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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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