The livestock auction industry finds itself at a crossroads and is likely to see a few profound changes over the next few years. This is according to Douw van Wyk, auctioneer at BKB Louwid in Bethlehem.
“The industry experienced a boom the past few years, especially in terms of prices, but since the outbreak of foot-and-mouth disease (FMD) in November last year, when the entire industry had to shut down, we have taken a huge knock. And just when we seemed to be getting off the ropes, COVID-19 arrived on our shores and we were knocked flat once more.”
Douw is a BSc (Hons) Agriculture graduate from the University of the Free State and completed an MBA at Pukke in 1996. While busy with his studies, he joined Tokkies du Plooy Auctioneers where he moved through the ranks and learned about all aspects of the industry. He joined BKB Louwid in 1998.
A different approach to auctions
The setbacks of the past year, says Douw, led to innovative ideas and approaches in the industry. Online auctions became common as it was the only way for farmers to continue to market their animals.
“In South Africa, however, there is a very distinct difference between production sales and your bread-and-butter fixed-point sales, where farmers sell their weaners and other odds and ends. In addition, there is a growing contingent of emerging farmers who bring their animals to these auctions as they have no other way of marketing their product.
“So, although technology allows players in the upper end of the market to make use of online sales, and those sales are supported by all the statistics and figures one could wish for, a large section of the market is excluded from this type of auction. There are buyers who insist on seeing the animals prior to purchase. This tells me that we may see both online and fixed-point auctions for a long time to come.”
Biosecurity and traceability
Douw believes there will be an increasing emphasis on biosecurity measures to make auctions as safe as possible. Veterinary supervision and inspections, the disinfection of transport vehicles, as well as the traceability of every animal at an auction are going to become stricter.
“As our meat export market grows, overseas customers are set to become more demanding. We will simply have to adhere to their demands if we want to remain a player on the world market. Animals will have to be certified disease free, for the moment the international market loses confidence in the quality of our livestock, we will see a drastic drop in demand and prices. We simply cannot afford this. Although this new dispensation implies a lot of initial legwork and extra administration, we do not have a choice. It will be worth it in the long run.”
With the importance of traceability on the rise, says Douw, the positive spin-off would certainly be that all farmers, including emerging farmers, will be forced to mark their animals in a standardised manner and keep better records of every event in that animal’s life – from vaccinations and disease treatment, to what it was fed. This, in turn, will improve management efficiency, which will obviously be to every farmer’s advantage.
Rise of a dual system
“For the foreseeable future I see a dual auction system comprising online sales, where visual inspection is not the only criterium, for upper-end stud breeders and fixed-point sales predominantly for slaughter animals. I cannot see that the latter will disappear within the next few years. However, I do not see a future for the really small auctions, those with only 30 of 40 cattle and a few sheep. In my opinion these will disappear.”
How will a new dispensation change the way auction houses operate? This, says Douw, is an open question. “It is the job of the auctioneer to get enough buyers to the auction. Prices go up when two or more buyers are looking for the same type of animal, which is in short supply on a given day. Whether those buyers are sitting next to the sales ring or in front of their laptops is probably not important. So, I do not think prices would necessarily be unduly influenced if the auctioneer does his job properly.”
Working together for success
An auction house needs four critical functions to operate smoothly and efficiently, he says. First there are the marketers who must source good quality animals to be offered at the auction. They must be one hundred percent informed as to the quality, slaughter percentages and weights of the animals on each farm. They must also be aware of the latest price trends in order to inform farmers about the prices they can expect to be paid for their animals. There should be no surprises.
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The auctioneer, in turn, must relay accurate information about the offer to prospective buyers and make sure that there is enough interest. For an auction to function well, several buyers should be participating.
“We have a rule that come Sunday evening or Monday morning early, the auctioneer should know exactly how many animals of what quality are lined up for the auctions scheduled for that week. This information is sent out to all prospective buyers so they can plan their week. After that, it is the auctioneer’s job to make sure the correct prices are generated at the auction, according to the weights and quality.”
The next critical function involves the auction clerks who need to make sure the administration and payments are up to date and that transactions are executed without any glitches. Similarly, the loading master has to make sure that transport is organised correctly and that it is executed on time. Each of these are critical functions, says Douw.
“In my experience, farmers choose their auction houses based on personalities, not the company as such. This is why the personal touch is so important in our industry. In a changing environment, it will be up to us as auctioneers to keep this personal touch from eroding and auctions from becoming impersonal events.”
Quality starts with genetics
For auctioneers, one of the biggest challenges is explaining to a farmer why his animals did not fetch the same prices as those of his neighbour.
“It is all about quality, and quality starts with good genetics. It is a grave mistake to skimp on quality when buying a bull or ram. Your investment in genetics will always be profitable in the long run. Not only will you gain on your weaner weights, but you will improve the quality of your herd through the replacement animals.”
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The second critical element when it comes to improving the quality of your herd is selection, says Douw. “Only retain the best replacement females. Instead of keeping all female animals and taking a knock with your pregnancy rates, weaner weights and quality, build your herd numbers more slowly. With 70 top females and a very good conception rate, you can make the same money as you would with 100 average females and an average conception rate.”
Seek and heed expert advice
Douw feels it could stand any emerging farmer – and any farmer who is still growing is an emerging farmer – in good stead to develop a strong relationship with his local auctioneer. “Because we know what the market wants, we can give excellent advice on the type of animal a farmer should strive for. We can also offer some pointers on what a quality animal looks like. The ideal weaning weight, for example, will vary depending on the maize price, but a good guideline is anything between 200 and 250kg.
“We have the same objective as farmers and buyers, namely to present a superior animal at auction that will realise the best price for the farmer, but also has the potential to realise the best possible profit for the buyer. The technology to achieve this is available. It may represent an investment, but it will be an investment that should pay ample dividends over the long term.”
The agricultural industry has had a very good season and a very good harvest is expected. This, concludes Douw, is bound to have a positive influence on the auctioneering industry. Changes and developments were heading our way but were accelerated due to events such as FMD and COVID-19. Now is the time to embrace these. – Izak Hofmeyr, Plaas Media