Auctioning calves in load lots

When it comes to selling calves at auction, more is better than less. Buyers are always willing to bid extra for those large, pre-sorted packages of uniformly sized calves the big producers are able to push through the ring.

But when a small producer's calves come under the block sorted for size in groups of maybe only five or 10 head the bid drops considerably. Buying cattle in such small lots simply makes it hard for an order buyer to patch together a potload of the uniform cattle he knows his feeder-client wants. And the price he's willing to pay reflects his dilemma.

That's what prompted seedstock breeder Dave Nichols of Nichols Farms, Bridgewater, Iowa, to start hosting feeder calf sales seven years ago for his bull customers. The feeder sales allow small producers to com-mingle their cattle, without losing the electronically tagged animals" individual identity. The cattle are sorted by computer into uniform 50,000-pound load lots and sold at auction in groups ranging in number from 70 to 100 head. The weight difference between the lightest calf in each group and the heaviest will not vary by more than 75 pounds.

"We designed these sales so that small producers could earn a fair price for their calves," says Mr. Nichols. "Our clients who are smaller producers are just as important to us as ranchers who might run 1,000 cows. We don't earn any money from the feeder calf sales. We host them simply as a service to our bull customers." Nichols Farms breeds Angus, Simmental and three lines of composite cattle.

In a nutshell, Nichols Genetic Source Verified Feeder Calf Auctions work like this: Producers with any size herd, no matter how small, consign calves on a first-come, first-serve basis. The calves must be sired by Nichols bulls purchased from Nichols Farms. Producers deliver their preconditioned calves to the sale barn the day before the sale. There, calves undergo an eight-hour dry stand, with no feed or water.

Following this, the calves, which are identified with both visual and electronic eartags, are individually weighed, sorted for sex and color, and electronically scanned for frame and muscle score. Using this information, a computer sorts the cattle into the uniform load lots in which they are sold. Consignors pay only regular sale-barn commission to sell cattle through the auction.

Calves sold through the Nichols Genetic Source Verified Feeder Calf Aucitons have averaged $30 to $90 per head more than the national average for cattle of similar weight sold
on the same day.

When Drovers first reported on Nichols Farms feeder calf sales in 1999, the Nichols family was hosting two of the sales each fall at the Creston (Iowa) Livestock Auction. This auction continues to be the site of two sales each year, one in December and the second in early January.

This past year, however, Nichols Farms added a second sale site Dixon Livestock Center, Dixon, Tenn. The first feeder calf sale was held there last September, and a second sale is scheduled to be held at the Dixon Livestock Center on Jan. 31. "The September sale we held there was a great success," says Mr. Nichols. "We've sold a fair number of bulls to customers in Tennessee." In total, Nichols Farms sells some 700 head of purebred bulls annually.

Though the number of sale sites has increased, the number of calves consigned to each sale has remained the same as it was when the first sales were held in 1995. As then, consignments at today's sales range from 2,000 to 2,200 head. "That's about all we can handle at one sale [because of the individual scanning and sorting]," says Mr. Nichols.

While consignments have remained constant, demand from buyers has increased, says Mr. Nichols. "At every sale we fill the sale barn," says Mr. Nichols. "And the number of buyers who just phone in bids has been increasing."

The lure of uniform load lots is surely one reason for the growing interest among buyers. A second reason is the reputation of Nichols-bred cattle for efficient feeding and high-quality carcasses. "Our cattle convert feed about four-tenths of a pound better and their average daily gain is two- to four-tenths of a pound better than cattle of a comparative source, meaning calves a feedlot bought during that same week and of similar quality," says Mr. Nichols.

In terms of carcass quality, Mr. Nichols says cattle of their genetics average 70 to 80 percent Choice, with a 30-percent Certified Angus Beef
acceptance rate. Half of the carcasses go Yield Grade 1 or 2. "Over the past seven years our cattle have earned an average of $25 per head in grid premiums over the Nebraska/Iowa average," says Mr. Nichols.

That kind of performance and the opportunity to buy uniform lots of cattle have drawn farmer-feeder Bruce Steele, Fontanelle, Iowa, to the Nichols feeder calf sales for the past six years. Each year he buys 100 to 150 head, and he finds the quality of the cattle increasing as the years go by. "We're going to market with these cattle four to six weeks earlier than we used to," says Mr. Steele.

He also buys heifers at the Nichols sales. Mr. Steele backgrounds these over winter in a heifer development program and markets them as replacements. Indeed, because of their demand as breeding stock, heifers have outsold steers the last two years at the Nichols Farms feeder calf auctions.

Because of the calves" good health and performance, Mr. Steele says he pays about $2 a hundredweight more for cattle purchased through the Nichols Farms feeder calf sales than he might for comparable groups of cattle purchased through a regular auction.

Villisca, Iowa, producer Mike Barr, who has consigned his entire crop of 130 steers and heifers to the Nichols Farms feeder calf sales for the last five years, says he sees added value in the price he receives for his cattle. "I don't have a real good handle on what my cattle might bring at a regular auction," he says. "But how I really gain on price at a Nichols calf sale is by being able to sell my cattle in a big, uniform bunch. Buyers at regular auctions really knock you on a small bunch of calves going through the ring."

Mr. Barr feels compensated in price for the labor and inputs requiring him to wean and precondition calves prior to the Nichols feeder calf sales. To be eligible for the sales, calves must be weaned for 45 days, vaccinated before weaning and after weaning and dewormed under the veterinary-certified Merial Sure Health program. In essence, this program replicates the old Texas A&;M VAC 45 program.

Benefits of fair price aside, Mr. Barr also values the opportunity these sales afford him to get carcass data back on his cattle. In advance of the sale, Mr. Barr and other consignors purchase eartags from Nichols Farms. These tags, which cost $2 apiece, provide visual as well as electronic identification for each animal. The tags individually identifiy the cattle through the feedlot and into the processing plant.

The individual eartag information is fed into Nichols Farms" computers as well as into the database of the Iowa Quality Beef Supply Network. Both Nichols Farms and Iowa Quality Beef work with order buyers and feedlots to get individualized feeding and carcass data back on cattle sold through the feeder calf sales.

"Being able to get individual data back on our calves has helped us do a better job of culling our cows," says Mr. Barr. "We can see that the performance of our cattle has improved in the last year or two. Our sale weights keep getting a little bit heavier every year, and carcass quality is improving. Our cattle yield well, and 75 to 80 percent grade Choice."

Individual data is returned, too, to Nichols Farms. Mr. Nichols reviews this information with customers and helps them choose future herd sires that are most likely to help them improve their cattle.

Through this work and through the hosting of the Nichols Farms feeder calf sales, Mr. Nichols hopes to improve the bottom line of cow-calf producers. "We do all this to keep our customers operating profitably," he says. "We believe we're creating a team approach to providing the industry with high-quality beef, and everyone all along the chain profits as a result."