The Fed Cattle Exchange has been operating for several years now, but after changing hands a few times, new owner Central Stockyards has big plans in the works for the industry’s only weekly fed cattle online auction.
The Fed Cattle Exchange was established in 2016. Superior Livestock Auction played a role in developing the platform along with Arcadia Asset Management, and operated it for a short period of time. The Exchange was then sold to 5150 Productions Company in August 2019. Most recently, the Exchange traded hands once again this past July to Central Stockyards.
Central Stockyards
Central Stockyards is an online cattle marketplace, with Percipio Partners as the main investor in the company. Percipio Partners reached out to Forrest Roberts in January 2019, who accepted the role of CEO and president of the company. Roberts told WLJ the company’s brainstorming at the time was how to be collaborative when entering the fed cattle market and not antagonistic.
“How could we be collaborative toward filling this gap of developing a platform that could be a solution for the challenges around the need for more transparent price discovery through negotiated trade, and implemented in a way that supports the benefits of how value has been created over the past couple of decades?” Roberts asked.
He noted such value includes value-added programs such as Certified Angus Beef premiums or the yellow tag program through the Red Angus Association of America, to other value-based marketing initiatives that start with the genetic seedstock supplier and go all the way up.
“We not only wanted to look at how we can bring a more robust level of transparent price discovery through negotiated trade, but it needed to support these benefits that have been in the works and building for some time,” Roberts said.
This led to Roberts reaching out to Jordan Levi, manager of 5150 Productions Company, to see how the companies could collaborate with the Fed Cattle Exchange. Central Stockyards offered to buy the Exchange outright because the company wanted it to truly be a third party stand-alone privately owned business, not part of any association or other third-party group—because that’s what customers were wanting.
“We’re a neutral organization,” Roberts said. “We have no interest in weighing into the debates about some of the proposals that are out there on issues around negotiated trade; whether 50-14, 30-14, or no action. Our focus is to bring a solution forward that the industry can use no matter where those decisions land.”
Big plans
Central Stockyards came into ownership of the Fed Cattle Exchange with the plan to transparently communicate three phases leading to the company’s new developments. The first phase was to operate the Fed Cattle Exchange as it was, with no changes, and open a feedback loop to gain input from producers and buyers. The Exchange is in the final steps of the first phase, and phase two will being in early November.
After receiving feedback from the first phase, phase two will launch a new Central Stockyards platform. The platform will have the option to choose a new, second marketing method. A live cash bid will still be one method a seller is able to choose, but they will also have the option to “bid the grid” through a negotiated grid.
The standardized grid will look at the par value of all the cattle in a particular lot. If cattle perform above the grid, there will be a premium associated. For example, if the par yield grade is 70 percent Choice and 30 percent Select for a pen of cattle, if cattle grade at 80 percent Choice, then there is a premium for that 10 percent growth. Likewise, if the pen graded 60 percent Choice, then a discount is going to apply, in the normal sense of how grids work, Roberts said.
However, the grid also includes some additional segments that are not a part of that particular settlement grid. One example is a position for 30 months and older cattle.
“Sometimes there’s cattle over 30 months that need to be marketed against that type of a grid and so they will be allowed, but there could be a discount applied,” Roberts said.
The second thing added to the standardized grid is incorporated Certified Angus Beef premiums, “because that general generic grid does not incorporate that and that’s a big deal to our industry.”
Finally, the third grid segment will be taking the week’s previous kill using data to populate the grid for the standardized grid for the week. The “most unique thing” Central Stockyards will be changing, is using a specific plant’s dressing percentage for the par value, as opposed to a national average.
Roberts also noted that through the platform, everyone will be able to see the negotiation of the base price bid, which today is not presented in an open and transparent way. Eventually, Roberts said he would like to have a library of grids for sellers to choose from, to incorporate other value-added programs or partnerships.
Eventually, a third marketing option will be offered in addition to the live bids and standardized grid, which will be related to hot carcass weight. Roberts said the third option is still in the works and may be offered a little later than the early November timeline.
Roberts said the new Central Stockyards platform will make it “simpler, easier, and more efficient for the user to navigate, whether that be as a seller or buyer.” The ultimate development of the new Central Stockyards platform will contain a portfolio of products. The Fed Cattle Exchange will be under the umbrella of Central Stockyards, with the plans to add a breeding cattle exchange and feeder cattle exchange, and “other exchanges as we determine are needed by the market and the industry as we go forward.”
The Fed Cattle Exchange data will be integrated into the Central Stockyards platform, and then phase three will begin in early 2021 with the introduction of new exchanges for breeding and feeder cattle.
Ultimately, Central Stockyards hopes for the milestone of 1 million head per year. — Anna Miller, WLJ editor
