Today’s rapidly-changing market for beef calves is still most favorable to cow/calf operators who market calves in truckload lots. Not surprisingly, calf buyers like to purchase and transport calves in groups large enough to fill a commercial cattle truck (also known as a cattle “pot” or “pot belly”) to save on freight.
Importance of Truckload Lots
In most states, a cattle truck is legally allowed to haul about 48,000-50,000 lbs of cattle, with some states allowing 60,000 lbs or more. Therefore, in addition to the forces of supply and demand, cost of freight has a substantial affect on calf price, especially when diesel is $3 or more per gallon!
In order for one owner to market 50,000 lbs of cattle (commonly known as a “load lot”), he would need to have at least 80 calves weighing 600 lbs each. This requires a cowherd of nearly 200 cows (or more, if the lot is uniform and all the same sex). Fewer cows may be needed if calves are heavier, sold later (and are heavier), and not uniform in size, age, breed, or sex.
Despite the fact that most marketing options cater to large operators, nearly two-thirds of U.S. cow/calf producers do not have enough weaned steers to market them as a truck-load lot (65.9% own less than 200 cows). As a result, most cow/calf producers market their calves in small groups through auction markets.
Video and Internet Auctions
Historically, about 85% of producers marketed their steer calves through livestock auction markets. In 2003, a greater percentage of cattle were being sold via video and internet cattle auctions (11% and 5%, respectively) and private sales (23%). This change has primarily benefited larger producers, since these methods require that cattle be in load lots as a service to their buyers. A survey of North and South Dakota producers indicated that as herd size increased, a producer was more likely to sell calves via either a private party or video auction compared to an auction market. In addition, as herd size increased cost per head associated with selling via private party or video auction decreased.
Since small- and medium-sized cow/calf producers are facing a reduction in marketing options at weaning time, they are exposed to fewer buyers. This forces these producers to be “price takers,” rather than “price makers.” Ultimately, fewer buyers will lead to less interest in their cattle, and oftentimes a lower price.
Livestock auction markets have done a great job creating a marketplace for these producers to sell their calves. They are basically providing a chance for their buyers to pool your calves together with others’ calves to make truck-load lots. In addition, niche marketing (including freezer beef and organic beef production) has provided producers with some additional, but limited, options for marketing smaller groups of calves.
Calf Marketing Pools
To overcome the load lot ‘requirement’ that most video auctions, internet sites, and order buyers have, some cow/calf producers have developed “Calf Marketing Pools” to increase the demand and price for their calves. These small ‘alliances’ have been formal (including by-laws, elected officials, etc.) and informal. However, their primary objective is the same – to increase the number of prospective buyers bidding on their calves.
A Calf Marketing Pool will only work if participating operations have similar programs. Ideally, the breed makeup and quality of the cowherd, date of calving and weaning, and vaccination programs should be almost identical. In addition, producers should have similar marketing philosophies, know and trust each other, and commit to making a cooperative marketing effort work.
Producers interested in initiating a Calf Marketing Pool should consider these key steps:
- Initiate the pool:
- Identify possible operations
- Secure member ranches
- Form a legal partnership (is it necessary?)
- Determine cattle characteristics (breed, sex, age, size, etc.)
- Determine sale method (decide early):