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The Consolidated Sell Holds Its Own

It has been five years since a group of 13 feeders from Alberta and Saskatchewan broke the Canadian mold for selling finished cattle to the packers by forming Northwest Consolidated Beef Producers (NWCBP), based in Strathmore, Alta. Since then it has grown to 143 members across the Prairies and in 2010 marketed 112,000finished cattle along with 2,450 cows and bulls.

The aim of the not-for-profit company has always been to up the ante in the cash market by facilitating the timely gathering and distribution of market information to members and marketing groups of fed cattle that are large enough to catch the attention of as many buyers as possible.

While NWCBP’s marketing team of Wade Pearson and Jodie Griffin led by industry veteran Vern Lonsberry negotiate the weekly sale, members still make all of the day-to-day management decisions, including cattle purchases, feed programs, as well as when and how to market their cattle. They are under no obligation to list their cattle with NWCBP. The only stipulation is that they refrain from selling cattle by other means during the weeks they do list cattle with NWCBP. Very few switch back and forth.

Lonsberry views this ongoing commitment to the concept of the consolidated sell along with the growth in the company as the major highlights of their first five years of operation.

Most of the challenges have been tied to the tumultuous market conditions of recent years — the erratic swings in the fed cattle basis in 2008 and the beginning of country-of-origin labelling in 2009 — as well as the ongoing consolidation within the Canadian packing sector.

“A major challenge has been the escalation of the value of the Canadian dollar relative to when we first started,” Lonsberry adds. “It took the U.S. plants out of the scene, cutting us back to the two major plants in Western Canada, but (market) adjustments over a long period of time have allowed us to compete (in the U.S.) with a high dollar.”

So far, marketings have remained fairly steady even though Canada’s cattle numbers have dropped but 2011 is shaping up to be a different story. Sales volumes were down 11 per cent by May and Lonsberry suspects Canada’s shrinking cow herd will present the greatest challenge for NWCBP going forward.

They are close to their initial target of 50 members from Saskatchewan but well short of their goal of 300 Alberta members. Seven feeder-members are from Manitoba.

The bigger number when it comes to influencing the cash trade is how many fed cattle those members represent. At the close of 2010 the NWCBP membership controlled 320,000 fed cattle — well ahead of their initial target of 250,000 — 130,000 backgrounders and 24,000 cow-calf pairs, producing a weekly show list that ranges from 1,500 to 7,500 head.

Most weeks that has been enough to boost the bid for cattle on the show list, which in turn supports the cash market overall.

How it works

Each week, marketing representatives build a show list of the cattle members have ready to sell. They try to describe all the cattle and estimate the grade and yield. Unless there is a significant difference in quality (or some cattle fit the requirements for a branded beef program) all fed cattle go onto one list with one asking price. Buyers don’t get to pick and choose.

Lonsberry and his crew keep close tabs on the markets, including a Wednesday code call with CBP marketers before they set their price “By then, we have a really good idea of what the markets will trade in that week and we can give our members the range. If they are comfortable with it, they give us the go ahead to sell their cattle in the range we have communicated.”

Every Monday at 2 p.m., NWCBP circulates the show list to packers in Western Canada and Northwestern U.S. If they’re interested, they call to get the ask price and say yes, no, or leave a counter bid. The first to offer the ask gets the cattle. If NWCBP doesn’t get its price or something within its range the members are polled to see if they want to sell the list at the highest bid, or roll the cattle to next week.

NWCBP generally schedules the delivery of the cattle, It’s up to the buyer and sellers to arrange the logistics. Members are paid directly for their cattle and NWCBP charges them a marketing fee of $4.50 or $6 per head, depending on their membership category.

In 2008, NWCBP introduced a membership for producers selling only cull cows and bulls. It’s a fairly seasonal market, so some weeks there are no listings.

They also contract members’ cattle when the basis is right, as a risk management tool.

In future they hope to develop alliances with the retail trade to broaden their base of buyers.

The fact that the five producers who formed the interim board of directors in the founding year — Terry Schetzsle, Jeff Warrack, Ed Miller, Darryl Sankey from Alberta and Sam Buckle from Saskatchewan — remain actively involved on the board of directors is testimony to the durability of the consolidated selling formula for feedlot operators who wish to be competitive and remain independent.

For more information, visit www.nwcbp.com or give the

office a call toll-free at 888-901-1986.

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