Online markets a source of price transparency

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“Some programs require a lot of extra effort, and some are just a matter of what I would call good management. Many growers already meet some of the standards set by these programs, but the challenge is keeping good records and, in some case, check it out. It’s really just another part of that marketing decision. The best price isn’t always the most profit.

Lacy points out that marketing livestock is a personal decision, with no right or wrong approach. But he adds that in today’s economy, it’s important to recognize that consumers aren’t just interested in the cheapest food product.

“An increasing part of the value that a livestock producer adds today comes in the form of information about how that animal was raised. Consumers want to know, for example, whether animals were treated humanely and what management practices were used. They want to know what’s going on. to bring this animal to the plate. And if a producer wants a higher price, they have to recognize that they are marketing that information as well as that animal,” he says.

THE VALUE OF A NICHE

Elliott Dennis, a livestock marketing analyst at the University of Nebraska, recently compared sources of price information, looking at feeder futures prices, available through the Chicago Mercantile Exchange (CME), as well as prices video auctions. Taken together, the two can give sellers a good idea of ​​overall markets and where they are headed.

“The prices we see on the CME represent the global demand for feeder cattle,” he explains. “We can convert that to a local price by making an adjustment for the basis, which is just the local spot price minus the futures price. This approach uses historical patterns as a basis, and it varies from year to year. ‘other.”

He says one of the advantages of these futures prices is that they are available several months before the time when the production will be sold on the spot market. The CME also offers daily price signals.

On the video market side, a producer examines the prices of production contracts between buyers and sellers, where the two parties have agreed on a price for a given set of characteristics, delivered on a certain month, at a certain place. Here, the spot price is known before delivery, rather than determined upon delivery — like when a producer brings calves to the sales barn and finds out what they are “worth” that day.

One of the biggest values ​​of video markets is that they approximate the real value of value-added labels in terms of price.

“It’s important to understand, however, that price is a compound of many things,” adds Dennis. “Buyers buy on the seller’s reputation, what the cattle were fed, how the cattle were raised, even transportation and shrinkage. It all depends on the actual price a buyer is willing to pay Adding to that is the added value element, and today what we see in those video sales in terms of added value is our strongest signal that tells us what people are really willing to pay. .”

ADVANTAGES OF THE VIDEO AUCTION

Video auctions gather the largest number of potential buyers of all other market methods and offer flexible delivery times. They are considered by many to be the best way to find out if your cattle fit into one of the many value-added programs.

Superior Livestock’s Joe Lichtie, a veteran marketer and vice president of the video sales company, says their top value-added programs revolve around health protocols.

“It’s almost a requirement now that producers have some sort of health protocol in place for their herds,” he says. “It has become rare to offer cattle to buyers without having this health program in place.”

The senior cattle vaccination programs, seven in number, begin with VAC 24, where calves are vaccinated on cows between 2 and 4 months old. This requires a dose of a 7, 8 or 9 way Clostridial; a dose of a 5-way virus; and one dose of a Mannheimia Haemolytica and/or Pasteurella Multocida vaccine. Control of internal and external parasites is recommended. From this level, there are additional vaccine and management requirements, including in some cases weaning 45-60 days before delivery.

Lichtie says they are also seeing great buyer interest in NHTC (non-hormone treated) cattle and all of the Natural Beef programs, of which there are three: Verified Natural Beef, Certified Natural Plus and Owner Certified Natural. GAP 1 and GAP 4 cattle, which Lichtie says enter the Whole Foods system through Amazon, are a growing sales area. GAP stands for “Global Animal Partnership” where a five-step animal welfare assessment program is used to certify an operation.

Finally, Lichtie says genetics continues to be a big driver of sales, which he says has moved the industry a long way in terms of choice and choice carcasses.

“Right now, about 30% of the cattle we sell are program cattle of some type,” he says. “If we had more, we could sell them. These programs all come back to the consumer. It’s the consumer who drives that demand, and I don’t see that changing.”

As the value-added niche grows, ultimately, Lichtie says, the primary price driver will always be competition at an auction between buyers.

“If you have one offer, that’s all you have. But if you have three, four or five offers, then these entities are in competition. This is price discovery at its best,” he says, noting that Superior sold 1.5 million head in 2021 through its video auction platforms.

Victoria Myers can be reached at [email protected]

Follow her on Twitter @myersPF



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