Markets

First AuctionsPlus lambs listed in 2016 for forward contract sale in August

Terry Sim, July 25, 2016

These February-Marrch 2016-drop Poll Dorset cross lambs sold for $86.50 at Cootamundra on AuctionsPlus last week.

LAMB producer and stock agent demand has prompted online livestock marketer AuctionsPlus to promote forward contract components in its 2016 store and prime lamb sales this season.

A forward contract option was offered in lamb sales last year, but there was no uptake by sellers.

AuctionsPlus business development manager Ciaran O’Gorman said producers have the option to offer sheep and cattle on a spot or forward delivery basis in all regular sales.

“The main reason for the concerted push this time around is agent and producer demand,” he said.

“We have had numerous enquiries recently from agents and producers who are wanting to become more proactive and begin transitioning to a ‘price maker’ from ‘price taker’, as well as offering a solution to marketing lines of old or last season’s lambs.

“On the flip side is also the benefit for buyers to operate in advance and manage supply of stock.”

The first sale this season with lambs available for forward contract will be on August 5, with about 2500 lambs confirmed. Other sales will follow on August 23, and September 6 and 20.

Mr O’Gorman said producers and their agents set the delivery terms for any forward contracted lambs.

“Therefore they specify the weight and condition of the lambs at delivery.

“AuctionsPlus will not hold the contract, we will simply offer the lambs as per normal and contract will be held between the producer and buyer.”

Elders national livestock and wool manager Chris Howie said people are looking to market their stock “a bit further out.”

This gave producers the opportunity to manage animal husbandry to get lambs and cattle up to specification, instead of concentrating on the spot market that can be influenced by currency and weather in a 24-hour period.

“I just think it is a natural progression to contract blocks of livestock further out to let the processor or the buyer get continuity of supply.”

Mr O’Gorman said AuctionsPlus is working on trying to help producers remove some of the volatility in the lamb markets and avoid the annual glut of lambs in the spring.

“Forward contracts are a way to secure some of this income and gain a little certainty in the future, giving producers the ability to plan ahead and take more control over the marketing.”

Mr O’Gorman said the ability to forward plan and operate counter-cyclically is a crucial tool to help even out business cash-flows and add some certainty to a budget.

“No longer can we afford to risk price fluctuations with the significant investment in production these days.”

He said AuctionsPlus believes it is imperative for a producer to have the option to attract competition on a forward contract, retaining the competition and price discovery from a spot sale and allowing forward planning for producers and buyers.

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