Hall, WJA; Shorthose, WR; Watchman, K; McLaren, L; Hanna, H; Beilken, S; Meynink, WE
Abstract:
Animal Production in Australia MARKETING LIVESTOCK AND MEAT INTRODUCTION W.J.A. HALL* and W.R. SHORTHOSE** In this section the term marketing is used broadly to embrace all physical and economic activity between the farm gate and the point of final consumption. Several factors characterise research and development studies in the livestock and meat industries. Firstly the resources being allocated to this field are abysmally low in comparison to those allotted to production orientated research. This issue is discussed in the papers below and some explanations are offered to account for it. A corollary of this lack of resources is that a variety of neglected projects exist which are likely to yield significant returns to industry and to the community. A third feature of effective research and development work in marketing is the wide variety of professional training and skills that are required. Such studies usually require a unique balance of the biological and social sciences. Further, as it is almost impossible to carry out definitive experiments under controlled conditions most studies entail detailed observation of commercial situations and results need informed interpretation. The papers included in this symposium attempt to analyse some facets of livestock marketing in this light. YIELD AND QUALITY DIFFERENCES BETWEEN DIRECT AND INDIRECT MARKETING METHODS W.R. SHORTHOSE** INTRODUCTION Whichever marketing method is chosen, product mass and product quality are likely to be affected only in a negative fashion by the marketing process. The extents of reductions in product mass and quality probably vary considerably. Proper economic assessment of alternative marketing methods requires that the magnitude of these changes are known. Such data as are available usually result from experiments with animals which represent a minute proportion of animals marketed commercially and in which the animals receive 'better-than-average' treatment in actual, or simulated, marketing conditions. Careful interpretation of this kind of data is necessary to properly translate results into commercial situations. I suspect that 'catastrophe theory' has a place in evaluating product losses. Given the probabilities of particular circumstances which individually affect product losses, and which acting synergistically in concert result in major losses, the probability of occasions of major loss can be estimated. Survey data are unlikely to demonstrate the difference per se between direct and indirect marketing as the types of animals so consigned to slaughter differ, at least in some respects, e.g. differences in incidence of deaths in transit (Q.M.I.O.M.A., 1981). Of the, approximately, 300 saleyards in Australia two-thirds are small (< 500 head of cattle/week), a quarter are intermediate (500-1500 head/week), and one-tenth large (> 1500 head/week) (B.A.E. 1981). To properly estimate the effects of indirect marketing this size spectrum should be considered. Experiments are often carried out only at 'convenient' saleyards. * Queensland Meat Industry Organisation and Marketing Authority, 14th Floor, MLC Centre, Cnr. George and Adelaide Sts,, Brisbane, Qld 4000. ** CSIRO Division of Food Research, Meat Research Laboratory, P-0. Box 12, Cannon Hill, Qld 4170. Animal Production in Australia In theoretical terms, a saleyard is a location where animals, more or less disease free, from a relatively large number of sources are collected together, intermittently, in a, more or less clean, environment unfamiliar to them. Animals are held in this environment, exposed to cross-infection, for varying periods of time, sometimes without water and often without feed. Simplistically, selling slaughter cattle through a saleyard, rather than directly to a meatworks, could be regarded only as increasing the time from farm to slaughter. I am unaware of any Australia-wide statistics on the spectrum of durations of this delay although I believe it is frequently between 12 and 48 hours and can be longer. Effects of this delay vary, depending on when it occurs in the marketing process. For example, the rate of liveweight loss is rapid early in a period of feed and water deprivation, and decreases with time from last feed. If animals arrive quickly, less than four hours from last feed, and are not given access to water liveweight loss/hr in the saleyards will be greater than that for animals which took three days to reach the saleyard. For the purposes of this paper I will assume that the process of marketing via a saleyard takes 24 hours longer than that involving direct consignment of cattle from farm to abattoir. I will then consider known and possible effects of this on product yield and quality. Of necessity, information has been gleaned from papers reporting the effects of delay in moving animals from farm to slaughter, rather than from actual differences in experiments involving both direct and indirect marketing. WEIGHT LOSS (i) Liveweight loss Liveweight loss is rapid in the first few hours of a per of feed and water deprivation and the rate slows subsequently. Access to wate after feed and water deprivation restores live weight to near the pre-deprivat state (Wythes, 1981) although weight loss due to tissue catabolism is not prevented, If animals enter saleyards soon after mustering live weight losses the saleyard will be greater, if animals are deprived on feed and water, than they arrived there some days from their last feed or last drink. I have not, this paper considered possible losses due to curfew and weighing procedures differentially affecting the live weights and, indirectly, notional killing-ou percentages, or killing-out percentages estimated by buyers, of different mobs sale cattle. iod r ion in if in t of (ii) Carcass weight loss I estimated that, after the first 24 hours and up to 4 days, cattle deprived of feed and water lost approximately 0.75% of their, calculated, on farm carcass weight per day (Shorthose, 1965). Other estimates, over 3 to 11 days from mustering, from Wythes (1981), indicate that rates may vary from 0.3 to 0.5% of, on farm, carcass weight per day. When such animals have access to water carcass weight losses can be slower, and if they receive water before slaughter, carcass weight can be increased, relative to similar animals that do not receive water preslaughter. Because intake of feed increases water consumption, it would be expected that allowing animals access to feed and water would further slow carcass weight loss. However, in a number of experiments, offering animals feed did not slow carcass weight loss more than that in animals offered water only. I will assume that carcass weight loss in the extra 24 hrs to slaughter of animals sold through saleyards is 0.4%. (iii) Organ weights Feed deprivation reduces liver weight. Neumann et al. (1974) reported losses of 18 % in liver weight in animals deprived of feed and water for 96 hours at a meatworks. Liver weight losses gradually slowed from 9% (24-48 hrs), 6% (48-72 hrs), to 2.5% (72-96 hrs) of initial (24 hr) liver 147 Animal Production in Australia weight. Liver dry matter and lipid content increase during feed deprivation. There are data on weight changes in other organs of cattle (e.g. Neumann et al. 1974) and sheep (Kirton et al. (1967). I estimated the loss in liver weight for a 24 hr delay, expressed as a % of carcass weight and adjusted for price difference between liver and carcass meat, as 0.1% of equivalent carcass weight; i.e. % loss in liver weight (24-48 hr) X liver weight as a fraction of carcass weight X price of liver/kg/price of carcass/kg. I could not estimate losses due to weight decreases in other organs. (iv) Bruising, crippling and deaths Animals sold indirectly are subject to more handling procedures, at least one more loading and one more unloading, than those consigned directly to slaughter and hornless cattle may be mixed with horned animals. This creates more opportunity for bruising to occur. Although the extra handling does not necessarily increase bruising the potential for increased bruising is there and small environmental changes, e.g. rain or potentially slippery pen surfaces, can increase bruising in saleyards considerably (Wythes et al. 1982, In preparation). I have been unable to find data to indicate the effect of increased handling, or delay to slaughter, on the prevalence of crippled cattle. An increase in deaths due to the delay in saleyard selling, relative to direct selling, may be inferred from data on deaths as related to time in transit. Using Q.M.I.O.M.A. (1981) data, deaths increased intransit by about 0.07% per day. This value is likely to be an over estimate of deaths due to handling cattle through saleyards. I have guessed that losses due to extra deaths, crippling and bruising, in 24 hours, are about 0.1% to 0.3% of carcass weight. DISEASE Meat from animals that have passed through saleyards cannot be exported to Sweden. This is because their imported meat is subject to routine bacteriological testing in Sweden and unacceptably high contamination with food poisoning organisms was found, The insurance rate on meat destined for Sweden is 3.8%, of meat value, more than that for meat destined for the U.S.A. Feed deprivation and stress can increase the susceptibility of animals to infection from low doses of organisms. Grau and Smith (1970) studied the etiology of salmonella infection of animals in saleyards. They showed that starvation or intermittent feeding increased the percentage of infected animals. In groups of cattle slaughtered 18 hr after leaving a feed-lot 4% were infected, in their intestinal tract, in groups of cattle, ex-saleyard, held for 3-5 days 86% were infected. They also showed, with sheep, that increasing preslaughter holding periods increased the percentage of carcasses contaminated with salmonellae; 7% were contaminated when animals were held l-2 days, 12% when they were held 3-6 days and 26% when held more than 6 days. To calculate the cost of increased contamination for meat to Sweden only, I divided the difference in insurance between meat for Sweden (4.5) and meat for the U.S.A. (0.7%) by 2, attributing half the difference to hygiene requirements. The increased risk of contamination to saleyard animals is thus costed as 1.9% of carcass weight. STRESS Sending animals to meatworks via saleyards as well as increasing the time from farm to slaughter and the extent to which they are handled also increases the time they have to interact and their exposure to, possibly inclement, weather. It might be expected that indirect marketing could stress animals more. I compared the incidence of animals, fat bullocks, with a pH value at 24 hr postmortem (pm) in the M-longissimus dorsi (LD) of > 5.7 in 7,600 cattle. Twenty-two percent of the 1160 animals arriving at the meatworks via saleyards had LD (24 hr pm) pH 148 Animal Production in Australia values > 5.7, whereas only 11% of 6,400 animals consigned directly to the works had LD (24 hr pm) values > 5.7 (Shorthose, 1980). Buchter (1980) recorded a greater incidence of dark cutting meat in young bulls and calves arriving at meatworks via a saleyard compared to similar animals consigned directly to the meatworks; the difference was exaggerated as time held at the meatworks increased. Wythes and Underwood (1980) reported that depriving cows of access to feed for 96 hours before slaughter rather than 72 hours, after they had travelled 1200 km by road, resulted in an increase in ultimate pH of the M.longissimus dorsi; 16% of cows deprived of feed for 96 hours had high ultimate pH values. The reduction in value of dark meat is difficult to estimate (Tarrant, 1980) and variable. If one presumes a dark cutting carcass has 95% of the value of a normal carcass, and that 10% extra animals are affected if they arrive at meatworks via saleyards, then the net loss in carcass weight terms if c. 0.5% of carcass weight. CONCLUSIONS The extra extent of losses in product quality and quantity due to holding animals in a saleyard for one day are given below. They are guestimates and are expressed as though they are a % loss of carcass weight. Carcass weight loss Liver weight Bruising, crippling, deaths Meat quality Meat hygiene Total of carcass 0.1% of carcass 0.13% of carcass 0.5% of carcass l-9%* of carcass 0.4% 3.03% weight weight weight weight weight (* For exports to Sweden only) Although the absolute values of these guesstimates are questionable, one can suggest that meat quality and meat hygiene costs of marketing via saleyards could be at least as significant as those due to loss of product mass. A STUDY OF DRESSING PERCENTAGE AS A PARAMETER FOR TRADING IN SLAUGHTER CATTLE W.J.A. HALL* INTRODUCTION The auction of slaughter cattle on a liveweight (LW) basis ($/kg LW) is now established at many saleyards throughout Australia. Its use is based on the belief that LW prices reflect the consumer value of the carcass more accurately than a per animal price basis (SCA, 1981). This in turn rests on the assumption that dressing percentage (DP) can be estimated more accurately than carcass weight (CW). If estimates are inaccurate, relative LW prices will not reflect the relative amounts of carcass beef in each sale lot (group). As a consequence, price premiums and discounts will not reflect consumer value and production or operational inefficiencies are likely to occur. * The Queensland Meat Industry Organisation and Marketing Authority, 14th Floor, MLC Building, Cnr. George and Adelaide Sts, Brisbane, Qld 4000. 149 Animal Production in Australia This study examines two aspects of the problem, firstly the degree to which prices reflect DP and secondly factors which influence DP in the saleyard auction. BUYERS ESTIMATIONS OF DRESSING PERCENTAGE A number of studies have demonstrated that buyers may mis-estimate DP (e.g. Loyns 1965; Park 1979). However these studies considered individual animals rather than lots of cattle. Naive et al. (1957) found with pigs that estimation of DP in lots was more accurate than those for individuals. In addition, previous studies examined DP estimation in a non-competitive environment when considerable time was available to assess the animal. Previous studies usually involved small numbers of buyers and cattle and may not, therefore, have accurately reflected conditions in the market as a whole. An alternative method of assessing the accuracy of DP estimation is to analyse the actual prices paid for different lots of cattle. A theoretical illustration is provided in Fig. 1. If two lots (a and b) are identical except for their DP, and each DP is accurately assessed by buyers, then the carcass price ($/kg CW) will be the same for both lots at Px in Fig. 1. In other words, there would be no statistical relationship between DP and $/kg CW (B=O) if there was a consistent tendency for buyers to average their estimates of DP by over-estimating lower DP's and under-estimating higher DP's, DRESSING PERCENTAGE -Fig. 1. Theoretical relationship between carcass weight price and dressing percentage. A study was made of the prices paid by a number of buyers employed by one meatworks for 125 lots of slaughter cattle. Prices were analysed by multiple 150 Animal Production in Australia regression using the equation: A Where P, = Price in weekly price, CW = thickness, A = ii ean t = Breed group, BR xt c/kg CW for each lot+, DP, = Mean DP for each lot+, W+ = Mean Mean kg CW, LN = No&. inteach lot F = Mean m&carcass fat t' t nos. permane& incisors, S = sex, PH = Proportion horned, Act = Saleyard centre and et = Random ii isturbance. The statistical estimate of p, was -0.90 (t = -2.12) suggesting that DP had a negative effect on the price paid in $/kg CW (P = 0.05, Fig. 1). FACTORS INFLUENCING DRESSING PERCENTAGE IN THE SALEYARD Many of the variables which influence DP have been established under experimental conditions but not in the saleyard environment. The weight of gut contents has the greatest influence on DP. At the saleyard auction, a major determinant of gut content weight is the length of time cattle are without feed and/or water, which in turn varies according to the mustering, travelling and resting times, the availability of feed and/or water and procedures specific to each saleyard. Under experimental conditions a positive relationship between DP and CW, DP and fatness, and DP and age could be expected (Preston and Willis 1970). There is no evidence of any significant difference in DP between males and non pregnant females. Zebu breeds have higher DP than British breeds which in turn, dress out higher than dairy breeds. This study examines the effect of a number of variqbles on the mean DP for each of 125 lots of slaughter cattle bought over a five week period from five different saleyards. At each auction the mean LW per animal, estimated breed type and sex of each lot was recorded. All lots were slaughtered at the same meatworks with the delay between liveweighing and slaughter being approximately 48 hours. Hot fat thickness at the 12/13th rib and CW were obtained on the slaughter floor. The equation to estimate the effects of various variables on DP was: The subscripts and result of the multiple regression analysis are outlined in Table I. Lots acquired at three auction centres had significantly lower (P<O.O5) mean DP's than Cannon Hill. Zebu breeds and British breeds did not differ in mean DP but dairy breeds were lower (P<O.O5). Mean CW and the numbers of permanent incisors has a significant effect. Fat thickness had a positive effect on DP and females had a lower mean DP than males (P<O.lO). The adjusted coefficient of determination suggests that 52.0 percent of DP variation was explained by the equation. 151 Animal Production in Australia TABLE 1 Analysis of variations in the dressing percentage of cattle purchased at auction (a) Critical levels of significance at P = 0.05 level based on a two tailed test are (+> 1.98. DISCUSSION The results confirm the findings of Loyns (1965) that buyers average their estimates of DP across all acquisitions. This indicates that the LW selling method provides price premiums to those lots with below average DP's and discounts to those with above average DP's. Pricing inefficiency might be reduced if buyers paid greater attention to saleyard by saleyard variations. In addition the evidence that different centres result in different DP's indicates that comparisons of LW price reports from different auction centres may be confounded by the differences in DP. For example, if it is assumed that a 216 kg CW steer actually receives $280/bead at all centres, the above results suggest that the LW quotation would be 7O.Oc/kg at Cannon Hill; 66.3c/kg at Kingaroy; 67.5e/kg at Murgon; 68.3$/kg at Gympie and 67.6$/kg at Dalby. These price differences are likely to create confusion amongst market participants who attempt to compare centres solely on the basis of LW price reports, and were to select selling centres on that basis. One method of lessening these price differences is to introduce saleyard procedures 152 Animal Production in Australia which minimise DP variation at different saleyards. The proposals of the SCA sub-committee on LW selling procedures (1981) are intended to achieve that objective and should receive support from industry. The estimated coefficient of determination underlines the difficulties faced by buyers at LW auction saleyards when attempting to estimate subjectively the DP of each lot. Even if buyers were fully aware of all the factors included in the equation, the results suggest that buyers estimates will only incorporate half of the sources of DP variation. Whilst further investigations into DP variation appear warranted, any procedural changes which reduce DP variation within a saleyard are likely to improve buyer's estimates. The recommendations of the SCA sub-committee on LW selling are also relevant in this context. LIVESTOCK MARKETING - PROGRESS AND IMPEDIMENTS K. WATCHMAN*, L. McLAREN* AND H. HANNA* INTRODUCTION The effort and money put into livestock marketing research and development has increased considerably over the last decade. However, compared with investment in production research, the level of expenditure is still low. This research and development in the livestock marketing area has led to some changes, but most livestock are still marketed through the traditional auction system. The areas covered in this paper are: . . the need for marketing change the approach adopted in South Australia to achieve change the major impediments to change and suggested methods of overcoming them. WHY CHANGE? At present the live auction (either per head or live weight)is the predominant method of marketing livestock in Australia. It is only one of many available systems, so its dominance indicates real or perceived advantages. The competitive price determination is probably the major advantage perceived by farmers. The role of stock agents in determining the method of sale also needs to be recognised. The live auction does, however, have disadvantages. It is a costly system. Producers can regularly pay up to 7 per cent of gross returns in direct marketing costs There are also indirect costs. There may be an increase in bruising and stock are double handled between farm gate and abattoir. l Paddock selling and weight and grade selling are two cheaper and less stressful marketing systems that currently exist (BAE 1981). The continuing popularity of live auction sales indicates that farmers are not satisfied with aspects of these alternative systems. Their dissatisfaction may be associated with the returns, or the information generated, or a lack of trust. Our approach in South Australia has been to bring the various sectors of the industry together, in an attempt to combine the apparent pricing efficiency of the live auction with the cost efficiency of direct sales. * Meat Section, Animal Industry Division, Department of Agriculture, South Australia, G-P-0. Box 1671, Adelaide, S.A. 5001. 153 Animal Production in Australia THE SOUTH AUSTRALIAN APPROACH A carcass classification system was introduced at South Australia's major abattoir,. South Australian Meat Corporation, in the early seventies. This led.to the formation of a number of producer cooperatives who were able to sell livestock by private treaty using carcass classification. Though these groups were initially successful and some still exist today, some of the members quickly realised further changes were needed for widescale adoption of improved marketing systems. The provision of a better method of price determination and introduction of a classification system at other abattoirs was required. Anumber of interested groups and individuals combined in 1977 to form the Livestock Marketing Study Group (LMSG). The LMSG initially was comprised of producers, Department of Agriculture representatives and a limited meat processor representation. The LMSG conducted a workshop late in 1977, to bring together industry expertise from all States to review the implication of a number of marketing systems based on carcass classification (Anon 1977). I Although the workshop did not recommend the immediate introduction of any one of the`five systems evaluated,' it did agree that the LMSG continue its research into marketing systems and that its membership be expanded to include agents and processors. The principal achievement of the Livestock Marketing Study Group since the workshop has been the successful introduction of*pig sales by classification in South Australia. Other States are in the process of introducing a similar marketing system. An important side benefit of the continued activity of the Group is that it provides a forum for all sections of the industry to discuss a range of issues. One important result of su,ch discussions has been the establishment of a course in live animal appraisal, meat marketing and carcass classification at a community college. This course while open to all members of the industry has been supported by agents. Agents see the need to improve their skills to retain their important position in livestock marketing. South Australia has developed a climate suitable for a more uniform industry approach to marketing reform. Changes have been achieved in pig marketing. Significant changes to beef and sheep marketing will hopefully flow from the present research and development being undertaken. IMPEDIMENTS TO CHANGE The impediments to change in livestock marketing are many and they vary from state to state. Tradition, conservatism and previous investments impede change in the meat industry as they do in other industries. The three main impediments to market change are:- . . . the lack of communication and co-operation between the various sectors of the meat industry. the difficulty of obtaining funds for research and development activities in livestock and meat marketing. the lack of a standard carcass definition and standard methods of carcass specification. 154 Animal Production in Australia (9 Communication and Co-operation South Australia has been fortunate. All sectors of the meat industry have been willing to communicate and co-operate. The LMSG has so far failed to modify the sheep and cattle marketing systems. Nevertheless, it has been claimed successful by participants simply for its communication function. Nationally there is still a tendency to sectionalise the meat industry. Some people have even suggested that it is not one industry but two - a producing industry and a processing industry. Though producers should not tell processors how to run their businesses, and vice versa, the inter dependence and mutual benefits necessitate communication and co-operation. The traditional middle men have been the stock agents. In an atmosphere of mistrust between producers and processors, their role has been largely of arbitration. The live auction has been the most effective arbitration system. Many producers rely heavily.on stock agents for advice, finance and marketing expertise. Developers of new selling systems who ignore the role of stock agents undoubtedly reduce the chances of adoption. The lack of communication and co-operation is not only between producer and . processor. within Departments of Agriculture and similar bodies the traditional separation of economists and technical people has hindered progress. The two disciplines have attempted to answer marketing problems individually with a consequent lack of success. (ii) Funding In South Australia we have been fortunate that the State Swine Compensation Fund and the Rural Credits Development Fund supported the initial work of the LMSG. Recently, there has also been a refreshing change to ,funding by the National Carcass Classification Supervisory Committee. In absolute terms funding remains a problem for all marketing research. Communication and cooperation have been stressed previously. Funds are needed to facilitate this activity. Intra-state activities such as those of study groups need to be supported. Funding of national forums is equally important, given the national nature of the meat industry. As such, annual 'refresher' courses dealing with meat marketing issues are worthy of consideration. It is important-that people working in meat marketing research and development areas are able to meet fairly frequently to avoid duplication of effort and to maximise progress. (iii) Standard Carcass Definition and Specifications Over the last decade there have been millions of dollars spent on the research and adoption of a national carcass classification system. A carcass classification system requires standard carcass definitions and a standard means of specifying the carcass characteristics. Though there has been some success in pig classification, there are still no national standard carcass definitions or carcass classification as envisaged by the National Carcass Classification Supervisory Committee. Marketing systems which are based on carcasses also require an accepted carcass definition and a means of carcass specification. Clearly, if a suitable national 'system existed it would greatly simplify trials of new marketing systems and greatly improve information flow from existing systems. A method of facilitating communication flow is vital. An objective specification of 155 Animal Production in Australia carcasses will lead to greater confidence between the different sectors of the meat industry (producer, processor, wholesale and retailer and overseas buyer). It will also permit new marketing systems to be introduced and evaluated more effectively. The lack of a suitable national classification system is the greatest single impediment to marketing change. The word 'suitable' is classification system. The regulations. This fact has classification and grading. words are interchangeable in has used the words almost as used deliberately. Australia already has a national existing system is embodied in the export meat been obscured by the pedantics about the words Dictionaries use grade and class synonymously. The general conversation. The meat industry, however, antonyms. Classification or grading is simply the allocating of a carcass into predetermined grades or classes based on measurable or defined criteria. Such criteria should be selected on the basis of those criteria that influence the value of the carcass. What is commonly called export grading as laid down in the Export (Meat) Regulations and supervised by the Australian Bureau of Animal Health could just as easily have been called a classification system. This system uses measurable or defined criteria (conformation, age, fat cover and weight) tc allocate carcasses to predetermined categories (lst, 2nd or 3rd). Such criteria were initially selected as being important in determining the value of carcasses. For too long there have been attempts to differentiate grading and classification. The approach has been to introduce the so-called national classification system largely in isolation to the existing grading system. It is little wonder that many processors have reacted to these attempts at a dual system. So the question should not be whether we need classification but rather can the existing classification system, called export grading, be improved. The export grading system for sheep and cattle two reasons. First, the measurement of criteria is obj'ective and second, the ordering of grades into 1, schedule for our meat which no longer exists on the Numerous people who have been Australian meat have noted the lack This is hardly surprising given the subjective assessment is illustrated independently graded 101 lambs into does need to be improved for subjective rather than 2 & 3 assumes a rigid demand world market. overseas or communicated with buyers of of buyer confidence in our export grades. subjective nature of assessment. This by the following example. Two graders lst, 2nd and 3rd grades. The results were:1st 2nd 37 15 35 3rd 16 51 Grader 1 Grader 2 The difficulty with the present situation is that it is not possible to prove that one grader is wrong, The subjective grade descriptions do not permit such a decision. The problems associated with the ordering of categories into lst, 2nd and 3rd are inherent in that ordering. The development of Middle East markets has led to the situation that buyers have requested a carcass type best satisfied by either our 2nd or 3rd grade carcasses. This is because they prefer leaner animals. It is un