A group of farmers based in northern England and Scotland have called into question the future of prime lamb auctions.

They believe collection centres trading directly with abattoirs are a better option, but what do you think? As a former auctioneer I still have faith in the auction system, but feel there are often too few buyers or too many buyers with multiple orders to make it competitive.

 Jonathan Long

FW Livestock Editor

I guess Johnathon has summed up the problem pretty well. I suppose that there are a number of different types of seller also, each with their own requirements. In recent years, as a breeder of low numbers of sheep I have found the markets do not give me a 'fair' return and have virtually abandoned them. The distance between markets has increased and the bigger farmer might find benefits in having a collection centre nearer home useful.

As the number of people keeping stock has fallen, there are also less people buying in, (disease and movement restrictions don't help) and this has encouraged more people to use their own breeding stock.

In addition, the decreasing value of sheep means that there is less point for the medium to small breeder in travelling to replace his 'marginal' breeding stock for better stock that he may be able to get at a market.

I have a feeling that we have seen the best days of auction markets and, although a few will remain, the majority those remaining will have closed within 5 years. I do hope I am wrong.

i am a market man. i have no faith in direct selling.

auctions i have always found to be fair and honest. also you meet up with friends and fellow farmers in the mart.

this morning 6 of us were sat round a table in the cafe and had a good old yap! that is what life should be like

As small scale pedigree breeders, the majority of our lambs are sold privately as breeding stock.  The surplus, between 30 and 40, mainly ram lambs (only 3 ewe lambs in the last 3 years) are sold privately as whole or half lamb packs.  Our return on these is linked to the general retail price in the area, not market prices.  The only sheep going to market are cull ewes.

Our local market seems to be very effective in getting buyers in and I suppose to some degree the cull ewe prices are good because we are close to large urban areas with good ethnic demand.  I don't check prices very often, but when I do, I see that our market is always among the best prices.

I agree that it seems there is a drift towards dead-weight marketing direct to processors, but I do wonder whether, without the free market option, would lamb and beef producers be put in the same position as pigs and poultry and be held in thrall to the processors whims.

Also, I wonder what the effect of 'red' markets has been.  I hear so many complaining of the poor prices received, but without the option of taking stock home, it would seem to me to be a recipe for lower prices.  

  I have to reply . If there are no fatstock sheep auction markets, what is to stop the wholesale abbatoirs run or dictated to, by the supermarkets, from caning us poor lamb producers just as they have done during the last two F&M crisis. They  dropped their prices as soon as the markets were not allowed . Then they deliberately kept low prices in the auctions.I for one supported our local sheep auction every week during this autumn, because if there is no auction system, there becomes more power to the multiples to fix their prices. The exception to this is M&S and Waitrose who have stuck to their contract price of 230-240p/kilo. during the Autumn, which is 20p better than I was offered for export lambs this morning.There has to be room for both types of trading, Tesco and Sainsbury always seem to rely on short term economics, which I think will in time may well be to their cost , as we move into times where we as farmers/ producers will be producing assured stock that is going to be wanted by the customers.

I think it would be a huge mistake for you to cut out the auction method.  Come over to the the States first and see how our fat cattle and fat hog markets work, and gauge the satisfaction of our producers.  If any fat stock trade by auction over here, the percentage is miniscule.  The question then becomes, how do you set the price, and who sets it?  In the beef trade we have a handful of huge packers.  What cattle are on the open market(I don't know the percentage but it is still significant) often times will trade over a few hours at the end of the week, because all during the rest of the week the packers and the feedlot owners try to stare each other down.  In our area we have one packer, Tyson.  They will come to the farm and bid on your cattle, but if you don't like the bid, what recourse do you have?   The next nearest packer is over 100 miles away.  Chances are, their bid will be exactly the same.  Often times, if the packers do not like the price of cattle, they will shut down a day or two, creating a backlog of cattle, thus driving down the price.  Since there is not an auction alternative, the game is played according to the rules set by the packers.  You can hold out, all the time your cattle are getting fatter and eventually may get too heavy, so in the end, there is no choice but to accept the price the packer offers.

The hogs are even worse.  In 1996, the last really good year for the hog business in this nation, I didn't sell a fat hog under 50 cents a pound, on up to 65 cents(today, low 30s).  At that time I could take hogs 4 days a week to 3 different collection points within 30 miles of my farm, and be paid live on the spot.  There were 4 or 5 auction markets within 100 miles selling fats, culls, and feeder pigs.  1997 was also a very good year for hogs.  At that time, many states had laws against corporate ownership of hogs.  Our own producer led organizations pushed to over turn these laws, claiming that direct contracts with packers would eliminate middle-men and bring stability to the hog markets, as I recall it would flatten the peaks and make the valleys more shallow.  Well, they got it half right, it for sure flattened out the peaks.  The packer contracts didn't actually guarantee a floor price.  The base price was set at say 40 cents per pound.  If hogs went to 30 cents, you got paid 35, but the other 5 cents went into what was called a "ledger account".  The producer ended up owing the packer money.  The idea was, that when hogs exceeded a certain price, say 50 cents, the producer would use the excess to pay off the account to the packer.  Well, what do you suppose happened when fats got to 8 cents in the fall of 1998?  24 cents under the base, divided by 2, you ended up owing 12 cents per pound to the packer, and were still getting crap for your hogs, (20 cents or so).  12 cents on a 250 weight fat, about $30 a head debt, plus still losing.  I actually don't know what happened with some of the ledger accounts, but I do recall some very believable stories that guys who started 1998 in a perfectly solvent state ended it beyond the point of no return, and I also know that some large producers ended up owing packers a million or so dollars, and then the issue was was it secured or unsecured debt.  By 2000, I could only sell at one point, once a week, deadweight, I paid the trucking to the plant(100 miles).  Those of us who would not or could not contract hogs were left to sell on an open market, a market with no real way to have price discovery.  Eventually I got involved with a pool run by a feed company.  But not one time in the last 9 years have hogs been as good as they were before the contract boom of the late 1990s.  While a $20 per hundred spread between fat cattle and fat hogs use to be considered huge, today fat cattle fetch 3 times the money per pound that fat hogs do. 

The idea of cutting out auctions is old hat here.  It sounds like a good idea, but as far as I am concerned, the trend toward direct trade with packers has almost entirely benefited the packer.  I don't know the mindset of those you deal with in the UK, perhaps they are more concerned about giving the farmer a good deal, but I doubt it.  Correct me if I am wrong, but the bloodbath in prices was caused by all of the movement restrictions, wasn't it, not the auctions?  I would be interested to hear what plan is being followed with regard to how prices will be determined if fat lamb trade is moved toward this collection point idea.  The other issue, and I could go on and on, is when packers have a guaranteed number of head coming in to the plant under contract,there isn't much incentive for them to bid on the open market, so what happens to those without contracts, or not in the marketing group?  Once the auctions are gone, they will probably be gone forever.  With auctions you get true price discovery in my opinion.  Sometimes the seller doesn't like the price, other times the buyer doesn't.  I say, better investigate our trade over here, you may find your situation doesn't look so bad. 

The fact that livetock marts dont want to have collective markets is a un-mistakable fact,if it was a good and workable scheme then they would be a reality.Transparency is the biggest problem ,allegations of farmer A getting more than farmer B would make life unberrable for mart staff.Remember we are involved in agriCULTURE ,if we dont use the marts we will lose them and our way of life

I agree that markets are desireable for all the reasons stated. The demise of markets is however, virtually inevitable so long as the government and big business do not believe in their benefits.

For some years Britain has followed the Japanese model of supply chain development in which each link in the chain specifies exactly what it wants from the preceeding link. Each link then gears itself up to produce exactly what is required at the right spec, agreed price and agreed delivery date.

The automotive sector works that way as does just about every other sector. Retailers work that way with all their other suppliers and so want to use the same model with their agricultural suppliers.

In that scenario, tell me where in the supply chain, is the place for auction markets?

As I said earlier, I wish it were not so!

Dear Peter,   I agree some producers have no option but to send lambs direct to slaughter houses,but believe me if every one did this it would soon go the same way as chickens, the supermarkets would determine the price you would get and you know that lambs have been half their value last autum as if to say"buy 1 get 1 free",lamb was not down in price to the shopper,  as to your question where is the place in the supply chain for the auction market, I would say that it is in the middle, you take your lambs to market if you are noy satisfied with the price you can allways take them home ALIVE and send them another day, you can only send lambs too slaughter houses once, when its hanging its to late to quarel about price or conformation as I have been done twice 2001 and this time f & m raised its head again. what ever you do keep the markets going PLEASE, we are very lucky in north and mid wales there are quite a few good markets.

cymro.

I am sure that you are right in that slaughterhouses and retailers would squeeze the life out of us should markets disappear.

I also agree with your point, that we can take our lambs to market and take them home again if they do not make the price. This being the only action (except pleading and moaning) that suppliers can take should they be disatisfied.

Unfortunately, I do not believe that taking stock home is sufficient to influence decisions by buyers at markets. They know that many farmers have limited grazing at the time when they are selling fat lambs, and/or that the lambs are at the 'right' weight and condition. This being so, taking them home will only mean that they lose condition and so are unlikely to get a better price the following week. Buyers also know that the number of markets has declined and that a trip to market can cost a farmer half a day and mileage. These factors militate against the farmer taking stock home.

It is thoughts such as these, that has led me to conclude that markets are all but finished. However, you are right in that when markets have finished, it will be only a few years before stock farming is screwed into the ground by buyers.

I think that, politicians apart, there are three things that could make a big difference. 1 That auctioneers remember that their duty is to the seller not the buyer. (Currently they favour the buyers on the assumption that 'without buyers there is no market.) 2. Farmers could cooperate in using only selected markets on a short notice basis. This would create uncertainty in the minds of buyers. 3. Farmers could cooperate (a bit like Handleys, now defunct Farmer's Ferry idea) to develop overseas markets, thus reducing availability of their product to the UK and thus INCREASING food miles.

I think however, that the English farmer is unlikely to take these ideas, and that only the Welsh farmer is sensible and socially minded enought to take the lead.

There are however, risks associated with farmers trying to influence markets in the ways proposed, but the alternative is a continuation of the decline in family based stock farming. Given that the politicians obviousely do not understand or care about agriculture, farmers have to make things happen by themselves.

As I said earlier however, I do not think it will happen.

What will probably happen, is that family stock farming will continue to decline and shortfalls in production will be taken up by corporate large scale farming, increased intensification and factory/laboratory food production.

When I read these posts about whether or not to do away with auctions, I want to jump up and down and scream at you guys.  The absolute worst thing you can do is sell direct to packers,or worse yet contract.  We call it captive supply over here.  Sure, it sounds good.  Raise a premium animal and we will give you a premium price is what you are told, cut out the middleman, and to begin with it works that way.  Once the ability to sell an alternative way is gone(the auction) you are then at the mercy more than ever of the buyer.  Selling deadweight grade and yield is fine, but as has been pointed out, once the animal is dead, you are going to take what the packer gives you.  Reports this last month have been that the packers are docking heavyweight fat hogs down below cull sow price, I heard from two different guys I pool with they were given one third the price of prime fats on hogs 20 pounds over weight, $10 a hundred weight below cull sow price!!!  There was nothing they could do because first, the packers are running full and they had to wait 3 weeks to get their hogs in and second, the hog was dead, the plant is  over 100 miles away, you take the price and like it. 

When we started the pool, the standard hog was 230-280 liveweight, baseline price at 48% lean.  Premiums up to $10 per hundred dead on 59% lean and up, docks of I think $5 on the too fat side.  When we had finally begun to see some good premiums, the packer changed the baseline to 51-52% lean, dropped the best premium to $5 and raised the high end dock to $10.  In other words,  a hog that would have earned $7-$8 premium per head now was the base price, the hog that was base was now getting docked $5, the rare hog that would earn a $25 per head premium now fetched $12.50. 

Don't fool yourselves thinking the auctions are the cause of poor livestock prices. They aren't.  I know they aren't perfect, but you mark my words, get rid of them, or even cut them back severely, and the days of the independant stockman in the UK are numbered unless you want to change is some ways you will not like. 

I realize I am coming off as a know it all, but I was envious of the way smaller cattle feeders could operate in the UK, guys feeding less than 200 head.  I wish we could do that over here, and survive.  Your system of marketing is pretty good I think, not faultless by any means, but more favorable to family sized agriculture than ours is.  You can still find ways to get premiums for above average animals with auctions, we call it "reputation" here, maybe you have the same thing, "reputation" cattle.  Make the buyers compete for animals, that is the best way to sell. 

Kansas, thank you for writing such a good piece, its happening over here aswell, i wish that you were farming over here i think more farmers would listen to you, and you would do a great job for the farming unions over here.        long live the auctions

I'll bet that no-one selling fat lambs deadweight this week had as good a price as those selling live- weigt, The big abbatoirs were all represented in our local market on Wednesday.