Which of the Three Common Methods is Best when Selling Your Calves?
There are three basic avenues for buying and selling livestock: going through a private buyer (often referred to as “in the country”), the local sale barn or livestock commission, and last, selling online or on the video. Some folks like to sell all their cattle using one method and some like to spread out their sales across all three types of channels. Just like everything else in life, there are pros and cons or risks and rewards with each avenue. In agriculture there is a lot of risk we can’t do anything about, but it can give you a lot of peace of mind to be sure you take care of the risks that are in your control and choose the best method for your operation.
Let’s take a look at the risks associated with each type of selling method for your calves.
Private Buyer or “In the Country”
What are the Risks?
Buyer Backs Out
This is the biggest risk when buying in the country. There are a couple things you can do to manage your risk around this. We covered them in depth in our blog: Selling Calves? Protect Yourself from Unnecessary Risk
The basics are: Make sure your buyer is licensed and bonded with the state, get a signed contract and a good downpayment, and read the fine print in your agreement.
Out of Date Information
There are times I will call a customer to bid their calves, only to find out that they recently sold them for less money than my bid. When you sell in the country, you need to know your breakevens and what your cattle are worth. We like to use this handy spreadsheet that helps you calculate your breakevens by inputting all your input costs so you know how much you need to make on the calves to “break even.” It’s also really important to check the market report and video report regularly so you know what your calves should be selling for on any given day. These numbers are incredibly important, so be sure to use all the tools at your disposal (you have a computer in your hand!) to get a good price.
Not checking the numbers
Every bid you get, you need to figure your net take home. If someone offers you 150 with 3% commission and another buyer offers you 148 with no commission, you might actually be better off taking the 148. It might not sound as good to the neighbor, but your net profit might be higher. So you need to be sure to do the math and figure that out. Of course the weighting conditions can factor into this too, so make sure you know what the agreement is for shrink and slide. How much is the slide? Is it one way? Two way? You need to know this math so you have no surprises and know exactly what your net profit will be.
Salebarn
What are the Risks?
Weather
I think in the agriculture industry we would all be a lot richer if we could figure out how to control, or at least predict the weather. But dealing with Mother Nature continues to be one of the greatest risks across the board as we produce and market. When we think about the risk of weather here, we’re mainly concerned with severe weather preventing enough buyers from being present on sale day. What if there are too many cattle with not enough people to raise their hand? There’s not a lot we can do about this one, other than recognize it as an important factor in the game.
If you’ve been impacted by weather this year, we’ve been getting together to discuss how to make your marketing decisions under these cirucmstances. You can join us or access the replays here.
Buyers Lack Access to Information
If you’re going to consign cattle to the sale barn, get them on the consignments sheet. As a buyer, if I’m going to drive to a sale, I have four hours of driving to do and only two hours of service. I have a list of 15-25 buyers and I cannot physically call all of them. It’s not a quick hang-up conversation. On a good day, I might get through 5 to 10 calls on the day of the sale. If I don’t know what’s available at the sale, I don’t know to call the buyer and see if I can get more money for your calves. Get on the consignment sheet and check with the barn to know they are updating it and getting that info to buyers.
An example we had just happen to us is the sale barn consignment sheet online said they were going to have 60 head of feeders. I gave them a call to see if the website had been updated. They said it had, so I didn’t attend. I watched online and saw that they had over 600 feeders that they didn’t have on the sheet. If you sodl that day, you missed out on my order because the sale barn didn’t update their information on the website, nor when I called in. What if three or four buyers made the same decision that 60 head wasn’t enough to attend? How many times would hands have to raise for that to make a big difference for your bottom line?
The other thing I will see is that a buyer will stop the sale to ask a question about the set of calves and the barn won’t be able to give them an answer. That immediately takes that buyer out. You can keep this from happening to you by providing the information about your calves and making sure the barn is going to bat for you by actually having that information ready for the buyer if they ask.
If at all possible, you need to sit there and watch them sell in the barn. This way you can answer those questions so people can make a better decision. Some questions that are commonly asked are:
Are these heifers guaranteed open? Have they been running with the bull, are they spayed, have they been preg checked?
Have they had two rounds of shots?
Were these calves weaned or right off the cow?
Unknown Shrink
We know that at the barn they don’t pencil shrink the cattle at all. But you will naturally get some from the time you leave the ranch to the time they go through the ring. But you don’t want to feed them a ton or fill them up with water. If your cattle are over full at the barn, the buyers will discount them. That’s just part of the calculations you need to make when you think about what they will bring.
Video or Online Auction
What are the Risks?
Selling to a Buyer You Don’t Know
When you’re selling on the video or in any online platform, there is always a risk that you end up selling to a buyer that you don’t know or that your rep doesn’t have a relationship with. If something needs changed in your contract, this is going to be a more difficult conversation than if the rep has a relationship with the buyer.
Is Your Rep Working for You?
When you sell on video, the rep REALLY matters. There are reps on the video that some of my feeders will not buy from. They see their name and will put a big ol’ X across the lots of cattle. It’s not that they think the cattle will be bad. It that they don’t want to deal with the rep.
When you sell on the video, the rep should be going to work for you. Every year the rep should come film your cattle. Every year- no exceptions. I can’t tell you how many times we’ve bought cattle off the video and the video was old. The herd appearance, country it was running in, mother look, bull power has changed, and the cattle we received were completely different than the cattle on the video. All the details need to be correct. I can’t tell you how discouraging it is when you buy a set of cattle that are NHTC and the rep calls you after and tells you “do you want them to actually do the program? They haven’t done it yet.” That makes me lose faith in the cattle, the rep, red flags are already going up. If they’re listed as NHTC, they should already have the paperwork done. If they’re listed as GAP, they should already have the paperwork.
Don’t be scared to ask your rep how many people they have lined up to be on the phone or what buyers they have called. They should go to work to sell the cattle for you. Not consign them. They need to call people, send catalogs, get guys on the phone. That’s what makes a successful sale on the video. Go down there and watch your cattle sell if you can. Watch your rep work. Are they on the phone with people? Are they talking to buyers and shaking their hands? Have they done their homework? Do they stop the sale before they sell and add some details? Do they guarantee the cattle are just as listed?
Is the Contract Up to Date?
Your contract should be updated every single year. Even if you think nothing has changed, something definitely has changed. Your weights might be wrong, your delivery date, etc. This is the same with in the country, but the video adds immense pressure. You need to know what you’re comfortable taking.
Each of these options has highs and lows, value and risk. There’s a lot to think about. We have different options for marketing cattle than we did 10 years ago and 10 years from now the options will be different too. The easy part is getting cattle listed. The hard part is selling the cattle. As a good steward of your operation, it’s your responsibility to find someone who’s going to sell them well, whether its a good sale barn manager who’s going to get them up on the website, make some calls, or a video rep, or a good person in the country. That’s the best you can do- work with someone who will help you sell your cattle for the most amount of money possible.
Ultimately what makes a good cattle sale is the right cattle ad the right time for the right person with correct details.
Sometimes we don’t remember that EVERY option has risks. We’ll be hosting a futures and hedging webinar (sign up here) so you know what you need to think about and understand the risks of every option.