The power of the auction…is it worth the commission?
We often ask ranchers why they sell their livestock 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 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 300 registered on our 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 put 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.