Basic Marketing Alternatives

DR. ANDREW P. GRIFFITH 

KNOXVILLE, TENNESSEE 

Sometimes it is beneficial to review some of the most basic aspects of any business. One of those aspects in the cattle business that should be revisited on a regular basis is the available marketing alternatives. The most common marketing alternatives for most cattle producers include private treaty, weekly auction, graded sale, marketing alliance, video sale, internet sale, or retained ownership. Thus, the challenge is to evaluate each one to determine which one is the best for a particular operation.

Beginning with private treaty marketing, this is a marketing strategy where cattle are traded directly off the farm to a buyer. This method is beneficial in that the seller can be independent, lower transaction cost (i.e.no commissions, lower transportation), and the cattle are fresh (i.e. not exposed to other cattle that may have some form of sickness). This is an extremely common method in the seedstock business as many of these producers sell registered males and females off the farm to cow-calf producers. It is also a common method for feeder cattle as some feeder cattle producers prefer to work with one or two cattle buyers to move their calf crop. One necessity in private treaty sells is the seller knowing what the cattle are worth. It is common for producers to both under value and over value cattle when marketing private treaty. Another drawback is that there is no government supervision, which could be important if the buyer writes a bad check.

The weekly auction market is the most common marketing method for most cow-calf producers. It is a true method of price discovery as potential buyers can quickly look at the cattle and determine the value on those animals through the bidding process. Other advantages include convenience, prompt payment, and supervised by Packers and Stockyards. There are drawbacks including the seller having little influence on price, commingling of cattle and disease transmission potential, and higher commission charges.

Graded feeder cattle sales tend to be special sales, but they can be part of a weekly auction. This type of sale tends to result in commingling of similar animals based on weight and quality (i.e. muscling, frame) that are marketed in larger groups. The price tends to be higher due to larger groups being sold. The disadvantages include the necessity for more management and poor-quality cattle will be heavily discounted.

Marketing alliances are a marketing method in which multiple producers work together to produce cattle with similar genetics, health programs, and that can be expected to perform similarly in the feedlot. The goal of such an alliance is to produce larger groups of cattle that can be marketed together with a lower risk of health issues. However, the challenges include some loss of independence, failure of a producer to deliver the desired quality of cattle, and dealing with challenges the cattle may face in the feedlot.

Video and internet sales are synonymous in most cases. This marketing platform puts the cattle in front of more buyers in that they do not have to be at a particular location to purchase cattle. It also reduces transaction costs in that many cattle are picked up at the farm and the commission fees tend to be lower. From the feeder cattle standpoint, this is often done in a lot size of 50,000 pounds.

Retained ownership is the last marketing method to be discussed. In most instances, retained ownership is when an owner of feeder cattle retains ownership of cattle in a custom feedlot. However, the term retained ownership could be used for cattle meant for a local beef endeavor. This method of marketing allows an animal owner to capitalize fully on the genetics and production efficiencies bred into the animals. It also extends the time in which risk is incurred.

This was a brief overview of the common cattle marketing alternatives. Each producer should consider the alternative methods and how they can benefit from their use. This is not an all inclusive discussion, but it is sufficient to guide further study. ∆

DR. ANDREW P. GRIFFITH: University of Tennessee