Auction market owners leery of technological changes

You don’t want to do a Blackberry when faced with the invention of the iPhone, scrambling too fast to match the competition and falling hard when you fail.

You also don’t want to be another Kodak, reacting too slowly to save yourself from the digital revolution.

Anyone facing a technological and digital revolution needs to manage such situations, but it’s easier said than done. Many smart people have failed badly when new technology disrupted their industry. Farming is no different.

Agricultural marketplaces have been swept up in the rapid technological changes of the digital revolution, and we’ve seen that from futures markets all the way down to local marketplaces.

I got a taste of how this situation is affecting part of the beef cattle industry while covering the Livestock Markets Association of Canada convention at the end of May.

Auction market operators heard about the BIXS data collection system, which can track cattle production data as animals move through the complex beef chain.

They’ve been wrestling for a while with how to deal with this sort of data because a big part of what the markets do is let buyers see in the ring what cow-calf and other producers have to offer.

If data from a computerized system lets feedlot operators and others see right into cow-calf producers’ herds, why would they need to buy from auction markets? Couldn’t they just cut out the markets and go directly to farmers?

The BIXS system is designed to prevent this by not letting downstream people identify which cow-calf producers have which animals.

However, the concern among auction markets is virtually the same as what has affected crop futures markets and every other kind of marketplace since the digital revolution began.

Surviving the revolution requires an understanding of whether the challenge posed by the technology can be made part of a new and improved system or is something that needs to be fought in a battle for market share between rival approaches.

I suspect there will be a continuing need for cattle auction markets well into the future. Unlike the hog industry, which is almost entirely contract-based because it produces a mostly uniform animal and is dominated by a few hundred producers, cattle production is done by many thousand of farmers who produce animals of more varied breeds, sizes and conditions.

That to me suggests feedlots won’t be able to just contract directly with a few cow-calf producers and cut out the auction markets. They rely on too many farmers, and they don’t produce cattle of the same quality, certainly not on a tight deadline as with hogs.

But it’s hard to see into the future, and that’s why auction market operators are being cautious.

They have agreed to deal with BIXS and technological change, and that makes sense.

As Hubert Lau of BIXS said when talking to the auction market operators, “industries will change and evolve.… If we sit back, somebody’s going to tell us what’s going to happen.”

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