The power of the auction…is it worth the
commission?
We often ask ranchers why they sell their calves to the country buyers.
Overwhelmingly, the response we get is that they receive top prices and
do not have to pay a commission. Is that really the case?
Consider this actual transaction. Not long ago, just before
the calf prices started to decline, a local rancher was getting the full
court press from a country buyer to contract him the ranch calves. This
buyer had purchased them for the two years prior and knew the feeding
history. His bid sounded fair at $118.00 on 600 lb. steers and $110.00 on
550 lb. heifers, but did it reflect the true market value? This buyer
was pretty adamant that this would be a better bid than the rancher could get at any auction
and have to pay a commission. This was his “top
bid and final offer”. This seller came very close to contracting with him as several
others in the area had recently sold to the same buyer for similar prices.
We showed the seller that with a 2% selling commission, he
would need a selling price of $120.50 and $112.25 on his calves to net the
same price as offered by the
country buyer. We were confident we could exceed those prices with exposure
to over 3000 registered buyers on the Superior Stampede Internet live
auction.
Seller bought into our
sales pitch, the contracts signed and the cattle were sold on the live Internet
auction one week later. The steers sold for $127.75 at 600 lbs and the
heifers sold for $129.00 (not a typo), a whopping $19.00 more per cwt than the country
bid. This particular rancher netted $43.00 more per head on his
steers and $90.00 more per head on his heifers and put over $24,000 extra
into his pocket after paying the 2% commission.
Remember our country buyer with
the “top bid and final offer”. A week earlier, he wouldn’t give more than
$118/$110 respectively, but quite surprisingly, he purchased both lots of cattle at the
auction. Through competitive bidding he had to pay significantly more to
buy the cattle. Had this rancher sold at the “top bid and final offer” it
would have been the country buyer pocketing the $24,000 plus the 2%
commission. This is just one example, but is not an uncommon one.
Tremendously high feed
costs combined with much higher freight rates are putting a lot of pressure on the calf
and yearling markets. With market
spreads of $15 to $20 per cwt on the same weight cattle, can you afford to
be selling your above average cattle to the country buyer for average or
usually less than average prices?
The power of the auction is real.
When you have cattle to market this summer and fall, please give us the
opportunity to visit with you about marketing the auction way whether it is
the video, Internet, or through the sale ring. Don’t be fooled by the “top
bid and final offer” of the country buyers. Remember, they do not work for
you. As professional cattle marketers, we are working for your best
interests. There are usually several buyers out there with a higher “top bid
and final offer”. We know how to reach them.
