Marketing beef cattle via satellite, video auction proves succesful in areas distant from markets (Research Brief #14)
Video and satellite auctions provide a number of marketing advantages to cattle producers who live long distances from markets or feeding areas.
A five-year research and demonstration project at the UW-Madison Hayward Agricultural Research Station evaluated a number of methods for marketing beef cattle.
“Marketing livestock in farming areas like northern Wisconsin requires a lot of planning and care before selecting a marketing system,” says Richard Vilstrup, a UW-Madison meat and animal scientist.
The College of Agricultural and Life Sciences ran the Hayward station from 1985 to 1990 to assess whether a family could make a living on a northern Wisconsin beef/sheep operation. Project staff relied on labor-saving practices, low-capital investment, and forage production to maximize profit.
Results from four years of marketing feeder calves via video and satellite auction from the Hayward station show the following advantages to this marketing approach:
- Cattle were filmed in their natural surroundings and appeared fresh.
Marketing costs were reduced.
- Buyer exposure was vast.
- There was less cattle stress.
- Farmers enjoyed some price protection since calves were still on the farm.
- Better service to people long distances from the market.
At the project’s onset, the Hayward researchers decided to keep 100 beef cows and 300 ewes. During the first year, they found that there wasn’t enough pasture to supply feed to that many animals. For the next three years, 67 to 73 cows were kept with an increase again to 100 the last year when ample feed was available.
The researchers originally purchased 3- to 5-year old beef cows that were one-half Hereford and Angus and one-half exotic breeds such as Simmental, Limousin, and Maine Anjou. Purchase price was $550 per head. Project staff later added older, proven cows from a herd believed to have a good health program.
Most calves were born in a 40-acre woodlot. There were very few health problems once calving began. The major disadvantages were difficulty monitoring calvings for problems and assisting an unrestrained animal if it needed help.
Marketing options are limited in the Hayward area. Most major packing plants, feedlots, and larger competitive markets are located in southern Wisconsin, Minnesota, Iowa, and Illinois. A lack of available transportation, the need to ship sufficient numbers of animals, and trucking costs complicate marketing decisions. Shipping livestock longer distances also increases weight losses.
The Hayward researchers made two important decisions at the start of the project:
- the calves would not be fed to slaughter weight at the station and
- replacement heifers would not be raised since the project would only last five years.
Each fall, project staff made several important market calculations and decisions, such as whether to market cattle as calves, hold until spring and market as yearlings, background the cattle for a feedlot, or put the cattle in a custom feedlot and sell as fed cattle. Each decision was based on projections of labor availability, feed budgets, price projections and market conditions.
The following six methods were used to market beef cattle from the Hayward Station:
Custom feed calves and market as fed cattle at public auctions
The Hayward staff decided to custom feed cattle depending upon current feeding costs of custom feeding contracts. They projected fed cattle prices compared to the profitability of selling calves at current prices.
The producer owns the cattle in the custom lot and is asked to make monthly feed and yardage payments. He or she communicates frequently with the custom feeder and can be actively involved in final marketing decisions. This system allows producers to maintain control of the cattle from birth to finish and to share in the profit or loss in feeding the cattle. If the custom feeders are unsure of cattle market prices or want to minimize risk, they may use futures contracts on custom-fed cattle.
In 1986, the Hayward project staff signed a contract to custom feed 87 calves to slaughter market weight. The custom feeder at Monticello, Wisconsin charged 40 cents per pound of weight gain to cover feed, bedding, and implant costs. The calves had a shrinkage of 2.9 percent during the 7-hour, 326 mile trip in November 1986. Some of the calves experienced respiratory disease problems several months after shipment and were treated; however, six died from severe acute pneumonia from B.V.D. virus. In subsequent years, project staff conducted a complete vaccination program on the farm.
The finished cattle were hauled to a competitive auction in Monroe, Wisconsin for sale. With higher market prices in the fall of 1987, cattle netted over $9,500 more by custom feeding rather than selling them on the depressed 1986 fall markets.
Marketing cattle by video auction
Marketing by video auction gives producers the opportunity to keep their cattle on the farm until the sale. They can also select weighing conditions and delivery times and offer cattle to buyers and cattle feeders in distant markets near feedlots.
Market representatives film the cattle in color and sound and fill out sales agreements at the farm. The buyer and representative agree on description, weighing, and loading conditions. They also should establish an estimated weight for the sale brochure and to serve as a base for establishing the market slide.
The cattle’s average weight is listed as an estimate. If the actual weight at delivery time is not within the estimated range, prices are adjusted according to the weight scale stated in the description.
Cattle are sold as listed in the catalog unless the auctioneer makes other announcements. Calves raised at the Hayward station from 1987 to 1989 were sold by video auction. Sales commission was $8.50 per head ($6.00) in 1987 plus $1.00 per head to the Beef Council as required. Cattle were picked up on the farm and delivered directly to the feedlot buyer in southern Wisconsin.
Satellite and video marketing operate similarly in preparation, description, sales, delivery, and payment. This marketing technique presents cattle to more buyers in receiver locations throughout the Midwest and the nation. Buyers can bid from their home or feedlot by calling bids to the auctioneer.
A video film is taken of the cattle and shipped to a video uplink system near Chicago. The auctioneer’s voice and buyer instructions are telephoned to Chicago from satellite auction headquarters and coordinated with the video film’s broadcast beamed to the satellite.
Most cattle are weighed at area Midwest market locations or on local community grain or lumber scales. Market representatives help to arrange cattle pick up and transportation and supervise delivery and weighing.
In 1990, 75 calves (41 steers and 34 heifers) were sold by satellite auction. Average gross weight was 533 pounds. The calves brought nearly $96 per cwt, or more than $490 per head, after a $9.50 per head sales cost. Commission was the same as the video auction.
Public livestock markets
The South St. Paul Public Terminal livestock market is the only one to serve the Hayward area. The market provides skilled representation at private treaty sales and northern modern auction facilities.
Three original bulls and all but one cow were sold for slaughter through a cooperative commission firm in South St. Paul. The market’s volume and location attract buyers who want to assemble semi-loads of cattle to ship to distant packers as well as sales to local packing plants near the market. Commission and yardage costs depend on the number and kind of cattle sold. Cooperative auction markets are also located at Barron and Altoona, where they market cattle, cows, and calves.
Public farm auction or dispersal sale
This final marketing technique was done at the end of the project to sell the beef herd, sheep flock, and machinery. Cows were sorted by size, type, age, and breed to aid buyers in bidding. Cows were also given a pregnancy check, with a few cows offered with calves as cow-calf pairs. Skilled auctioneers provided sorting gates, labor and sales service.
Specialized selling of breeding cattle
Selling breeding cattle often requires specialized sales techniques and can be costly and time consuming depending on the level of local market demand. A few surplus-bred cows were sold by this method.
In summary, says Vilstrup, market selection and timing is essential to profitable livestock production. Several conditions must be considered to maximize market returns, he adds. These include: price and competition; number of buyers; weighing conditions; cost of transportation; shrink or weight loss; representation at the point of sale; and market and advisory services available.
Table 1. Five-Year Performance and Health Problems of Calves
|Cows in herd||100||73||73||67||96||82|
|*5 calves stolen and 2 purchased as replacements – the number of 90 calves
included in total calves weaned **Calving percent = calves weaned/cows in herd at breeding x 100
Contact CIAS for more information about this research.
Published as Research Brief #14