Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, June 20, 1993 TAG: 9306240492
SECTION: BUSINESS PAGE: F-1 EDITION: METRO
SOURCE: DWAYNE YANCEY STAFF WRITER
DATELINE: MEADOWDALE LENGTH: Long
No more.
Now he buys cattle the same way some folks buy cubic zirconia - he kicks back in his easy chair and bids via satellite dish and an 800-number phone line.
Or, as his wife, Crystal, puts it, when she comes to fetch him from his morning labors to make sure he takes his seat in time: "He has to go buy cattle on TV."
This is farming of the 1990s, in which farmers not only worry about the weather, they fret about their orbital uplinks.
The closest most of us ever come to cattle-trading is buying a Big Mac, but over the past decade, even cattle farmers have been overtaken by the telecommunications revolution.
Now it's common to hold livestock auctions over telephone conference calls and livestock auctions by satellite.
The result? More convenience. Better prices. Even a whole new market. Virginia's biggest cattle farmers, no longer constrained by geography, have begun selling to top-paying cattle buyers in the Corn Belt of Illinois, Iowa and Nebraska, where an abundance of cheap corn makes it so profitable to fatten up cattle that farmers sometimes can't buy enough animals.
For now, this telemarketing generally involves only the top 5 percent of Virginia cattle farmers, those who buy and sell cattle by the tractor-trailer load of 60 or more at a time. The rest still buy and sell their cattle the way they always have, at local livestock markets.
But Virginia's biggest cattle farmers quickly have become dependent on telemarketing, says Reggie Reynolds, who runs the Virginia Cattlemen's Association, a Botetourt County-based trade group that helps such farmers market their feeder cattle - young cattle being sold to fatten up for re-sale to slaughterhouses.
Last year, Virginia farmers sold about 600,000 feeder cattle. About one-fourth of those were sold through the special sales the Cattlemen's Association runs to cater to big-time cattle sellers - and buyers. But the more important figure is this: Of the 140,000 cattle sold through the association's sales, more than a third went to buyers who bid via a telephone conference-call auction - most of them from the Midwest.
Put another way, of the $70 million worth of cattle the association marketed last year, almost $19 million worth were sold via conference-call auctions.
"It would be difficult to market cattle in Virginia without the Tele-O-Auction," Reynolds says.
Virginia cattle farmers first started looking for new ways - and new places - to sell their livestock in the early 1970s.
At the time, Virginia farmers selling big lots of cattle generally looked to buyers in Pennsylvania and Ohio, who often would come here to inspect the cattle personally. Some out-of-state cattle dealers frequented local livestock auctions; others went straight to the farm.
But the closing of some major slaughterhouses in Pennsylvania and Ohio reduced the demand for cattle in those states. At the same time, many Virginia farmers started to expand their herds.
Instead of selling 20 or 30 cattle at a time at their local livestock auction, Reynolds says, they needed to sell three times that many at once. But that's often hard to do at a local livestock auction. For one thing, not many Virginia farmers have trucks big enough to haul all those cattle to market at once. For another, there were fewer buyers who wanted to buy such big lots of cattle showing up at local auctions
To overcome these problems, in 1975 the Virginia Cattlemen's Association began setting up auctions via telephone conference calls with an eye toward attracting cattle buyers from farther away.
It worked.
"We started off selling 2 to 3 percent of our cattle that way and now it's about 35 percent," Reynolds says. Some years, that figure has topped 40 percent.
The association now holds 22 cattle auctions via telephone conference-call each year, and sponsors another 130 auctions at livestock markets around the state that it also hooks up to the conference calls.
How's this work?
Take the most recent Tele-O-Auction, held June 7. Six Virginia farmers were offering cattle for sale. Listening in were 44 prospective buyers from 11 states, who followed along on a printed program that described the cattle, their condition, feeding program, vaccination history - the technical details that farmers want to know.
"We sold 12 tractor-trailer loads in 40 minutes," Reynolds says, with four loads going to the traditional markets in Pennsylvania and Ohio, but the rest headed to Indiana, Illinois, Iowa, Minnesota and Nebraska.
In all, that's about 800 cattle - $500,000 worth. Generally, the cattle are shipped by tractor-trailer within about a week, with the buyer paying the shipping costs. Usually, those shipping costs are counted by the mile, which may range from $400 to ship a trailer load to Pennsylvania, or $2,000 or more into Iowa. When the cattle arrive on the farm, the buyer simply writes a check.
Virginia may have been the first East Coast state to run such a conference-call auction, but it's no longer the only one; neighboring states have started doing the same thing.
In 1987, two Texas companies opened yet another frontier in the cattle business - phone-in auctions televised by satellite, where bidders could see video clips of the cattle in question.
These video auctions are geared primarily toward big-time ranchers in the West who might be buying and selling thousands of cattle at a time.
But the TV auction's reach has steadily extended across the continent - Superior Livestock in Fort Worth, Texas has marketed cattle from 39 states, Canada and Mexico; Satellite Cattle Exchange in Amarillo has marketed cattle from Maine to Hawaii. "It takes five days to ship them [to Hawaii]," says general manager Ike Carter.
In the past few years, a growing number of Virginia cattle farmers - how many, no one's quite sure - have started to tune in these video auctions on televisions wired to satellite dishes.
Whether buying or selling, by telephone or television, the result is the same.
First of all, farmers save time, and lots of it.
Take Pittsylvania County farmer Barry Keatts, who raises 400 cattle near Danville. For him to offer his cattle at the nearest livestock market, he'd have to load them up and haul them two hours to Lynchburg. "If I'm carrying 600-pound calves, anywhere from 10 to 13 is the most you can get on a small truck and I have to figure on seven trips," Keatts says. "So it would take me a month to market all my cattle in Lynchburg. I could hire a big outside hauler [to haul all his cattle at once] but that costs money."
Now, he says, "I work right up to the sale. My wife comes in, makes some lunch. I get a Pepsi and some potato chips and we sit on the couch and watch the cattle. That's as compared to be running to market every Monday for a month. It's much better, much better."
Not only does he save time, Keatts figures he makes more money selling his cattle this way.
That's because more buyers are tuning in by television than could ever be at his local livestock market. Each week, Superior mails out about 6,000 catalogs to prospective buyers around the country. Also, the major cattle buyers at the local markets tend to be middlemen who make their profit buying up small lots of cattle and re-selling them out-of-state - to the folks who are now tuning in, and bidding, by satellite.
By offering his entire herd of feeder cattle at once via satellite, Keatts in effect can cut out the middleman - and pocket the profit.
"If I carry 100 cattle to market, I couldn't get the prices I could by satellite," Keatts says. "This way, I make more money on it and that's what this is about, making money."
Stephenson, who raises about 1,000 cattle in Highland County, is on the other end of the satellite auction. So far, he's just been buying - from as far away as Florida. For him, the price of going through the satellite auction may be a bit steeper, because now he has to pay the shipping bill.
But time is money for him, too. "Even if I could go somewhere and save a nickel, it cost me money because I was letting stuff go here," he says.
Besides, he's dealing in Brahmin cattle, an unusual breed in Virginia, and figures to more than make up the difference when he starts re-selling them this fall via satellite. "There's not enough cattle like that here to attract any buyers," he says. "The local markets kill you."
Just as Virginia's biggest farmers have now become dependent on conference-call auctions, Stephenson and Keatts believe Virginia farmers will eventually become hooked on the televised auctions, as well.
"I think it's given us a boost," Keatts says. "Most all of the slaughterhouses here have shut down, so cattle have to go west and we need all the markets we can get."
He predicts the telemarketing of cattle will eventually put local livestock markets out of business.
"I think eventually the local stockyards will become a thing of the past," Keatts says. He's encouraging his neighbors, who raise cattle on smaller scale and normally sell at the local livestock market, to get together to offer their cattle as a single lot on the satellite auctions. "If we get more and more of these little farmers to go together, eventually all the cattle will be marketed this way. When you eliminate all the hauling, the farmer makes more money."
The livestock auctions don't buy that.
Most of the cattle being sold by the telephone and televised auctions weren't going through local markets in the first place, says Joe Meek, general manager of the Pulaski Livestock Auction in Dublin. They were being sold direct out of the field.
The Cattlemen's Association's conference-call auctions actually have been a boost to local livestock markets, Meek says, because the association has asked them to handle the money. That's brought them new commissions.
He believes the televised auctions, because they're so oriented to the large-scale western ranchers, will attract only a handful of Virginia farmers - although he thinks more will start selling via the conference-call auctions.
"I think it's the way things are going to go in the future," he says.
\ BUYING CATTLE
Auctions by satellite
These are the two biggest firms that hold cattle auctions via satellite.
Superior Livestock
Location: Fort Worth, Texas.
Established: 1987
Annual number of cattle sold: 860,000.
Broadcast information: Galaxy 7, Channel 22. Sales usually are held every other Saturday, 11 a.m. eastern time.
Information: 1-800-422-2117
Satellite Cattle Exchange
Location: Amarillo, Texas
Established: 1987
Annual number of cattle sold: 200,000.
Broadcast information: Galaxy 2, Channel 23. Sales usually are held every other Thursday, 12:30 EST.
Information: 1-800-658-2622
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Sales by conference call
The Virginia Cattlemen's Association, a trade association that helps Virginia farmers market their cattle, sponsors 22 conference-call auctions each year. It also runs another 130 special auctions around the state that are hooked up to inter-state conference calls.
In the 18 years that Virginia farmers have been using telephone auctions, the percentage of cattle sold via telephone bids has increased eight-fold.
Year Total cattle sold Cattle sold via conference calls %
1970 78,988 0 0
1975 120,823 6,042 5%
1980 117,558 18,810 16%
1985 122,008 28,062 23%
1990 117,785 48,146 41%
Source: Virginia Cattlemen's Association
Virginia farmers' shifting market
Virginia cattle farmers first got into conference-call auctions as a way to expand their markets from neighboring states into the Midwest.
Now more than half of the Virginia cattle sold through the Virginia Cattlemen's Associations auctions wind up in the Corn Belt.
A survey in late 1992 shows how Virginia cattle farmers' new markets for year-old cattle - called "yearlings" - stack up:
Pennsylvania 26.3%
Illinois 17.8%
Iowa 11.8%
Nebraska 10.9%
Kansas 6.9%
Virginia 6.3%
Ohio 6.2%
Indiana 5.5%
Maryland 2.6%
Other 5.8%
Source: Virginia Cattlemen's Association
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by CNB