The following is the proposed fee structure for evaluation services offered by the company for evaluating cattle and includes the cost of a company identification tag.
EVALUATION OF BREEDING ANIMALS:
NO. OF HEAD COST
0 – 99 $7.50
100 – 999 $5.00
1000 upwards $4.00
EVALUATION OF PROCESSING ANIMALS
NO. OF HEAD COST
0 – 99 $5.50
100 – 999 $4.50
1000 upwards $3.50
Cost Analysis for 200 breeding cows through system:
Evaluation Fee $5.00 x 200 = $1000
Cost Analysis for 200 processing steers through system:
Evaluation Fee $4.50 x 200 = $900
Working on an expected return of $2.00/kg. live weight return for evaluated stock, the normal sale agents commission of 5% means that there would be a commission charge of 10 cents per kg.
For a 400 kg. live weight beast this equates to :
400 kg. x $2.00 = $800
at 5% comm. = $40 per head.
The cost of evaluation for this animal would be $4.50 divided by 400kg. = 1.125 cents per kg. live weight.
Given the marketing opportunities that we expect to be available with a consistent, branded product, this cost will be well covered by the overall return. Our aim in this example would be to obtain at least a 5 cent per kg. premium for an animal grading 3 or better on our grading system.
This means the total for this animal would be 400 kg x $2.05 = $820 as against $800.00 for a non graded animal.
This also gives an indication of the amount that would normally be paid in commissions and therefore available to cover evaluation costs. Not all stock will be sold without commission. In fact, there could end up being very few sold directly to buyers, so it will be necessary to ensure that quality demands a premium return to ensure producers can continue to justify having their stock evaluated.