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Electronic Marketing Becoming Dominant Force in Cattle Sales by David Bowser Electronic marketing will not replace the sale barn, but it can supplement it. Brian Winter, director of electronic marketing with Winter Livestock Auctions, said his family's operation has expanded from their feedyard and auction barns to video and the internet sales. The Winter family has been in the livestock marketing business with a traditional auction barn for more than six decades. Last year, they sold over a half million cattle. Winter said there has always been change in livestock marketing. In the past hundred years, it has changed from cattle drives to auction barns just in Kansas. Now, video and the internet are taking buyers to the ranch to look at cattle. With each step, Winter said, the owner of the cattle has come closer to getting a fairer price for his livestock. "The object of the livestock auction is to group your cattle and sell them for the most money we can," Winter said. "That's the reason the cattle are sorted. They're trying to get similar characteristics so they can be sold better." Now, with the electronic livestock auctions, the cattle do not leave home and hundreds or thousands of potential buyers can see the cattle in the country. The more people that can see the cattle, he said, the more competition there is. That, in turn, brings more value to those cattle. "The cattle are sold on their merits," Winter said. The way cattle are being marketed as the beef industry moves into the 21st Century, he said, benefits the producer the most. He doesn't believe, however, that the internet and video sales will replace the local sale barn. It will only be one more tool for the cattlemen to buy and sell livestock. The benefit to the local livestock auction is that a rancher can load up his cattle and take them into town and get a fair market price and leave with a check in hand. Internet auctions, he said, are essentially forward contracting. It is, he said, more efficient than markets where one or two buyers come in to bid on cattle. Within three years, he said he thinks most livestock auctions will broadcast sales over the internet. He said there are going to be a lot of changes in the livestock industry with the new technologies being introduced, particularly with regard to the internet. Video auctions on the internet will be less expensive than buying satellite time. There are two types of internet auctions. There is the real-time auction where the auction is broadcast as it happens and there is an ask and bid auction. Real-time auctions can have an auctioneer or it can be computer run, but there is a shorter selling period. The other type is the bid and ask auction, which is similar to selling in the country. With the electronic auction, the seller has time to decide whether or not he wants to take the bid. On the bid-ask auction, the computer either updates the price or the producer sets the minimum he'll take. There are a lot of things the buyers are looking at, Winter said, like what month the cattle will come out when their fat. "When you're deciding when you're going to deliver your cattle, it makes a lot of difference," Winter said. Just before Christmas, when the eight and nine weight cattle moved into the summer months, he said, big cattle had a drop in price. "It's because they're going from April to June market on live cattle," Winter said. "That's something to consider. The buyer is looking at that more than anybody because that's how he's planning his inventory." Winter said internet auctions are regulated under the Packer and Stockyard Administration. "Every check issued by a company is FDIC insured up to $100,000," he said. The most important aspect of internet marketing, Winter said, is working with a legitimate company. "It's really easy for some guy to start an online auction," he said, "but you really need to make sure that they're Packer and Stockyard regulated. Get a hold of them on the phone and talk to them. Don't get caught up in a neat website. I think that's true for the whole internet. You can really get fooled by a company's graphics as opposed to their substance." Another thing a producer should consider on internet marketing is the commission. Right now commissions run from 1.5 to 3 percent, but Winter warned of hidden charges on some websites such as a billing charge, travel charges or a no sale fee. With competition strong on the internet, Winter said producers don't need to pay those fees. Most of all, the electronic auctions increase control for both buyer and seller. With the electronic auctions, Winter said, a producer still has flexibility. On the buyer's side of the transaction, the buyer can plan when the cattle are coming in. A lot of the buyers will go ahead and hedge the cattle as soon as they buy them. Winter said that while they have cannibalized some of their own sale barn businesses, their electronic auctions are bringing in new business. About 80 percent is new business. He said he expects internet auctions to grow in popularity and volume. |
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