Farmers risk becoming unsecured creditors in livestock sale fine print

The livestock markets are on fire and porspects are good down on the farm.

Independent Whanganui livestock commentator David Cotton is urging farmers to read the fine print when selling stock to the larger stock and station companies.

He said it appeared farmers may become unsecured creditors with the sale of livestock.

"I always understood that the commission charged for selling livestock was for the agent to value the livestock, find a buyer and importantly guarantee the proceeds for payment in 14 days from delivery - it's often the major reason farmers use a livestock agent," Mr Cotton said.

"I liken it to why most people buy their cars off a licensed motor vehicle dealer. I have had a couple of issues with stock and station companies paying late for livestock purchases recently.

"When I inquired with three of the larger stock and station companies I deal with whether paying them a commission guaranteed payment in 14 days from delivery to vendors, the answer was no.

"So I would encourage you to ask your livestock agent next time you sell whether you are guaranteed payment as part of their service and commission fee and if yes, ask for it in writing otherwise you just might find you are an unsecured creditor."

He asked the same question of the independent agents he deal with because he needed to know his own financial exposure to their companies.

"Two well-known independent agents, Ross Dyer from the Hawkes Bay and Stephen Harris from Taihape, gave the same answer, yes. They said that any deal with them would be honoured with payment guaranteed in 14 days. I also asked if they considered it (14 day payment) was standard terms of trade.

"All the independent agents I talked to gave the same answer, yes. We all remember Cuttle & Isaacs that went broke in the South Island leaving a trail of unpaid farmers. So like insurance, read the fine print when doing a deal - a hand shake may not cut the mustard any longer," Mr Cotton said.

Meanwhile, the River City Livestock principal said he continued to enjoy the changing livestock market.

"What I love about my work is that the game (market) is always changing, While it is not always enjoyable watching livestock markets go down, we all know markets never stay the same and they must go down to go up and both ways create opportunity for buyers and sellers.

"April was so wet. I recorded 227mm rain at Kai Iwi (his farm) for the month - it was mud for Africa. Just look what it did to the store market.

"Take 32kg-34kg store lambs that were making $3.15/kg in early April, but by the second week of May had dropped back to $2.85/kg with more sellers than buyers. In June the sun was out again, the fertilizer planes and trucks working overtime and I recorded just 35mm of rain for the month while the ground temperature was above 8 degrees C, so DAP fertilizer pushed the grass growth along setting the store lamb price on fire with the average price at the Stortford sale recording $3.40/kg.

"Add to this the lamb schedule climbing each week it won't take long to bounce through the $7/kg kill weight mark."

Mr Cotton said the cattle market had also been on fire and with lower numbers coming through the yards and the schedules going up it was a "watch this space" scenario.

"As always happens this time of the year buyers are hoping for the weather to turn and put pressure on the livestock market as it's hard to see much of a trading margin at the current values being paid. Even the In-lamb ewes have taken a major lift over the past two weeks.

"The livestock markets look great with low interest rates - the only down side is the wool market, but three out of four ain't bad."