Think margin not price for livestock marketing

RMA Network chief executive officer Chris Howie, September 6, 2023

RMA Network CEO Chris Howie.

SHEEP, cattle and goat producers should focus on margins rather than prices in the current market conditions, according to RMA Network chief executive officer Chris Howie in his latest market and industry wrap.

Stay positive and think of creating a margin, he advises. Don’t look at the prices now, think about the potential in 6-9 months’ time.

I think it’s time to stop talking about price and concentrate on margins. As an example, before the last drought, the sheep industry would have a lamb glut for about six weeks from the start of September to mid-October in most years.

Timing around seed set meant woolly lambs needed to be sold or shorn. Sometimes it would move forward because of a dry August with more store lambs and other years back with a green Spring and more slaughter lambs.

Irrespective of the reasons, sheep or cattle – too many, limited demand, shortage of freezer space, excess old cows and ewes, 1 trillion goats etc etc the price is the price and we seem to have fixated on where it has come from instead of what margin can be created at the current levels.

It makes no difference if you are a breeder or a trader, thinking about your options to create this margin is so important.

For traders it is relatively simple, but I am basing this on a grass or stubble trade – not feedlot. Do you have the feed?

The buy price is favorable – tick, less interest to pay – tick, lower sell price means lower commission at sale – tick.

I believe $30-$40 margins are very realistic whether trading crossbred lambs or Merinos with a clip of wool to boot. Current heifer prices also lend themselves to creating margin. Feed a few less to do a really good job – don’t run out of feed doing too many.

Breeders need to put some more thought into this conversation. Some will not have the feed to carry stock and they must go. However, others need to analyse what will provide the best return or why they are selling at this time. Is it because that is what Dad and Mum always did? Is it because of a bank repayment or a fertilizer bill etc?

The ability to cash flow livestock is relatively new, but at these prices it does provide you with affordable flexibility as interest is on a lower value article. If feed is the concern get rid of the old, ugly or non-productive animals, the bits and pieces from the ram/bull paddock and keep the tops of your drop on good feed. Even if the market stays flat, these animals will give you the best weight gain/wool and you can sell them a bit later with a lift in the dollars per head on weight alone starting from a low base.

Merino wethers, ewes and margins

Tom Bartholomaeus Nutrien, Fleurieu Peninsula South Australia and Broken Hill said the season in both areas is going along OK.

However, many are not prepared to take an opportunity on Merino wether lambs. We both remember Rod Eckert, long-time Elders Manager at Broken Hill buying low value Merino wethers lambs at Yelta and Peterborough to tip out into the pastoral country when feed was right. The wool would make the margin, the hoggets would cover the costs and with a fair wind create some cream. Simple trading mentality at a low entry point and low cost to run.

Maybe we have become too fixated on lamb finishing and we need to think about growing a clip of wool then selling the Merinos as hoggets? Use them as your spray rig then drop them onto stubbles or into your rough pastoral country. Just a thought.

The South Australian Merino lamb and ewe sales are underway with the Pinaroo, Karoonda, Murray Bridge and the Eyre Peninsula sales yarding between 5500 to 15,000. Pricing trends on the Merino woolly wether lambs so far are: tops in the 18-22kg dressed range $50 to $70 with the couple of elite 24 kg pens getting up to $113. The second cut bagging style lambs, 12-16kg $45-$55, with processors on the fresher lambs, feedlots, south-east of SA and Wimmera all operating. The thirds and drier lambs ranged from $25-$40.

Simon Lehman, Spence Dix & Co, Karoonda quoted the Karoonda annual Merino ewe sale. The 1.5 year-old ewes topped at $258 for an exceptional line, with most 60-75kg ewes making $165-$210, 50-60kg ewes $100 to $155 and under 50kg $65-$100. The 2.5 and 3.5 year-olds topped at $124 with most from $85-$90. Breeding ewes to trade and to Victorian buyers made $60-$95. Overall sheep presented well and considering current lamb prices made above pre-sale expectations.

Dick Gleeson, Elders Inverell said the season has closed right up, with very little buying demand for store lambs and many crops now grazed off. Good numbers of store cows are selling for around $1.50 per kg live. Most enterprises west of Delungra in New South Wales towards Moree and Goondiwindi are concentrating on their cropping programs with less and less running livestock. From my travels this is not isolated and is across all states – even the marginal country. It’s good to see Dick stacked another premiership for the Inverell Saints AFL men.

Angus Stuart, Milling Stuart Pty Ltd, Dunedoo said old lambs are now done and new season lines are just starting to appear, although a month later than normal.

Sam McKay, Forbes Livestock and Agency Co, Forbes said they had 32,000 lambs this week with an expectation numbers will rise if it stays dry. There was an increase in new season lambs with good buyer competition. There was full supermarket and processor support on quality trade lambs at $120-$136, heavies topped at $137, but in limited numbers. Old season clean up lambs eased $20-$25 with limited demand. Mutton was significantly cheaper, with most ranging from $1.40-$1.80 per kg and very few pens making $2.

Cattle prices and price discovery

I did receive a couple of comments about my expected upward move on cattle pricing in September. I suppose we can all look backwards and be safe or take the step to try and think about what is coming. I make my assumptions on where the market might go if we follow a normal trend. The drier conditions in NSW and limited live export numbers in the north have all put pressure on prices, although in the south heavy finished cattle showed some positive signs. Early August feedlots put out pricing to secure September numbers, which normally happens, and were inundated with supply. Does this mean the price was too high or the confidence in holding stock was low?

This led to feedlots being fully allocated for September, with many going no quote for a week. We do normally see a slow up 100 days out from the Christmas break.

I will be first to admit forecasting is an imperfect science based on historical trends, phone calls and gut feel. The more transparent the livestock industry becomes around the price drivers the better the industry will perform over the long term. Price discovery is still very limited in our livestock system yet nearly all other commodities have some form of future price visibility allowing budgets to be constructed, trading to be informed and financiers to build more robust offerings.

The price spread for Angus and Wagyu over other breeds is the smallest I can remember and maybe a driver on bull buying activity. Throwing a terminal cross in for a year or two with older cows is starting to gain momentum with the additional weight created by hybrid vigour. Much the same as creating a margin in lambs, as the price spread decreases, the base calculation of weight for age grows in appeal. That doesn’t mean throwing your breeding values of 200, 400, 600, IMF and EMA out the window, but it is worth doing the sums.

Angus Stuart, Milling Stuart, Dunedoo said the season is in the balance with pastures starting to struggle and crops needing rain with little subsoil moisture. With livestock prices down many are banking on the cropping for income.

Cattle numbers are on the lift, with dry cows and heifers being sold whilst those that were aiming at more weight have just started to exit lighter weights on the back of feed pressure.

Chris Patterson, Chris Patterson Stock and Station Agents, Tamworth said the season is only an inch or two of rain from being OK, with hope of an early storm. Many in the area are not prepared to hold and feed this year, with weaner steers gone and cows and heifers being the main sale item. Chris did mention the mainstream media is not helping with its continued focus on El Nino. I agreed we have had enough of this continued media weather hype and it is taking the confidence and rational farming thought away from many.

Andy Gray, AG Livestock and Land, Katherine, said several more export depots have had their Indonesian licenses revoked on the back of the ongoing Lumpy Skin Disease negotiations between both countries. Australia has had no notified cases, but this impasse is leading to export numbers — Brahmans and crossbreds — looking for homes domestically. Again, this presents opportunities for those with feed and a plan.

Networks are so important

The ability of producers and agents to network across wider areas is more important than ever and I receive a call or 2 every day about who might be looking to buy particular categories. Casting your net as wide as possible and thinking about different options are the conversations needed in dry times, market closure and over supply. Everyone is a champion with a good season and high prices but it is rare the cavalry will ride over the hill to save the day when the job is tough. Good agents that have networks come to the fore by creating destinations for livestock and are well worth looking after.

Setting online price reserves

When selling online setting your reserves is so important and $5 too high can quickly destroy activity. Lately, we have seen many reserves being set ‘in hope’ instead of based on market intel and facts. It is very easy to unfairly blame the various platforms when this happens. Irrespective, if you are the vendor or the agent those lots listed with realistic reserves are creating activity and selling in most instances.

I see AuctionsPlus has now created an option that allows you to research the price spread for your listing prior to assessing. If you don’t regularly attend sales this is a great tool and will help remove the rose colored glasses when setting reserves.

Agency opportunities and training

I receive a call a week looking for agency and service provider staff – sales or administration. It seems advertising is struggling to draw interest at this time, yet I know there are plenty out there looking for a start or a career change. The great part about the livestock and agricultural industries is the first job as a station hand, shearer, meat worker, contractor etc gives you a great operational insight to take the next step. If the first position is not your fit it will open a door for a job that may suit you.

At the August agency and supply chain training at Wodonga, we had 22 young and new industry starters that proved this point. Their experience ranged from university degrees, plumbers, trucking coordinators, a 5-star sous chef, stable and station hands, transport company owners, marketing, pork processing, dairy manager and drovers.

Trucking livestock of no commercial value

Do your homework before trucking stock. Some areas are getting tight with plain sheep and cow numbers increasing heading into Spring. What is the plan for these plainer types that are already approaching no commercial value – NCV — in some areas? It is too easy to ignore this conversation, but these discussions need to be had at a producer, agent, saleyard, processor and government level before transporting to a saleyard. If they are not sold the costs quickly mount creating issues for everyone.

Retail meat prices

If we look at the margin analytics on the carcase price and the shelf price it seems to be a bit like interest rates. When price / interest goes up it reflects to the consumer in hours, yet when it comes down it seems to take months to follow. I was in a store called Arnolds in Wodonga that sells fruit, vegetables and meat with an instore butcher. The butcher said they put lamb loin chops out on special at $9.99/kg and sold over 300 packs in the hours.” The proof is in the pudding – price at realistic levels to meet the needs of the everyday house hold and meat sales immediately go up.

My ewe and lamb project

My lamb marking is done and achieved a percentage of 130pc. I know we lost 17 lambs all up and if not for the dogs we would have had another 10 making it 144pc. Putting price to one side, the livestock production advice provided by Rob Inglis, Elders, Jason Trompf of Lambs Alive and Peter Gordon, Yenda Co-op, has been gold.

Taking the time to understand and implement how to lamb ewes down in your operation allows you to lift productivity off the same country, just a no brainer really. Livestock Production Advice is next generation improvement for your enterprise.

Opportunities and well-being

 Workout feed and trading margins and have a go.

 Investigate custom feeding for cattle.

 Heifers and Merino wether lambs

o both give you 2 options without having to fatten now.

 Consider getting EU accredited if targeting the feeder market.

 Stop listening to the media for a week or two – so much better.

 If you can handle some numbers let someone know – you are important.

 Get back to making calls and talking to others instead of texting to find out what’s happening.

 Get involved with a strong network that has relationship-based contacts across Australia.

 As hard as it is, stop worrying about stuff you can’t change.

 Barrack hard for those in the sports finals – let off some steam.

 Give your partner a kiss (It worked for Crocodile Dundee in the pub), hug your kids and pat the dog.


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  1. Peter Small, September 6, 2023

    A lot of very valuable advice once again Chris Howie. One point you made needs much greater amplification:
    “The butcher said they put lamb loin chops out on special at $9.99/kg and sold over 300 packs in the hours. The proof is in the pudding – price at realistic levels to meet the needs of the everyday household and meat sales immediately go up”.
    There is far too much overpriced stock right along the meat chain. The producers have already taken a haircut. To get stocks moving out of cool store and onto retail shelves, those holding expensive, overpriced stock must immediately face reality and take a haircut too. This is essential before the Spring flush commences.

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