Angus Bulls better value for money than ever before

April 26, 2017 8:34 am

With the demand for Angus bulls at an all-time high, and the auction prices being paid for Angus bulls at levels not seen before, it is timely to reflect on what has occurred within the Angus bull selling market over the past 20 years.

 

1. Number of Angus Bulls Sold at Auction

Reflective of the increased market share of Angus cattle in southern Australia, and the increase in the number of Angus bulls being used in Northern Australia production systems, the number of Angus bulls being sold at auction has increased considerably over the past 20 years.

2016 saw a record number of 8,405 bulls sold at auction, a 128% increase on the 3,685 bulls that were sold at auction in 1998.

A breakdown of the number of Angus bulls sold at auction by year is outlined in Figure 1 below.

Note: the statistics regarding the number of bulls sold at auction have been compiled by Angus Australia based on information provided by members, and from information contained in media reports. The statistics may not necessarily be a complete record of all Angus bulls purchased at auction, and do not include the considerable number of bulls that are purchased by private treaty.

 

2. Number of Angus Bulls Sold by State

New South Wales has been, and remains the primary state in which Angus bull sale auctions are held, with 49% of bulls sold nationally at auction in 2016 being offered in NSW, followed by 19% in Victoria, 13% in Queensland, 9% in Western Australia, 7% in South Australia, and 4% in Tasmania.

Of note has been the increase in recent years in the number of bulls offered for sale at auction in Queensland, which has increased from between 600 – 700 bulls sold annually in 2006 – 2011, to over 1000 bulls in 2016. Anecdotally, this increase is consistent with a considerable increase in the number of private treaty sales of Angus bulls into Northern Australia (QLD, NT and Nth WA) in recent years.


 

3. Average Angus Bull Auction Price

The average price being paid at auction for Angus bulls has increased over the past 20 years, with the bull sale prices in 2016 being the highest on record.

The average price being paid at auction for Angus bulls each year in nominal (i.e. actual) and real (i.e. adjusted for inflation) terms is outlined in Figures 3 and 4 below.

 

4. Average Angus Bull Price By State

The average price paid for Angus bulls at auction is each state has generally followed the national average, with bulls prices in NSW and Western Australia in recent years being consistently higher than bull prices in other states.

The difference between the average sale price of Angus bulls sold at auction in each state, versus the national average is outlined in Figure 5.

 

5. What Has Driven the Increase in Bull Price?

When evaluating the increase that has been observed in the average sale price of Angus bulls sold at auction, both in nominal and real terms, it is interesting to consider what factors have driven the change in bull sale price.

Figure 6 illustrates the relationship between the average sale price of Angus bulls at auction, and the Eastern Young Cattle Indicator, each year.

The conclusion that can be drawn from this figure is that increase in sale price is predominantly a reflection of increased price of young cattle, as illustrated by 82% of variation in bull sale price being accounted for by changes in the EYCI.

Similarly, it can also be concluded that the increased demand for Angus bulls is not leading to an increase in sale price, with the Angus seedstock sector appropriately increasing the number of bulls being offered for sale each year and keeping the demand:supply balance of Angus bulls unchanged.

 

6. Are Angus Bulls Better Value for Money Than 20 Years Ago?

When considering the average price paid for Angus bulls at auction, it is important to recognise that the genetics of Angus bulls in 2016 bear little resemblance to genetics of Angus bulls from 20 years ago, with the Angus seedstock sector continuing to make genetic improvement at rates that surpass any other recorded beef population in the world.

Figure 7 explores whether Angus bulls now represent better value for money, by adjusting average bull sale price at auction (in real terms) for the genetic merit of the bulls being offered for sale.

Specifically:

  • The lower genetic merit of bulls in past years is modelled as an opportunity cost, and added to the average bull sale price. The opportunity cost differs subject to the number of females to which purchased bulls are subsequently joined over their breeding life, with values provided if bulls are joined to 100 or 200 females respectively.
  • It is assumed that the genetic merit of the bulls being offered for sale is reflective of the genetics of an average Angus animal born two years prior to the sale date
  • It is assumed that the Angus Breeding Index describes the overall profitability of the bulls being offered for sale.

Figure 7 clearly illustrates that the increase in the genetic merit of the Angus bulls is outpacing the increase in average bull sale price, suggesting that Angus bulls now represent better value for money than at any time in the past 20 years.

Note: the values in figure 7 represent the increased profitability of Angus genetics across the entire beef supply chain, from conception to slaughter, and so the increased profitability may not all be realised by the bull purchaser.

 

7. What Lessons Are There For Angus Bull Sales in the Future?

It would be remiss of anyone to speculate as to what the future holds for the sale of Angus bulls, but there are some important lessons that can be taken from bull sales over the past 20 years.

  • The demand for Angus genetics is strong, with current trends indicating the demand is continuing to increase each year.
  • Any increase in demand for Angus bulls should not lead to an increase in the price of Angus bulls, with the increase in demand likely to be matched by an increase in the number of Angus bulls that are offered for sale.
  • The major determinant of the price of Angus bulls will continue to be the current price of young cattle.
  • The Angus breed will continue to make outstanding rates of genetic improvement, meaning Angus bulls will continue to represent better value for money each year into the future.

 

Advertisements