal and ethical rules of selling livestock at auction.

When buying stock direct, abattoirs can freely set grids and price penalties, and currently, most are discounting seed-damaged lambs by $1.50 to $2 per kilogram carcass weight depending on the severity of the infestation.

It is a big penalty – a 30kg lamb sold at 800c/kg and worth $240 gets dragged back to $180 at a discount of $2/kg.

Some buyers and abattoirs are reportedly trying to push such claims onto lambs bought out of saleyards.

It means clarifying auction rules is important because farmers could face the scenario of being told the stock they sold a week earlier at, say, $250 could end up being paid out at $190 (30kg x $2 discount = $60 less than the fall of the hammer price).

The key question is: does ownership and liability of stock pass onto the buyer at the fall of the hammer, i.e. is the much famed ‘buyer beware’ rule of the auction system really enforceable?

It seems a simple enough question. But there appear to be no clear answers to this seed saga, with organisations ducking for cover and few people within the industry willing to comment publicly.

Most livestock offered at auction are sold under the terms and conditions set out by the Australian Livestock and Property Association.

The Weekly Times sent questions to ALPA asking the organisation to clarify selling terms, specifically if claims for seed damage in lambs could be made against farmers who had sold lambs in the auction system.

The response: “Thank you for reaching out to ALPA regarding grass seeds in lambs in southern markets; however, ALPA respectfully advises that we do not wish to submit any comment on the matter.’’

This adds to agent, vendor and buyer confusion because it is ALPA’s document that underpins the framework of selling livestock by auction, and ALPA should know the legal strength of its terms and conditions.

Two clauses within the ALPA terms are being debated between those on opposing sides of the sale transactions for lambs that show up with seed at processing.

The first clause is being argued by the selling side and refers to section 17(c) of the terms and conditions, which states: All livestock other than cattle sold on a liveweight basis is at the risk and expense of the buyer upon the fall of the hammer.

Some sub-causes follow this paragraph which gives buyers a brief period to reject an animal for lameness, blindness or disease, but any ‘rejection period’ ends well before stock reaches the processing chain.

Bonnie Skinner, Sheep Producers Australia chief executive officer, said the ALPA document was clear-cut:

“According to the ALPA terms and conditions, if the sale occurs under these (terms), there is no legal obligation for the producer or saleyard to negotiate with processors if grass seed is detected.’’

Many agents staunchly agree and argue the change of ownership for lambs takes place at the fall of the hammer, and the vendor cannot be held liable for any issues beyond this point.

One agent described it as a ‘sacrament’ to the auction system.

But some meat processors are reportedly attempting claims by evoking a ‘merchantable quality’ clause which is also in the ALPA terms of selling.

This clause 27 states: The warranty of a vendor is that livestock and their companion animals are offered for sale at auction:

•Pass government and other regulatory authority requirements and inspections at the time of slaughter;

•Are of merchantable quality.

The term ‘merchantable quality’ is broad and basically means fit for purpose or meeting the reasonable needs of the buyer.

Many agents admitted to The Weekly Times that there was a raft of “grey areas’’ in regard to the grass seed issue.

They said most claims, made in the past two to three months, for saleyard lambs had been negotiated with processors based on the evidence of carcass damage reported through pictures and video, and the accuracy of lamb identification.

In at least one case, the selling agent refused the claim around lack of proof for animal ID, and that is one of the big questions to arise from meat works claiming any sort of penalty from saleyard stock that are often mixed with others for transport and during lairage.

Another major ‘grey area’ is how the severity of grass seed damage is assessed – mild to severe – and how the scale of price penalty is applied.

Some auctioneers have begun advising meat buyers where lambs have come from in a move to try and prevent any claims post-auction. It was done at Swan Hill last week. The inference was that buyers were made aware stock were from a likely grass seed region and should have altered their price accordingly or not bid.

Aside from the legal queries raised about auction terms and conditions, grass seed in lambs also presents some moral and ethical questions for farmers and the industry to ponder:

•If a farmer suspects or knows (after selling lambs direct and receiving carcass feedback) that lambs have seed damage, should they be required to advise this at the point of auction. The Weekly Times has been told of a case whereby a processor stopped a kill chain and sent a draft of lambs back to the owner due to severe seed damage, and the lambs were subsequently sold in the saleyard system;

•What is the responsibility or liability of store lamb breeders to inform traders/finishers of possible seed issues.

The Weekly Times was told of a case whereby a run of store lambs purchased and put straight into containment and onto grain were penalised for seed when sold direct. Agents said it meant the finisher wore a harsh penalty for damage that occurred earlier in the lambs life;

•Lambs being trucked out of grasseed-prone areas and offered at saleyards further away where buyers were less wary of seed problems;

•Once lambs are sold for a price at the fall of the hammer and the vendor is advised of this money by the selling agent (often within hours of the auction by text or email), is there any obligation for the agent to still pay-out the funds if the lambs are discounted later?

Grass seeds is a Pandora’s box, and even through it might be a problem that comes and goes according to seasonal conditions, it has highlighted a host of issues that industry needs to clarify.

Saleyards are still a major part of the livestock transactions and everyone – farmers, agents, buyers – need to know the firm rules of play, particularly when significant penalties of $2/kg are being thrown about.