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Auction Markets Are Essential

In a Q&A feature with BEEF magazine, Clark Willingham, prior to assuming duties as National Cattlemen's Beef Association (NCBA) president, responded to a variety of beef industry topics. One subject in particular, the role of auction markets in a rapidly changing beef industry, sparked a reaction that culminated in the Livestock Marketing Association recently calling for its members to press for a referendum on the national beef checkoff. In this followup, Willingham answers some of the concerns that have surfaced.

What are your feelings toward the debate your initial interview has generated?

I'm surprised, frankly. First of all, the answers I gave to the interviewer's questions were my own personal views and not NCBA policy statements. I tried to be open and honest in my personal opinions and I was not misquoted. But, I do think my opinions are being misinterpreted.

How have they been misinterpreted?

Well, we've all been told that the beef industry needs to improve the quality and consistency of its product. I believe that's a true statement. But, I also believe most producers won't change until paid to do so. That's why I believe in value-based marketing - marketing finished cattle so the producer gets paid more for producing cattle that provide more value in terms of meat and by-products. A marketing system should reward cattleman who produce superior products.

Don't auction markets provide that?

I fully understand that our current auction market system rewards producers with the best calves with higher prices for those calves. I also know that the ten best calves in a string will not all produce the same value of meat when they're processed for the ultimate consumer.

All our studies confirm significant differences in value between the top calf and the bottom - even when looking at the best ten. But all of the calves were bought for the same money - and all were sold for the same price by the feedyard. The producer was not rewarded for the full value of his superior genetics. Regardless of the way a producer chooses to market his cattle, he should receive the maximum value for the animals he raises.

Some contend you foresee or advocate elimination of livestock auction markets.

That's not true and that's part of the misunderstanding. My BEEF comments were meant to position auction markets as the source for many producers to access new marketing systems and techniques. I know, and have publicly stated numerous times, that the livestock auction markets touch the vast majority of America's beef producers.

My personal vision for the future would have the livestock auction market be the place where the producer has the option to get market information, individual animal ID tags, individual carcass data, pool their cattle for better market leverage, partner on some or all calves or simply sell them.

In the one short year I'll be president of NCBA, I am personally committed to seeing all producers, down to the cow-calf operator, get a larger share of the consumer dollar spent on beef. That's why I said in the BEEF interview that if I were "Czar," I would require that "all finished cattle be purchased by packers on a value-based system." And to me that means getting paid on meat and by-product value - not a formula based upon live cattle cash bids.

If we can sell finished cattle on this value basis and receive individual carcass data, then we have a system that can reward individual producers or industry for improving quality. And, if we improve quality and consistency, we can improve consumer demand for beef.

So basically you're saying value-based marketing should be an option for all producers, regardless of size.

Exactly. Everyone needs to get paid for genetic improvements. All industry segments are vital to the producer getting the most for his cattle. As I said in the BEEF interview, "Auction markets are essential for the small producer to participate in value-based marketing."