Electronic auction marts find their niche in today’s market

By Tim Kalinowski, Staff Writer

As the Canadian cattle industry has evolved so too have the methods for marketing cattle. The traditional auction mart still exists and has its niche. Cattle feeders and packing plants have developed an integrated approach based on Futures pricing. And online forums like TEAM (The Electronic Auction Market) provide another option for producers to reach a different and more diverse customer base. Jason Danard, General Manager for TEAM, says every method has it purpose in today’s livestock market, but fundamentally it all comes down to bringing buyers and sellers together to broker a deal.

“Every group of cattle has a place where it belongs, when it comes to marketing,” states Danard. “And I guess that’s where me, as a broker, I want to be in on the trade, regardless of where it is… The TEAM platform has been extremely well-received by industry for the last three decades. As time goes on, we see our market share increase just about every year. It’s a way of marketing that’s extremely appealing to producers for a lot of reasons. The service also compliments our direct marketing platform (located in Strathmore) in the live ring.”

Danard explains in more detail what niche TEAM holds in the busy cattle trading marketplace.

“For producers TEAM is an excellent option if they have the numbers to put loads together,” says Danard. “So the guy that’s running 40 mother cows and selling 32 calves a year, whatever the number happens to be, is not a very good fit for the platform. Generally, if you are a calf-cow operator you need to be running 200 mother cows or greater. These days that’s a pretty standard operation.

“Big strings of cattle are very unlikely to ever see a cattle ring. The inefficiencies of doing that just dictate that in almost all those cases cattle are going to sell direct, either on our platform or anyone else’s or through a private sale. We do get involved (as a company) with all those different types of sales.”

Last year was a banner year in electronic auction marts across North America as the Futures market hit record highs on calf sales in the summer months.

“Last year during the summer months, the market peaked,” confirms Danard. “We saw cattle trade at a level we had never seen before. Beyond our wildest dreams. We saw calves trading at $3.00 or $4.00/ lb. The problem was those calves aren’t delivering until October, November or December. So in August if you wanted to capture all of that optimism the only way to do that was to sell the cattle forward. And we do that all the time. Price the cattle today and sell forward; no different from grain.”

Producers who got in on the Futures trade early cleaned up, but some buyers, admits Danard, were left holding the bag when the Futures market plummeted later in the year.

“We forward sold a lot of calves at levels never seen before, maybe at levels we’ll never see again; not in my lifetime, anyway. Without a platform like TEAM that never would happened. So we, literally, had hundreds of producers that cashiered that huge price that was available in the summer months, but the time they were delivering their calves in the fall the Cash market was $500 less than what they had priced them at.

“With that being said, there is obviously some stress and headaches associated with delivering calves to a buyer who is $500 off stride. But that’s a huge thing we offer as well; assured payment by an outfit that’s going to stand behind the transaction.”

Danard says the result has been slower levels of cattle trading overall on TEAM and other electronic auction forums so far this year as buyers look for more price stability in direct cattle sales.

“We haven’t had giant sales this year, but we have been very consistent. From an accounting standpoint, our numbers are fine. They are nearly the same as last year. We are not pricing as many on the internet as we did last year,” concedes Danard.

Online sales continue to chug along regardless, says Danard, because the forum is very adaptable to fast-changing market conditions, giving it an advantage over other marketing options out there. He points to the changes TEAM has seen in the past 30 years as proof of this statement. Fed cattle were the mainstay of the electronic auction market then compared to relatively few now coming through in the era of forward contracting and direct delivery agreements.

“The platform originally evolved to handle something that no longer exists,” says Danard with a chuckle. “We had to adapt it to meet the times, and we have continued to evolve. Pure bred sales, bull sales, production sales. We have done horse sales. I sell panels on the platform. We use it for a lot of different things. We have evolved right alongside industry. And, quite frankly, it serves us better today than it ever has. However, commercial cattle feeders are still definitely our bread and butter.”

Danard feels the big advantage of the TEAM forum is it give producers an option to market their cattle at a distance, and reach thousands of buyers across Canada.Thus it fulfills the primary mandate of the cattle broker: To bring buyers and sellers together.

“From day to day, hour to hour, I don’t know who’s got the money (to buy); nobody does. Our format draws them out, so to speak. We find every Friday morning who’s got the money. We are surprised week after week with the players who step up and jump in. If I am trying to sell my cattle privately, I have know way of knowing that. The exposure to market players is second to none, and impossible to match. And obviously with 30 years of electronic marketing, we have built up a large buyers’ base,” he says.