Stocker connection depends on value
By Doug Rich
Order buyers like Margaret Ann Smith with Southlex Cattle Company in Lexington, Va., connect stocker cattle buyers in the High Plains and sellers in the southeast. Smith, her business partner, and the buyers that work for them attend weekly livestock auctions in Virginia, West Virginia, and North Carolina, putting together loads of cattle that will end up on grass or in feedlots in the High Plains.
There are a number reasons for this connection between the southeast and the High Plains, but the price of corn has to be at the top of that list.
"In February we had a 75 cent positive basis on corn," Smith said. "If that is not a reason to put cattle on a truck and send them 1,100 miles west, then I don't know what other reason there is."
That is one reason there are not many feedlots in the southeast, which means those calves have to find a home someplace. Although farmers are growing more corn in the south and southeast regions of the country these days, most of that goes directly to export markets, Smith said.
"You do not fatten cattle at that kind of price for corn," Smith said.
Smith deals primarily with community, locally owned sale barns that offer weekly livestock actions. There are few seasonal sales that operate in the fall and spring, but most of them are weekly.
"They sell bull calves to dairy calves and everything in between," Smith said.
Most of the herds in her area range in size from 12 to 25 head, and the producers are part-time operators for the most part. The growers market when it is convenient for them or when they need some quick cash and not when the market dictates.
"There is nothing wrong with that--it is just the way they do business--but it is not based on market signals," Smith said. "Our sales pick up about the time property, income taxes or college tuition are due, or they need money for Christmas gifts. People treat their cowherd like a savings or retirement account."
Because most of these producers have off-farm jobs, the cattle may not get the best management possible but the genetics are there. Smith said it is not hard for their cattle to meet a very high-end grade. That is primarily due to the large number of purebred breeders in the area.
"You could throw a rock from our place and hit 10 Angus breeders," Smith said.
Producers can get their hands on good genetics with their bulls. That carries over to the calf crop and that is why their cattle do well.
"The cattle will be from good genetics; they just may not have the best management behind them," Smith said.
Cattle coming into the sale barns are graded by either a state agency, such as the Virginia Department of Agriculture in Virginia, or they are barn graded if the sale barn does not pay to have the state do the grading. The cattle are sorted on color, quality, muscling, confirmation and the commingled into group pens based on their grade and weight.
"If you tell me it is a No.2 Angus that weighs 550 pounds, I know what it is," Smith said. "It is a way to group these cattle together instead of selling them all as singles."
The cattle have to be structurally correct with no humpbacks, bad eyes, warts, stocking legs on black cattle, and no pink-nosed Charolais. Those cattle still end up being sold as singles.
Smith said a pot load of cattle could represent as few as five producers or as many as 25. A producer might show up at the sale with five head and the get split five different ways and one may end up being sold as a single.
If a producer shows up at the sale up with 25 to 30 head of uniform cattle, they are penned together and sold as a one-owner group. Smith said this would be noted on the grade sheet for the buyers. If the cattle have been through a pre-weaning or vaccination program, that will be noted on the grade sheet, also.
Looking at sale barns from east to west, the biggest differences seem to be size and volume. Load lots and groups of six or more are common in the west and Midwest versus the east and southeast where you see singles and smaller lots.
"Most of these cattle are coming back to the High Plains and everyone is trying to fit that order and sell them accordingly," Mark Markey, chief executive officer of the Livestock Marketing Association, said.
Although Southlex Cattle company will ship anything from a 200-pound calf to a 1,000-pound calf, most of their business consists of cattle from 300 to 600 pounds. A lot of the 500 to 650 calves are split loads of steers and bulls. However, they can do full loads of either steers or calves.
"We have one customer who only wants 700- to 900-pound bulls and that is all he will take," Smith said. "It works for his program and he prefers that I do not send him steers."
Another reason that the southeast is a popular source for stocker cattle is availability. The availability of cattle does not really change throughout the year. Numbers at the sale barns go down the first of May to the first part of June when hay season starts and when hunting season starts in the fall. But cattle are still available all through the year.
"If something else is a priority the cattle come in second," Smith said.
The sale barns see a good run of yearling cattle from October to February. Smith said a majority of these cattle will be light to medium fleshed and wont have a lot of condition on them as yearlings. These yearlings have been run on grass with a small amount of protein supplement.
Typically, when producers in the southeast have a few cows they always have a few cows, but Smith said they saw people sell off cattle and leave the business when the economy turned down in the last few years. When the mortgage bubble and the housing bubbles hit the southeast, people sold their cows to make up the difference.
"You know you have a liquid asset and it is an interesting way to manage you money," Smith said. "They have value all the time."
Value is the key to this connection between High Plains buyers and southeast sellers. As long as there is value in these cattle for both parties, cattle will continue to make the long truck ride to sale barns in the southeast to grass or feedlots in the High Plains.
Doug Rich can be reached by phone at 785-749-5304 or by email at email@example.com.