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BEEF Industry Chat

It's an understatement to say the Madden brothers cut a wide swath. As auctioneers, ranchers, cattle feeders, farmers and real estate brokers, these Torrington, WY, men don't sit still for long. Shawn, 47, and Lex, 44, are world-champion auctioneers. Judged by fellow auction owners, Lex won his title in 1998; Shawn was the 2001 champion. No other family team can claim that distinction. As co-owners

It's an understatement to say the Madden brothers cut a wide swath. As auctioneers, ranchers, cattle feeders, farmers and real estate brokers, these Torrington, WY, men don't sit still for long.

Shawn, 47, and Lex, 44, are world-champion auctioneers. Judged by fellow auction owners, Lex won his title in 1998; Shawn was the 2001 champion. No other family team can claim that distinction.

As co-owners of Torrington Livestock Markets Inc., the Maddens have followed in their father Joe's footsteps to become volume-wise one of the top independent livestock commission operations in the U.S. Along with partner Oliver Dickens, who recently passed away, they have facilitated trade of more than 300,000 cattle each year through their two sale barns. In addition, they market another 37,000 head annually through their affiliated video auction sales.

The Maddens chalk up part of their success to location. Torrington lies in the natural flow of cattle from the western and northern cow-calf regions to the Midwest and High Plains farming and feeding regions.

The rest of their story, by a slew of third-party accounts, is aggressive, honest business practices and a positive, upbeat outlook for the cattle industry. BEEF recently sat down with Shawn and Lex to discuss their views on their work, the livestock industry and the role auction markets play in today's cattle business.

BEEF: What's going on with the structure of the livestock auction business?

Shawn: It's becoming like every other industry. There just aren't as many local auction barns anymore — they're becoming larger, regional markets. Like a 160-acre farm, it's really tough to make a living on a small operation.

We handle a lot of cutout cattle and tail-enders, but we also handle a lot of quality cattle. Some very large consignments of calves and yearlings come though our facilities every sale. They aren't all one at a time.

Lex: You need numbers to grow. Numbers of cattle bring buyers; numbers of buyers bring cattle. It's a volume-based business — but to get the volume, you need good cattle going through the ring. We compete on a regional basis with auction markets and order buyers in Montana, Colorado, Utah, Wyoming and western South Dakota and western Nebraska.

BEEF: With the growth of direct marketing programs, are livestock auction markets the source of price discovery they once were?

Lex: Price discovery is our job. We do it with every animal we sell. When animals come through here, people know what they're getting for their money. That's price discovery.

Shawn: Even if people don't sell cattle with us, they still, by some method, check what the prices are at Torrington. We are market setters — especially when you look at feeder calves and commercial cows. The problem with price discovery we're seeing in this country is more in the direct trade of fed cattle — and that's a whole other issue.

BEEF: What do you see happening with marketing alliances and the impact they're having on business at the auction markets?

Lex: We need a better premium system built into those alliances for the better-doing cattle before they're going to be much of a factor. Alliances might be hurting sale barns — especially the smaller barns, so you could say there might be an impact on the live auction process.

Shawn: I don't think the alliances have hurt our business all that much. People are always interested in improving their cattle — but that doesn't automatically mean they want some kind of retained ownership. More importantly, at least in our part of the country, not all ranchers are cut out for the feeding business. Sometimes it isn't a good fit for a rancher who can't handle the risks involved.

BEEF: Let's talk about the checkoff.

Shawn: There's no doubt that both parties — the Livestock Marketing Association and the National Cattlemen's Beef Association (NCBA) — are in a position they really don't want to be in. I don't know anyone who really wants the checkoff to go away. What most people seem to want is a periodic vote on the checkoff. It just seems like it's the democratic way.

I think if there had been a provision for a periodic vote the whole lawsuit would have been over or never happened. If NCBA thinks there's a 70% majority in favor of the checkoff, then what's the problem? Why don't we just have a vote?

Lex: The sides are so polarized that no one will move. It's like a poker game where you're in so deep that you can't blink or you'll lose all your chips — and lose a lot of pride.

Shawn: By the way, I think country-of-origin labeling would be the best thing that could happen for American beef. A big segment of consumers would choose American beef over any other — if the price is the same. Let the other countries compete but let's make sure consumers know what they're paying for. If they're going to sell foreign meat here, let's put a sticker on the meat and sell it as “Mexican” beef or whatever. The bottom line is I don't want my checkoff money being used to promote foreign beef.

BEEF: What's your read on outfits like Tyson and Smithfield wanting to get into the beef business?

Shawn: It's hard to tell because of the timing. Since Tyson bought IBP, we've had Sept. 11 and an obvious shortfall in fed cattle. Tyson/IBP has killed short days and short weeks one right after another. They've done everything they can to keep the supply stretched out as far as they could. It's too early to tell, but they certainly wield a lot of market power.

Lex: They've done a very good job of using their market power — and widened their margins. That said, you tell me what to think of Tyson… It's hard to say at this point.

BEEF: Are you fans of the new mandatory price reporting rules?

Shawn: What a joke. We've been played like a fine violin on price reporting. The confidentiality and 3/60 rules stink. What kind of idiot would allow confidentiality in a system that should be reporting what a monopoly is doing with prices?

The government guys are supposed to be market reporters — but they can't report the prices that really mean anything. They should have to report every trade they make, immediately, just like the New York Stock Exchange does.

Lex: It was a good idea in the beginning, but it's just not working.

BEEF: What do you think about legislation banning or severely restricting packer ownership of cattle?

Shawn: When you talk about packer feeding, you have to think about where we've been. We just had a lot of equity jerked out of the feeding industry. I don't know if the cattle industry as a whole is braced for the dramatic downturn in feeder cattle value we'd see if packers suddenly couldn't own cattle. I think you'd see a dramatic drop-off in feeder prices from an already beat-up feeding industry.

Lex: Maybe it would shake out in the long term, but I'm not sure the feeding industry could absorb the feeder cattle at stable prices without the investment packers put back into the feeding industry. If you suddenly pull out the money the packers are putting into feeder cattle, I think you'd see a significant slide in feeder prices.

BEEF: What do you do to help smaller producers get more for their cattle?

Shawn: We can take small groups and sell them in uniform lots with other similar cattle. We basically sort them into three sizes on the steers — big, medium and small — and the same on the heifers. The calves might go six directions depending on who wants certain weights and classes of cattle. There are a lot of buyers these days buying only certain types and classes of cattle. We see that a lot — and more so all the time.

Lex: That's how you create markets. You put in front of the buyer exactly what he wants. It's not like the old days when you could keep those calves at home and sell them to an order buyer. We provide the service of sorting and putting cattle together. Our guys will buy little packages, if they're good cattle, competitively with what they'll pay for the big loads of calves.

Our meat and potatoes are the people who have 40-200 head of cattle — it's not necessarily the big guys. We rely on producers small and large to help make a market.

BEEF: Who do you work for when you're in that auction box?

Shawn: I'm going to do everything I can to make sure the rancher gets everything he needs to stay in business. A rancher wants to know he's had a good turn and that we've treated him right. Our job is to present the cattle as best we can so they can bring a price within the market range.

Lex: We don't try to show favorites — whether they be buyers or sellers. We represent both. We're paid by the seller, but if we don't treat the buyer right, he won't be back. We try to accommodate everyone in the same manner.

BEEF: What keeps you going every day — why do you stay in the auction business?

Shawn: Well, we're too lazy to work and too nervous to steal.

Lex: We enjoy it. They aren't all easy, but I get an adrenaline rush on a good sale. This is a good business that's needed by a lot of people or we wouldn't be here today.