The Oxford Farming Conference this year was billed as being all about “ambition,” but I reckon one commentator got it right when he said the key word for farming right now is “resilience”.
In fact, even as the great and good of the industry were in the hall listening to the speakers waxing lyrical, dairy co-op First Milk was announcing a two-week delay in its payments to members who are already receiving some of the lowest prices in the sector.
The corridor outside the press room is one of the few places in the ancient building with a reliable phone signal and it was a busy place, with industry leaders making and taking calls on what was fast becoming a crisis.
Nearer home Caledonian Marts,or the Cally as it is always known, is facing up to its situation in a commendably public way.
Its problems don’t come from inefficiency of operation or lack of throughput. Indeed, it always gives the impression of being run without frills and extra cost and serving its consignors well.
The now well-publicised problem comes from an accumulation of bad debt which had either not become apparent or had not been recognised by the directors or auditors for too long.
Of course, being stung by bad debt is the achilles heel of the livestock auction system. This has happened before, and indeed there appear to be real parallels with the situation at Lawrie & Symington’s Forfar Mart where a seven-figure sum of bad debt was allowed to accumulate.
The position at the Cally is of a greater magnitude, with £3.75m owed by livestock buyers most, it appears, by a small number of dealers who are now embedded in the debtors’ book.
As chairman James Cullens pointed out, trading out of such a problem is nearly impossible on commission rates of 4%.
Compared to furniture or art auctions where commission rates are 20% or more, this is a slim margin.
The farming industry can be grateful for that, and for the speed at which livestock auctioneers practice their craft. If they worked at the leisurely rate at which the auctioneers on television dispose of the lots, most store cattle sales would be three-day events.
But it is that very speed and the values involved which pose such a risk for the auction system.
Caledonian Marts now has a credit limit of £100,000 per buyer, but in reality that is quite hard to police. Everyone has seen dealers using three or more accounts, only indicating which one they have been bidding for after the hammer comes down.
At a cattle sale the £100,000 limit could be easily reached in half an hour, and would only account for 75 to 100 cattle.
It can’t be easy for an auctioneer and his clerk to keep tally of what is happening.
If they suspect credit limits are being overshot, should they stop taking bids?
Or, if buyers are unable to settle their accounts at the office counter, should the stock be withheld and the consignor told that their stock has after all been unsold?
The risk is one of losing consignors and buyers in such a scenario, but it is one worth taking if I read the feeling at the Caledonian Marts meeting on Friday correctly.
The fear of causing embarrassment shouldn’t come into it.
One member on Friday angrily asserted that this was an auction mart and not a bank.
This is only partly correct. Some auction houses notably ANM Group make a virtue of running a loan scheme, with members, often retired farmers, lending money at a good rate of interest to the mart. The funds are then made available to store stock buyers, who then have to commit to selling the finished stock back through ANM, either live or deadweight. The stock acts as the collateral, the risk is low and lenders and borrowers benefit.
Other markets have similar schemes.
So, acting as a bank need not necessarily be bad.
What is bad is extending credit to what would appear to be a small band of buyers, mostly of finished stock, who have no collateral and give little priority to settling debt.
They might be welcome at marts on a day when the pens are full and buyers are thin on the ground, but everyone would be better off without them in the long term.
Markets are important as a transparent method of price setting. As Caledonian Marts operations manager John Kyle pointed out on Friday, one only has to look to Ireland, where there are no prime stock auctions, to see what happens to prices.
This newspaper, as do others, carries regular market reports and always has done. Even if prime cattle sold by auction in Scotland rarely exceed 500 per week they do offer a benchmark.
Sheep numbers, at well over 20,000 most weeks, are more significant as a proportion of the total.
In short, auction markets are important and that is without considering the social role they play in an industry where isolation is now such a worrying feature.
Here’s hoping the Cally has a future, and that the market sector in general stays strong.