(Bloomberg) -- Murray Roos was until earlier this year central to an effort to revolutionize the world’s capital markets via the London Stock Exchange’s nascent digital assets platform. Now, the 48-year-old former trader is using technology to take on even more entrenched market — the UK’s centuries old livestock auctions.
Roos stepped down as LSEG’s head of capital markets in March and decamped to the 200-acre East Sussex farm he bought in the final months of the Covid-19 lockdown.
Set among rolling hills with woods to wander and ponds to gaze across it also has the hallmarks of a working farm that allows Roos to teach his children about the natural food chain and that meat doesn’t begin life on plastic trays.
There are chickens, pigs, sheep and vegetable patches. At any one time there are also 300 cows which have become Roos’ fixation since leaving LSEG, and the inspiration for what he hopes will be the next chapter of his trading career as he gambles on being able to persuade farmers to move from in-person livestock auctions to his online trading platform, LiveStockEx.
“I’ve always liked doing things from first principles. So instead of buying bread, I like making bread,” says Roos, whose family owned farms in South Africa and Zimbabwe. A brief flirtation with rearing chickens in the leafy London suburb of Wimbledon was cut short by urban foxes.
The farm was initially a hobby for Roos — co-head of Citigroup Inc’s equities and securities services business until early 2020. He installed a manager to look after the day-to-day operations and carried on with his busy day job. LSEG was embarking on a bid to use blockchain technology, better known for powering Bitcoin, to trade traditional assets faster and more cheaply, as the UK’s capital markets were fighting for relevance in the aftermath of Brexit.
What quickly caught Roos’ attention on the farm were the mechanics of buying and selling in a UK market with 44,000 cattle farmers and annual sales at auction of 1.26 million cows. His farm manager — like others the length and breadth of the UK — loads the animals for sale onto a truck and drives them to the nearest livestock auction, which in his case is about 40 miles (64 kilometers) away in Ashford, Kent.
“I’m a financial guy,” says Roos, “so I’d say to him, ‘well, what’s our margin, how much are you selling them for?’ It used to really frustrate me because his only answer was always, ‘we’ll get what we get’.”
The way Roos tells it, farmers never know how many buyers will turn up at auction on any given day or how much those buyers will be willing to pay. After the auctioneer starts bidding, farmers in the ring bid against that price until one reaches a level the seller is willing to accept. Some days, if they don’t like the offers, or there are none, they load the animals on the truck again and head back to the farm. Other times, to avoid that process, they accept a lower bid.
The paper-based payment system means deals are settled by check and every sale generates expensive transaction costs. Roos produces an invoice showing a recent sale of £8,120 ($10,285) attracted commission of £450 and fees of £137, wiping around 7% off his top line.
“I felt like I was walking into the pit in 1995 and from there it was so easy to sort of assign personas,” Roos says of his first auction, and how it brought back memories of his early days in the equities market when shares were bought and sold by open outcry. “You can say, well, there’s Goldman Sachs, there’s AJ Bell, you know, there’s the broker, there’s the big bad investment bank.
In this analogy, Roos’ farm is a small buyside portfolio manager “getting a bad deal”.
Grandstand View
Roos believes he has found the solution, not just for his farm but for thousands of others. He, and his software engineer co-founder Srikrishna Murali want LiveStockEx to be a digital platform where farmers can log the cows they want to sell, list them by their passports issued from the British Cattle Movement Service alongside a ‘quality index’ score generated by LiveStockEx based on breed, age and weight.
Buyers — from abattoirs to bigger farms and meat producers — can log onto the platform, and make offers for batches of cows. Sales can be agreed with a few clicks of a mouse with animals then transported directly to their new home. More efficient, potentially better environmentally, and the cattle don’t risk picking up disease by mixing with other herds at auction.
LiveStockEx takes instant payments and releases the money to the seller once the animals are delivered. If they don’t turn up, the platform would mediate disputes, and charge a fee to the party found to be at fault. It charges a commission of around 1% to 2% of the sale price. LiveStockEx also notifies the UK’s Department for Environment Food and Rural Affairs of sales, eliminating the risk of farmers being hit with penalties for missing the 36-hour Defra-policed deadline for reporting transactions involving the movement of cattle.
Roos argues the trading platform is better than the online classified advertising already used as an alternative to auctions, because they don’t offer the same level of detail as LiveStockEx, and are not trading venues. He hopes to raise as much as £1 million in external capital for the venture as soon as the first quarter of 2025. When Roos canvassed opinion about his venture from friends in the City, “the equity guys all saw it very very quickly,” he says, “they couldn’t believe it wasn’t already like this.”
But he will need to get more than equities traders on side. Farming is an industry steeped in tradition. The auctions — conducted in grandstand semi-circles with a theater-like feel — are a part of that heritage, a practice passed down through the generations.
“It’s the oldest marketing platform there is within agriculture and it’s been challenged multiple times over the last two hundred and something years,” says Chris Dodds, head of the Livestock Auctioneers Association and a 44-year-veteran of the industry. “More recently, it’s been challenged in the last 20 years by companies that come in thinking they can create something that’s different and that is in their opinion faster and cheaper.”
Despite that, Dodds says livestock markets are still selling at least the same percentage of livestock now as they were before the 2001 foot-and-mouth crisis triggered a months-long shutdown of in person markets. Auctioneers later tried moving to video auctions but the system broke down after a few weeks because buyers claimed they weren’t getting the animals in the condition they expected.
The latest data from the LAA shows that almost 11 million animals changed hands at livestock auctions in 2023, for a total of £2.2 billion.
Selling livestock online “is not a competitor to what we do,” says John Rossiter, head of auctions at the Hobbs Parker Group that runs Ashford’s livestock market.
Rossiter says that apart from people wanting to purchase livestock based on seeing and, in some cases, feeling an animal, the marts are about a lot more than cattle. “A number of farmers attend auctions every week and don’t buy or sell anything, they come for the company and interaction,” says Rossiter, describing farming as a “solitary life.”
Hobbs Parker’s auctions also host a charity-funded medical hub, a barbers and hairdressers, as well as two tool shops, a solicitor’s office, a feed seller and cafe.
“There are some people who love the tradition of what they do,” admits Roos. “These people are not really, and I mean this with the greatest of respect, they are not really our target clients.”
“They are selling four or five animals, they enjoy the morning, it’s their social outing,” he adds. “We are looking for people that are upset about how much money they are paying to transact, people who are in business.”
Roos’ target audience includes farmers like Ben Pike. “I’m 100% behind it,” says the 40-year-old farmer who lives in nearby Heathfield and sells around 1,000 calves a year. “The existing system of the auction marts and commission charges is very expensive and obviously transport to markets and then onto another farm is adding a cost to the sale that isn’t needed.”
Pike already does most of his business through private sales and only uses auctions as a “last resort,” he says.
“Everyone we deal with now is in the 21st century,” says Pike adopting things like do-it-yourself accounting software, “they’re digital. Even the guys in their 60s and 70s are going down that route.”
Roos’ target market are farmers already embracing technology. He demonstrates a popular feeding system activated by a digital tag attached to a cow’s ear — when the animal has eaten their portion, it stops dispensing food. There are also farm management apps that can track an animal’s weight based on a tag, information Roos can feed directly into the LiveStockEx system.
The plan is to offer a free farm management system with LiveStockEx’s platform embedded to encourage adoption among farmers. Initial outreach to potential users from abattoirs, to brokers and large meat purchasers has been largely positive, says Roos. He’s starting with cattle in the UK because the passports available from the BCMS make the animals easy to catalogue, and because it’s a market with a lot of sellers and a small number of buyers.
If that goes well, Roos sees the potential to expand into other farming markets with similar characteristics, in the UK and beyond, and even create forward contracts for farmers raising cattle which they know they will sell in a few months time. He is not, however, keen to re-enter the world of blockchain. The LSEG project he was involved in still has not come to fruition though the stock market group says preparatory work continues. And he doesn’t think the much-hyped technology will appeal to most of his prospective clients.
He said, they would likely say: “Woah, that’s too much for me”.
(Updates with latest LAA data in 19th paragraph.)
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