"When most people think of the cattle industry, they imagine cattle grazing in the field, being sold at the market, or being finished at a feedlot. Yet, there is one critical player in the industry that works with cattle, at every level, and that's the order buyer and most of them are here in Lexington and the surrounding areas.
Order buying business
"We are the middle man," explained Scott Bucher, co-owner of S&B Cattle Company, an order buying business based in Lexington. "We buy from the producers - whether it be straight from the farm or at the stockyards - and we sell to the feedlots in the Midwest."
Though it might sound simple enough, order buying isn't easy. Order buyers have to know the livestock industry, know the transportation industry, stay on top of the feed markets, and most of all, have to be willing to take risk.
Bucher explained that the ideal situation for an order buyer is to buy a load of cattle on a specific order. A customer, usually a feedlot, will call and place an order for a certain number of cattle, requesting a certain size, weight, and price. The order buyer will then find a lot that meets the description of the order, buy the lot, and then ship the cattle to the customer.
But often order buyers operate on speculation. Bucher explains that S&B Cattle Company will assemble a load of like cattle at the market and then begin making calls to customers to sell the load. Unlike other commodities that can be stored until the best price is offered, they are working with a live product that has to be moved.
"The cattle that we buy and take possession of today, we will go ahead and load them on trucks and head them in a direction where we think we can sell them," said Bucher.
Sometimes the risk pays off and the order buyer will find a customer to buy the lot and make a profit. Then there are times when a buyer is found, but they have to take a loss on a load. The worst case scenario occurs when a buyer can't be found that night, and the order buyer has to send the load on to a feedlot and retain ownership.
Beyond the speculation risk, order buyers also face risk in transporting live product. The mishandling of the livestock in loading or during the trip can result in a lower price for the lot or worse - the customer refusing the entire load. That is why it is critical to have trained responsible drivers in the business.
"The order buyer business is one that is built on reputation," explained Dell King, owner of King Livestock, an order buying business based in Hopkinsville, Ky. "Your customers expect a certain quality in the cattle and the service, and we have to work hard to fulfill those expectations."
Kentucky's industry
Bucher recalls that when he started out 30 years ago selling cattle, he would go to a potential customer and say he was from Kentucky and they would send him right back out the door. Today there are feedlots that are willing to pay a premium for Kentucky cattle, especially cattle from the Bluegrass area.
What has turned Kentucky's market around in the last several years?
The loss of tobacco encouraged many farmers to focus on beef cattle in their operations. The UK College of Agriculture and the Kentucky Cattlemen's Association - with financial assistance from the Agricultural Development Fund - stepped up to help these farmers make the transition to beef, with education and production training programs. The producers have gotten better, the overall health of the cattle has improved, and that has helped the entire cattle market in Kentucky grow.
Research and investments made by UK and KCA have also catapulted Kentucky producers and markets into the role of technology leader for the livestock industry. Blue Grass Stockyard has state-of-the-art electronic readers and data management. Savvy producers are recognizing the financial benefit of incorporating data management and technology into their operations, and order buyers are able to capitalize on the cattle that are electronically identified and source verified.
"The help of everyone has allowed us (Kentucky) to be at the front of the market," explained Bucher, "in the quality of cattle and in the cutting edge of technology."
Impact on the Bluegrass
The Bluegrass has the largest assembly of order buyers in the United States. Eastern Livestock, the largest order buyer in the nation, has offices in Lexington. S&B Cattle Company and Eugene Barber & Sons are national players that are also based in Lexington.
How did the Bluegrass area become a mecca for the order buying industry?
It is the home of Blue Grass Stockyard, the largest stockyards east of the Mississippi. All the order buyers have offices at the stockyards, and many of them have located their headquarters in Lexington as a result.
"We (S&B Cattle) buy cattle here at Bluegrass and all over the U.S.," said Bucher, "but all the money comes through Lexington. People don't realize the economic impact this business has on the area."
S&B Cattle Company has six people who buy cattle in their organization, along with bookkeepers, secretaries, and barn help employees. In Lexington alone, the cattle industry employs hundreds of individuals, and that doesn't take into consideration the producers, truckers, vets, and other people who contribute to the Lexington economy through this industry.
As for the future of the order buying business in the Bluegrass, Bucher believes it will continue to grow along with the cattle industry.
"The order buyers will end up wherever the stockyards go," stated Bucher. "Even if we don't relocate Blue Grass Stockyard in Fayette County, we won't go far."
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