|
Local auction markets are an
important part of the cattle industry, providing an essential
service to the stockman. Lee Pitts, well known columnist,
rancher, and an owner and announcer for Western Video Market,
has a great admiration and appreciation for auction markets.
“Small producers are the bread and butter for the auction
markets in this country. The really big strings of cattle hardly
ever hit the auction market, as they are often sold on the
videos or the owner is retaining ownership,” says Pitts.
Some people think small producers
don’t get a fair shake at the auction barn, but this isn’t true,
according to Johnny Smith and Dennis Hansen at Fort Pierre
Livestock. “If you look at our sale paper last week, you’ll see
that a small lot--10 steers—topped the market. Sale barns work
just as hard for the little guys as they do for the big guys,
because if you don’t have the little guys you won’t have a
business. If you get enough little guys bringing their cattle,
you get a market going and then all of a sudden the big guys
start coming, too,” they say.
Tom Anderberg of Mobridge (South
Dakota) Livestock Market says the little producer gets treated
with the same respect and consideration, and quality always
sells. “Little producers many times get as much or more for
their cattle as pot loads,” says Anderberg. Thor Roseth, of
Phillip Livestock Auction says that any time you can get buyers
together, bidding competitively on your cattle, you’re going to
get a better price than if you only show them to one guy and
sell them in the country. “The auction process is the only way
to really know what your cattle are worth,” says Roseth.
Scott Vance, president of South
Dakota Livestock Auction Market Association, runs an auction
that was purchased by his grandfather in 1960. He’s a third
generation owner, and doing business with third and fourth
generation customers. “My largest customer today is one who
started out small. Through marketing and the dealings we’ve had
over the years, that producer has grown. Their management
decisions and what they’ve done is the reason for their growth
and success, but I’ve also contributed to that with marketing
their livestock properly for them. We assist a lot of people,”
says Vance. Pitts points
out that some regions depend almost completely on auction yards.
“In the south, where the industry is made up of predominantly
small livestock producers, if there were no auction markets,
there would be no way for these stockmen to even sell their
cattle. They would not be ranching, period!” says Pitts.
Jerry Vogeler, executive director of
the South Dakota Livestock Auction Markets says it’s important
that producers don’t sell themselves short. “Cattle producers
need to take full advantage of the market. We sell the highest
percentage of feeder calves in this state through auction
markets and our feeder cattle index is higher than surrounding
states, because we have one of the most competitive auction
market systems in the nation,” says Vogeler.
“The reason people haul cattle to an
auction is because we work really hard to get buyers here, and
make the cattle bring what they are worth,” says Roseth.
“Ranchers don’t have to rely on themselves and their knowledge
of the market. And the country buyers wouldn’t know what cattle
are worth at any give time unless they see an auction report. In
western South Dakota, the livestock auctions are really driven
to get the best price because we are so competitive amongst each
other. There are many sale barns here and we are striving the
get the most money for these cattle, because if we don’t, the
guy down the road might. This may not be true everywhere, but
it’s sure true here, and this works to the producer’s benefit,”
explains Roseth. “The offer
a cattle buyer out in the country makes for your calves may
sound good, but you have to ask yourself why that country buyer
is spending high priced diesel driving around to try to buy your
calves,” says Vogeler. “It’s because he knows that feeder calves
will bring more at a livestock auction market and he’s trying to
buy them cheaper. A producer may think he’s saving himself a
commission, only to find out that he just sold himself short by
$50 to $100 a head,” explains Vogeler.
Vance says ranchers hear all
kinds of things about added value and advantages of video
markets where you can sell your calves at home. “We continue to
get pressure against our markets, but the ones who are putting
the pressure on are the people who eventually end up with the
cattle anyway, and if they can keep them out of the auctions and
buy them cheaper, they will,” says Vance.
The small producer who doesn’t have
a full semi load of calves can’t do well on the video sales
because part loads or mixed loads are always discounted. He can
get a better price at an auction. “I don’t care what kind of
operation you have, you always have some extra calves or some
that don’t fit a particular load. We provide a market for every
class of cattle, from weaned calves to crippled bulls or cull
cows,” says Vance. The auction markets are sometimes looked upon
as the last resort when producers can’t do anything else for a
market, but it should be the other way around.
Special sales are playing a key role
in attracting buyers and sellers. “Whether it’s for age and
source verified calves, natural cattle, CAB or preconditioned
cattle, the buyers know they can go to that sale and get what
they need without driving the wheels off their car,” says Pitts.
“And sellers are rewarded because of the demand created by the
special sales. Today there are fewer country buyers and there’s
a reason for this. They can see more good cattle at less
expense, buying them at the auction!” explains Pitts.
“Auction markets don’t just sell
livestock, they merchandize them,” says Vogeler. “This isn’t
just a matter of holding a sale and hoping someone shows up.
There’s a lot of time and money spent advertising, making
contacts, getting to know people, representing cattle to people
who are interested in buying those cattle. There’s a big
difference between selling and merchandising,” he says. There is
always good competition for those cattle.
Smith and Hansen at Fort Pierre
Livestock feel that a sale barn is price discovery at its best.
“Auctions spend a lot of advertising money trying to bring
people in to buy cattle, and people have all the livestock
papers to see what prices the cattle are bringing and can
compare them. People pay us a commission to try to get the most
for their cattle, and we work very, very hard at it.”
One reason there is plenty of
competition and demand for the cattle is because the auction
crew sorts the cattle to make them as even as possible. Buyers
want uniformity. Lee Pitts says the first time he sold his
calves at an auction, years ago, he didn’t even recognize them
in the sale ring. “At home they were an up-and-down
multi-colored bunch, with a wide weight variation, but by the
time they were done sorting them, they looked so good I almost
bought them back as stockers,” says Pitts.
“An auction market may have only one
sale day a week, but that doesn’t mean the owner, manager or
staff are not real busy the rest of the week,” says Pitts. “The
manager is always on the phone letting potential buyers know
what he’ll have this week. He knows who is in the market for
what, at all times.” When
you sell cattle at a livestock auction market, state and federal
law ensures prompt and reliable payment, says Vogeler. “There
are strict bonding requirements, so this also ensures that the
seller is going to get paid. You have protection, under state
law. If you sell cattle out in the country or through an
out-of-state firm, you need to be careful to make sure the check
is good. A phone call to the bank will not always protect you
from a bad check.” When you sell at an auction, you can get your
money the same day, and you don’t have to worry about a bad
check. Pitts says auctions
go to great lengths to buy good hay, have clean water, and make
the entire experience less stressful for the cattle. “For people
who are not set up to wean calves, auctions perform an
invaluable service in getting a good fill on the cattle, and
letting the sellers know when to have them at the sale for best
results,” says Pitts.
“It always amazes me that
ranchers are willing to give a 3 percent pencil shrink when
selling calves at home, but complain about giving the yards a
commission,” says Pitts. “If you doubt the value of an auction
market, next time you send calves or yearlings to the auction,
get a weight, if you can, at home and another off-car weight at
the auction market. If you give them time, I guarantee that the
yard will make up the weight and then some, and when you add the
feed and commissions bills it won’t equal what you would have
given up on shrink back at the ranch,” he says.
“And the yard takes all your calves.
They don’t sort off the worse ones like the buyer does at the
ranch, that you have to send to the auction. And then some
ranchers compare what their worst calves brought with the best
ones they sold at home! Still, I’ve had many ranchers tell me
their cut backs brought more at the auction than their best
cattle did at home,” says Pitts.
Smith and Hansen point out that an
order buyer at the ranch will always cut some back. “The auction
people don’t sit around and say your calves are too full or your
cattle are too sorry-looking. When a country buyer looks at your
animals there is always something wrong with them; they are too
big or too small or something else.” There’s always an excuse to
cut some out. But the auction yard takes them all.
Auction markets provide personal
service and take time to know the needs of the seller, and the
seller’s livestock. Local markets want repeat customers. The
customers are their business, and these markets provide true
price discovery. It’s always a more equitable and fair market if
several buyers are bidding on your cattle. You don’t have to
take an offer from just one buyer or feedlot rep or video sale
rep. Smith and Hansen explain that auctions make it more fair.
“Most ranchers have TV or the internet to keep track of prices
and know what the market is, and don’t have to take an offer
from some country trader that’s $10 off the current price. For
small producers, we can put small groups of cattle together,
right here at the auction, to fill big orders. Without the
auction, a country trader can steal a small bunch because no one
else would be looking at them.”
“You always hear from purebred
breeders that you should sell your calves direct. But they sell
their bulls through an auction!” says Vogeler. “If you want to
know what happens to small producers once they lose price
discovery, just look at the hog market. There are no small hog
producers today.” They were put out of business.
Smith and Hansen point out that
auctions are the best way to ensure competition for the cattle.
“Years ago, most of the competition in the fat cattle market was
eliminated, and now nobody knows exactly what that market is.
Packers buy cattle just a few minutes a week and it might be on
a Tuesday, or a Friday at 6 or 7 in the evening. There’s no
semblance of a fat cattle market anymore because there’s no
price discovery. Price discovery is how you figure out what
something’s worth. If you do away with the auctions in the
feeder cattle deal, you’ll take many dollars off the prices.”
Packers want to create vertical
integration so they can buy all the cattle at the same price and
essentially have a monopoly. “But if that happens, who would
want to pay $5000 for a bull, if he’s going to get the same
price for his calves as the guy who only pays $500 for a bull?
If vertical integration is so good, how come it’s ruined
everything it’s been in? Look at the hog and chicken
industries,” says Smith.
Even the big push for a national ID system works toward this and
will put the small producers out of business. “The only
difference between the small producer and the big one is that
the small producer will be eliminated first, in vertical
integration, but the big producer is next. A lot of people
haven’t figured this out yet, but that’s where they are heading.
They think the packer will take care of them because they are a
big boy, but good luck!” says Smith.
Lee Pitts has great appreciation for
livestock auctions because he was exposed to the pork and
poultry industries. He doesn’t want our business to become like
theirs. The auctions are the heart and basis of the grassroots
livestock industry, and spend a fortune in advertising. “Take it
from someone who has owned a livestock newspaper, without the
advertising from auction markets we would not have all the great
livestock papers that we do. Go to a college library and ask for
all the newspapers about the poultry business. I’d be surprised
if they even find one. That’s because they don’t have auction
markets for chickens. They also don’t enjoy price discovery like
we do,” says Pitts.
“When people tell you we need to
join strategic alliances or become integrated like the poultry
and pork people, just compare their businesses right now with
ours. We are in much better shape primarily because of price
discovery, transparency, quick payment and marketing options
that come with selling at auction. Read a contract sometime for
a pork or poultry producer. One I read was 24 pages long. The
packer’s responsibilities were outlined in 3 paragraphs on the
front page and it took the other 23 pages to say what the
producer was responsible for. It’s no exaggeration to say that
without auction markets and the important role they play, we
would already look like the pig and poultry industries. That,
right there, even without all the other things they do, should
be enough to convince anyone they should continue to support
their local auction market, or whatever auction they feel will
do the best job for them,” says Pitts.
“Most auction markets offer a
complete service 52 weeks a year,” says Vogeler. “They sell the
small lots, the large lots, the cows, bulls, and calves. The
market supports their home town, too. In South Dakota we have
300,000 buyers, sellers, truckers and visitors that attend these
sales. They are spending money on gas, food, motel rooms, pickup
parts and many other items,” says Vogeler. The auction has a
great multiplier effect throughout the community.
“Not only do they sell the cattle
higher than anyone else in the U.S. but the money stays in the
community,” says Vogeler. “They generate local income, employing
people, supporting local businesses by buying feed and supplies,
they pay taxes, support local youth groups, 4-H, etc. When do
you ever see a country buyer buying 4-H calves? Local markets
work hard—it’s a tough business—but they do this because they
care about their customers. The auction market’s business
depends on the cattle producers staying in business. Without the
cattle producers, we don’t have a business!”
Smith and Hansen feel the auction
yards are the lifeblood of the cattle industry. “And they are
important also for the communities they serve. There are many
things the auctions do that the video sales don’t do, in helping
the community. They provide jobs, and a lot of people gain extra
income working at the sale barn, even if it’s just 1 to 3 days a
week. In this day and age, farm economy hasn’t been the best.
Auctions are a lifeline for a lot of communities, supporting
everything from 4-H one up. Every time there’s some kind of
need, or a benefit, the auction barns participate. They are a
very important part of the community.”
|
