The Economic Efficiency of Livestock Selling Complexes in Victoria

Abstract

Saleyards remain the single most common method of livestock selling for Australian livestock producers despite relatively high selling costs and the variability of prices at auction (Australian Bureau of Agricultural and resource Economics 1992; Hall and Todd 1981). Saleyard selling dominates particularly in Victoria where smaller herd sizes and lower transport costs have hampered the development of alternative methods of livestock selling. Given the reliance of producers on saleyard selling, the efficiency of the saleyard selling system is pivotal to the efficiency of the broader livestock industries. An earlier investigation of saleyards in Victoria suggested that a rationalisation of the number of selling complexes was warranted (Saleyard Working Party 1986, p.1). However, a review of the current selling system reveals that the number of selling complexes has remained largely unchanged since that report (Municipal Saleyards Association 1996). This research sought to provide quantitative data which clarifies the apparent conflict between the need to rationalise the number of selling complexes and the continued support for saleyards by local government. Statistical cost and revenue estimation techniques were used to identify the minimum scale of saleyard which would leave local government revenue neutral. Moreover, these techniques were used to identify the minimum efficient scale of municipal saleyards and highlight potential economies of scale. This section of the study revealed that a rationalisation of saleyard selling complexes in Victoria was indeed warranted. A cost benefit framework was then employed to examine the broader economic implications of livestock selling complexes. It was discovered that such facilities are responsible for inducing additional regional expenditure and there was some evidence that the information derived from saleyards was of value to producers. The consequences of saleyard rationalisation are therefore discussed in terms of the ability of local governments to capture these additional benefits since public funds are required to support those saleyards which generate internal economic losses.