Kaplan, of Bend, OR, visited with BEEF contributing editor Wes Ishmael to discuss his goals for marketing fed cattle for CBP.
Q: Why was Consolidated Beef Producers (CBP) established? How will prices be negotiated?
A: CBP was established to maximize the return on cattle for our members by providing packers with the right cattle at the right place at the right time.
Prices will be negotiated with packers on a daily basis either live, in the beef or as the base price within grids. That's not significantly different than the way it has been; we'll be in the market offering cattle every day and negotiating the price.
And, if the packer receives an order and has immediate need for a specific type of cattle, we have the people who can search the data base of our 130 members' yards, try to find the cattle and price them.
Q: Do the majority of the cattle committed to CBP represent cattle that have typically traded in the cash market?
A: My guess is yes, but the reality is that we don't really know. Our members have the option to choose which cattle they offer us.
Q: Is the cash market dead, alive or somewhere in between? If the cash market is alive and well today, do you think it will be in the future?
A: I don't believe the cash market is dead. I believe it's alive, but it might be in between for some. I don't know what it will be in the future but I believe price discovery is important and that both cash and the Chicago Mercantile Exchange cattle futures markets need to play a significant role in keeping price discovery alive.
Q: What impact might CBP have on accelerating the industry move away from the cash market or the move toward strengthening it?
A: I don't know that we'll have any impact one way or another. We will be a part of the cash market every day, again trying to send the right cattle to the right place at the right time in order to maximize returns for members.
Q: What impact does increased cattle feeding consolidation have on the markets in general?
A: What we're trying to do is test the cash market and have a place we can go for true price discovery. Perhaps some of the marketing that has occurred which hasn't included a negotiated price has made the cash market less liquid, thinner.
Q: How does the transition toward more non-cash cattle change the lives of cattle feeders and their customers?
A: We must have a fair negotiated base price for the cattle trading in grids and formulas. How can you have true price discovery if the base price reflects the average of fewer cattle that aren't necessarily representative of what it is you're trying to value?
Q: As CBP and its members look at valuing fed cattle away from averages, will they also be developing value-added mechanisms for buying feeder cattle?
A: For many members, I'm assuming that as they see the results of these grids and tests they will look toward buying different types of cattle and learning how to market different types of cattle.
Q: Are we seeing a fragmentation of the industry into a collection of large but individual production and marketing systems?
A: Our industry is changing rapidly. Obviously, we're going through some transitions and eventually something will sift to the top that works. For those of us who have been in the business for a long time, who would have thought that we would be trading cattle with videos or over the Internet? Who would have thought all of these cowboys would spend their evenings on the Internet searching for better ways to care for and market their cattle?
Q: So, how can a feedlot and its customers best position themselves for this transition?
A: Remain open-minded and look at everything that is out there. Refuse to get stuck in a fixed way of doing things.