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Auctions Get you the Highest Dollar

Auctions are the key

Sample Advertisement for your Special Sale

   

 

LIVESTOCK AUCTIONS ARE THE KEY *

My name is Keith Chapman. I am Region Executive Officer for Livestock Marketing Association, a national trade association based in Kansas City, Missouri, representing the livestock marketing industry which includes livestock auctions, order buyers and dealers, satellite video auctions, and related businesses and their customers. I also serve as Executive Director for LMA of Texas, which is the state organization for livestock marketing businesses and their customers. I am employed by the national association and my role with the state association is a non-paid position.

Livestock marketing businesses and in particular livestock auctions are in the unique position of LEGALLY REPRESENTING THEIR CUSTOMERS in their marketing transactions. WE ARE THE VOICE FOR THESE CUSTOMERS and WE DO NOT TAKE THIS RESPONSIBILITY LIGHTLY. In Texas the 113 livestock auctions along with their 120,000 customers MAKES US THE VOICE FOR THE LARGEST CATTLE CONSTITUENCY IN THE STATE.

Livestock auctions play a vital role in the various livestock industries and in particular the cattle industry. By open competitive bidding, livestock auctions provide true price discovery on every class and type of animal. They provide financial responsibility by immediate payment with a bonded custodial account check. They facilitate the handling of a virtual maze of technicalities that come from a variety of rules and regulations surrounding the marketing, handling, receiving and delivery of livestock. They collect and distribute fees to a variety of groups and people including Texas and Southwestern Cattle Raisers Association (TSCRA), Texas Beef Council (TBC), and veterinarians. Texas auctions send to the TSCRA over $2 million each year for TSCRA’s theft protection and law enforcement program. Approximately 80% of the money that is sent to the TBC on non-fed cattle comes from livestock auctions. Texas auction markets test about 5 times more cows for brucellosis than are tested on farms and ranches in the state and provide a vital link in improving the health of livestock for the producer.

Livestock auctions are the lifeblood of the cattle industry and particularly the independent cattle producer. To illustrate this point you need only take a look at what has happened in the hog industry. There are only very few independent hog producers left in this state and very few auctions left who sell hogs. Now I am not sure which came first “the chicken or the egg”, but my point is that the two go hand-in-hand. I also am not real sure how the hog industry got itself into this mess, but the cattle industry definitely does not want to follow their steps or the independent cattleman may find himself out of business or working as a contract laborer for the major packers

and corporate agriculture. It appears that the hog industry to a large degree followed the steps of the poultry industry with the exception that the independent poultry producer did not have the auction industry to help them out, so they fell victim to the major packers and corporate agriculture much more quickly. It took awhile before the major packers and corporate agriculture could capture the hog industry. The cattle industry can avoid this pitfall if we will pay close attention to the warning signs.

In talking with some veterans in the hog industry, here are some of the steps they went through. There were many hogs and many auctions selling hogs. Major packers set up buying stations (less hogs at auctions). Major packers started forward contracting hogs (less hogs at auction). Major packers started raising their own hogs (less hogs at auction). Under the guise of IMPROVING pork quality, major packers started insisting that hogs be railed and graded (less price discovery on live hogs). When major packers had sufficient volume from their own hogs and contract hogs, they lowered the price they would pay for live hogs to a point that independent hog producers went out of business. The major packers and corporate agriculture then controlled the industry. The negative effect on the local farm communities was staggering.

In Iowa, one of the top pork producing states in the USA, the livestock auctions are providing a ray of hope to their local communities and independent hog producers. Contract hog farmers started selling their “cuts” at auction instead of “giving them to the packer”. The auctions found enough buyers for these hogs and the price was attractive enough that more hogs started coming to the auction. Independent producers are starting to raise hogs and sell at auctions. This has helped the local feed dealer and hardware dealer and local businesses are beginning to prosper again. A similar story is developing with fat cattle once again being sold at auction. [Ronald Jordan, a transplanted Texan, and Jim Schaben, Jr., who married a Texan, have the details of all these positive things that are happening in their local Iowa communities.]

A healthy livestock auction industry is vital to animal agriculture and the independent producers and the local community, but the investment cost and expense of operating a livestock auction continues to rise. Labor cost, insurance cost, “hot check” cost, complying with government regulations cost, etc. affect the “bottom line” of these businesses and affect the commissions and fees they must charge to provide the services that cattle producers demand and need.

But when you look at the whole picture, THE COMMISSION YOU PAY IS AN INVESTMENT RATHER THAN AN EXPENSE. It is AN INVESTMENT YOU MAKE TO GUARANTEE A FREE and OPEN MARKETPLACE. It is AN INVESTMENT YOU MAKE TO HAVE TRUE PRICE DISCOVERY. It is AN INVESTMENT IN YOUR FUTURE AS AN INDEPENDENT BUSINESS OPERATOR IN THE CATTLE BUSINESS.

I will close by reminding you that a renowned entrepreneur in the cattle business has often said, “THE AUCTION METHOD OF SELLING WILL GET YOU THE BEST PRICE. The people who sell fine art, fine horses, fine wine, and fine cattle have figured this out so why not do what they do to get the best price, SELL AT AUCTION.”

*Speech given by Keith Chapman, Region Executive Officer Livestock Marketing Association at theIndependent Cattlemen ‘s Association of Texas, Inc. COLLEGIATE FORUM at College Station, Texas, on Saturday, November 22, 2003.

Speech written by D. Keith Chapman with editorial assistance from R. ‘Chip’ Chipman.
(NOTE: On the hog industry analysis, time and format would not permit a more detailed explanation.)

 

 

   
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