SOUND MARKETING PROGRAM IS CRITICAL FOR SUCCESS

by: Stephen B. Blezinger
Ph.D., PAS


Part 1

A sound marketing program is an integral part of any cattle production operation. Too many producers engage in cattle production without ever establishing a well thought out marketing and sales system. Countless producers rely solely on taking their calves to the sale barn whenever they think they are “ready” which generally means when they are of an age to be weaned or if they need a little money. This commonly results in situations where receipts for these cattle sales are not optimized and the producer technically loses money simply due to the lack of a marketing strategy. The following discussion will outline marketing options as they would pertain to the typical cow-calf producer.

Understand that the different programs work differently for different operations. Some of this is subject to the size of operation and the ability to group cattle. For options such as retained ownership into the feed yard to be economically feasible you would have to put together truck quantities or around 70 head or work with a neighbor to put together an appropriate amount. In many cases it will be necessary to research the option as it applies to your operation and “take it for a test run” a time or two to gain some experience. Optimally you should become familiar with several of these for use under different market conditions so you have options under different market conditions.

Marketing Options

Conventional – sale barn

As mentioned, for the largest part of the beef cattle producing community this is the most common means of marketing animals from the farm. This includes heifers and bull calves (a large percentage of male market calves are sold as intact bull calves – this generally results in a price discount, often $1.00 to $5.00/cwt). This is something to keep in mind – the various management steps that can be taken (castrating bulls, deworming, dehorning, vaccinations, etc.) will not necessarily generate price premiums but MAY help prevent deductions. Similarly, steps like creep feeding have to be taken carefully because if the calves are overly fleshy (subjective) they will have price deductions applied since overly fleshy calves often do not perform well through transition off the ranch.

Pros

1) Convenient. Most sales operate every week (except on holidays). For most producers, there are enough auction market facilities within a reasonable distance that they have more than one option in a given week.

2) Numerous buyers bidding on cattle. Every sale is attended by a number of order buyers who's job it is to purchase cattle for their customers. These customers may be other ranches, grazing/growing operations, preconditioning/backgrounding operations, feed yards and so on. With numerous buyers this can create more competition and drive prices up within whatever range the type of cattle you are selling that week are bringing and what type of cattle the order buyers have orders for.

3) Depending on the sale barn, if the producer can get to know the manager/auctioneer and let them know you are bringing cattle and what has been done with them in some cases they MAY promote this during the auction process. This is, unfortunately hit or miss since if they have a big run and are in a hurry they are just trying to get all the cattle through. However, communicating with these folks never hurts. It might even be of value to invite them out to the ranch at some point to see first-hand what you are doing.

Cons

1) You have no control over the prices you receive. It is a bidding situation and there is no option for negotiation.

2) Cattle carried through the auction process generally shrink to some degree. This can be variable based on how they are handled from the time they leave the farm until they are run across the scale at sale time. This can vary from 2 to 10 percent depending on the animal. I'd encourage that anytime you are taking cattle to the sale that you weigh them to give you a frame of reference if you have access to a set of scales.

3) The expense of selling cattle through the sale barn can be considerable. In addition to what they deduct for sales commission there are a variety of other charges they add for handling the cattle. It adds up.

Comments

Given size, type of operation, cattle quality, etc. the sale barn may or may not be the best option and only when cattle do not fit other marketing programs, etc. If they don't fit then you need to evaluate why they don't fit and may need to look at the cow or the cow/bull combination. This typically results in removing that individual cow since her offspring are atypical to your overall program.

That said, taking the proper steps and making good decisions regarding cattle that need to take this route is still important to maximize your returns on these cattle as well as any other.

Private treaty – sales to individuals, order buyers, etc.

Direct sales off the ranch can improve returns on cattle and provide more control of the sales price received. This will require marketing efforts to reach out to professional buyers and others who might be interested in your cattle. These would need to be sorted into groups primarily similar in size and type. If sold to order buyers and ultimately heading to feedyards they will want a pencil shrink of two to three percent (possibly more depending on distance).

Pros

1) More control of pricing – negotiation

2) No added expenses (i.e. commissions, other)

3) If you have scales the starting weights are on-farm and initial shrink is minimum even with a pencil shrink of two to three percent.

4) If sold to other producers pencil shrink may not be requested

Cons

1) Will require more homework to determine what a fair market price would be.

2) Will have to engage in a negotiation process.

3) Time commitment may be greater since cattle will have to be shown, possibly to more than one buyer.

4) Marketing efforts will be required to reach out to potential buyers.

Comments

This is another good option but does require a certain amount of work and an ability to perform price discovery (determining fair market prices at a given point in time) as well as some negotiation skills. This will take some time and practice. However, with the development of some online marketing sites, the process is simpler and easier now. An example of this is www.cattlerange.com. Another related method is via online or satellite, “live” sales. These will require a company representative to come out and video the cattle you wish to sell for posting or playing at a future sale date. These are somewhat of a crossover between private treaty and an auction sale since there is a cost. However, it opens the listing of your cattle to a much larger, wider range of potential buyers.

Preconditioned Calf Sales

Preconditioned calf sales (PCS) are becoming increasingly common and well attended. Buyers have recognized the value of having cattle preprocessed. Given the challenges that many feedyards, in particular, face with obtaining good, experienced employees who understand dealing with stressed or sick calves, practices that can help reduce losses at or after receiving are of value.

Pros

1) PCS generally attract large numbers of buyers which increases bidding competition and thus can increase sales prices

2) Required to have cattle on feed so they are typically a little heavier than non-preconditioned cattle.

3) Cattle may bring a premium because of program participation and management applications.

4) Are reasonably well timed/frequent enough throughout the year.

Cons

1) Require additional management and adherence to specific programs

2) Additional cost

3) Because of time frame and handling at the sale facility, cattle may shrink more.

4) Cattle should not be discounted as much as in conventional sales but may or may not generate a true premium.

Comments

It has long been up for debate if preconditioning is truly worth the time, effort, money to the seller. It is, certainly, for the buyer since a lot of the work and expense has been done and incurred by the seller. This really falls into the category of giving it a try and seeing what your experience might be and the prices you receive as compared to conventional sales. Again, this is simply another sales and marketing option.

Heifer development/sales of pregnant replacements

A good heifer development program is required for every breeding cattle operation to grow or maintain numbers and replace cows culled from the herd. Since not all heifers are required as replacements some are available to be sold as replacements to other breeders, commercial or purebred. Typically, a given heifer crop can be divided as follows: At or before weaning, heifers are evaluated based on phenotype and dam performance. Heifers not meeting the grade are removed for sale as a market animal (for slaughter) or through one of the other marketing routes. Retained heifers are put into a development program. These heifers are grow out to approximately 750 lbs (or at puberty depending on breed, breed-type). A second selection/culling process removes any females that have not developed suitably. These can be sold as market cattle or as opens. Once heifers are bred (pregnancy confirmed), the top 10-15 percent or numbers needed are retained for the herd. Remaining heifers are marketed as pregnant heifers at a suitable market price which has historically been significantly higher than market prices. Again, some market evaluation must take place in order to determine fair market pricing.

Pros

1) This generally results in sales prices considerably higher than for open heifers at the same age or size.

2) Proper designed the program results in females that are better for retention in the herd.

Cons

1) Requires more additional up front expense for more animals, a number of which may be removed from the program along the way.

2) Requires the same marketing efforts as those listed in Private Treaty sales. More involvement in sales process.

Comments

Unless a farm purchases all replacement heifers from other breeders, you are developing these heifers anyway. Development and sale of pregnant replacement generally increases per head returns significantly.

Conclusions

It is critical for a cattle operation of any size to evaluate different marketing options and determine which one(s) best meet the producer's needs. Every year countless dollars are wasted or left on the table simply because the producers have not done the necessary research and homework. In Part 2 of this series we will continue this discussion and evaluate more marketing options.

Copyright 2016 – Dr. Stephen B. Blezinger. Dr. Stephen Blezinger is a nutritional and management consultant with an office in Sulphur Springs, Texas. He can be reached at sblez@verizon.net or at (903) 352-3475. For more information please visit Facebook/Reveille Livestock Concepts.







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