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Filling the Need, Filling the Market

February 2005

Coming off their first ever $10 million year, Jersey Marketing Service (JMS) is looking back on 2004 as a year marked with milestones and accomplishments. The mark is a long way from the organization’s humble beginnings some 34 years ago and testimony of the importance of building a superior product.

Summing up the accomplishment best was Jim Cavanaugh, former Executive Secretary of the American Jersey Cattle Club (AJCC) and head of the organization in 1971, when JMS was established. “The mark is vivid proof that JMS is providing a real service to buyers and sellers. It shows that a keen demand - one that is even greater than supply - and a ready market for Jerseys for sale has been developed.”

The cattle-merchandizing subsidiary of National All-Jersey (NAJ) Inc. also reported a record $1,670 average on the sale of more than 6,100 live animals and embryos in 2004. In all, the marketing service managed 27 public auctions and helped 56 buyers in 24 states purchase cattle from 95 sellers in 22 states through private treaty sales. Averages for these public auctions and private treaty sales reached record highs as well, at $1,752 and $1,488, respectively.

Company growth during the new millennium has been tremendous. Despite two years of historically low milk prices, annual sales from 2000 to 2004 have increased 59.9% over sales of the previous decade.

So, what makes for such success?

“Rendering a good product and doing it in an honest way: that is what makes JMS successful,” continued Cavanaugh.

Spend some time with those who have used the organization’s services and you’ll understand that this good product comes from a few key ingredients: integrity, credibility and adaptability.

A Need for Jersey Cattle Marketing

As is true with many ideas that prove successful long term, JMS was born out of necessity.

The marketing service was established because “there was a need for the association to provide a service that was not being effectively provided by other sale managers,” explained Cavanaugh.

In the early 1970s, Jersey cows were in short supply in the south. Cavanaugh said that southern dairy producers frequently told him that cattle dealers said they could not easily find Jersey replacements, but could find Holsteins.

This was a particular challenge for AJCC and NAJ as they worked to establish All-Jersey milk markets across the country.

One of the individuals charged with this task was Allen Meyer, West Fargo, N.D., who was an area representative at the time. He said, “As we tried to develop markets for Jersey milk, it became clear that we also needed to develop markets for Jersey cattle.”

It was easier said than done. The very notion of association involvement in cattle marketing was called into question. Up to this point, field staff members were not permitted to trade cattle, accept commissions or be used for by-bidding under any circumstances.

In March 1970, Cavanaugh told NAJ board members, “It seems to me that it is nearly impossible for NAJ to effectively perform its function without getting involved, to some extent, in the buying and selling of cattle.”

From the minutes of the meeting, it was clear that NAJ President Amzi Rankin supported Cavanaugh as he remarked, “Many All-Jersey dealers need more production. Many producers need good Jersey cows. Cow sales is a part of the game.”

A Special Review Committee was appointed by the board to recommend policies for the marketing of Jersey cattle.

Three months later, at their June meeting, the AJCC and NAJ boards adopted the committee’s recommendations and established Jersey Marketing Service. New policy allowed the Jersey organizations to participate in the movement of Jerseys at private treaty on a commission basis and encouraged staff members to provide, without fee, sales assistance at public auction.

In November 1970, the Idea Committee assigned JMS their first public auction, the 1971 National Heifer Sale. Held in Reno, Nev., the 14th annual sale brought what was the series’ high-selling animal, at $2,600, and second-high average, at $796.88, to date.

The second elite sale JMS was asked to manage was the 1971 All American Jersey Sale, in Columbus, Ohio. Steady was the term used to describe the sale of 37 consignments, 31 of which sold for $1,000 or more. The sale averaged a solid $1,823.65.

These two high-visibility sales set the groundwork for what would later become the marketing organization’s bread and butter – consignment sales.

Integrity Builds Credibility

JMS has become a leader in the cattle-marketing arena because it has been built on a foundation of integrity and honesty.

“The number one strength of JMS has always been integrity,” remarked Neal Smith, Executive Secretary of the American Jersey Cattle Association (AJCA) and former JMS Manager. “Through integrity, credibility has been developed.”

“We were successful because we were honest with every detail of the sale,” Meyer said. “We let the buyers know what the cows looked like and what to expect. We had no personal profit in the deal. We tried to get the best price for the seller and find the right buyer.”

From the beginning, JMS has provided full disclosure of all information at private treaty and public auction. Dairy producers are made aware of all production and pedigree information, health test results, reproductive histories, pregnancy exam results, defects and commissions and fees.

“We have set fees and there are no hidden charges,” explained current JMS Manager Herby Lutz. “The seller knows what he’s getting and the buyer knows what he’s paying.”

Dairy producers appreciate the honesty of the process. “I feel very secure with the cattle I bought through JMS,” said Keith Broumley, Hico, Texas. “They were the quality that was represented and everything was as it was said it would be.”

Broumley, a Holstein dairy producer who converted to a fully Jersey herd this past year, initially balked at the JMS fees. Experience changed his mind. “I must say that JMS markets cattle honestly,” he remarked. “There were no disappointments and no surprises. I can say that, in the end, the fees were not too high.”

For JMS, the load they delivered to Broumley last year is just a start. Broumley plans to expand his 550-head dairy to 1,000 head over the next 18 months. “JMS did a good job for me and will have opportunity to buy for me again,” he remarked.

Another former Holstein dairy producer who appreciates honesty is Ron Kutz, who milks 600 head of Registered Jerseys in Jefferson, Wis., and plans to expand the milking herd to 1,200 head. “The cattle are represented for what they really are,” he said. “If a cow has a web teat, JMS will tell you she has a web teat. They are totally on the up-and-up.”

Kutz Dairy began the switch to Jerseys in 2000 by purchasing 50 head; half of them were purchased through JMS. The organization earned their trust and has sold them some 500 head of Registered Jerseys over the past five years. “We buy from JMS because it’s hard to find good Jerseys without them,” commended Kutz. “The caliber of cattle they put together in their volume consignment sales would be especially hard to find somewhere else.”

Confidence and Trust

Integrity also leads to trust, an ingredient found in many of the relationships that develop between JMS staff members and the dairy producers they serve.

“It always amazed me that someone would open the checkbook and give me $50,000 to purchase cattle for them sight unseen,” Meyer commented. “This shows that breeders put a great deal of confidence in our people and the program.”

Buyers trust JMS because they know the product is of good quality. “We felt a real obligation to the buyer in making sure they got the goods they wanted,” explained Cavanaugh.

Lutheridge Farm, Mt. Ulla, N.C., is one of the satisfied customers working with JMS today. Each year, the heifer raiser purchases about 150 open heifers from JMS and sells them as bred heifers through the Deep South/Southeast Heifer Growers Sale and the Dixie Invitational Sale. Said herd co-owner, Ted Luther, “JMS has been quite helpful to us in making this enterprise successful.” Success includes consigning the top-selling animal of this year’s Deep South sale, a purchase from the New York State Sale, another JMS-managed sale.

“When we buy from JMS, we know that someone has visually inspected the animals,” Luther explained. Since the Lutheridge milking herd was dispersed in 1997, some 1,000 head of Registered Jerseys, mostly open heifers, have been purchased. “We’ve bought a lot of animals from them sight unseen because we know that we can depend on them to get good, quality cattle.”

Trust has been earned on the seller end of the deal as well. This was proven this past spring when two long-time Jersey breeders from Alabama asked JMS to manage their sales. Teamwork resulted in the first-ever $1 million weekend for JMS and the Deep South/Southeast Heifers Growers and Cedarcrest sales.

Clint Collins, III, Arco Farms, who hosted the Deep South sale at his farm in Sylacauga said, “We work with JMS because they are the number one company dealing with Jersey animals.”

The Collins family has worked with the organization for many years, buying about 500 head and selling as many as 2,000 head. “The honesty of the organization and the people who go the extra mile to put a sale together and run it properly are a real bonus,” he concluded. The Arco Farms Milking Herd Dispersal, which was managed by JMS in 2000, held the record as the highest-averaging herd dispersal of its size until it was topped by the Butterfield Farms Dispersal in 2003.

Cedarcrest Farms, Faunsdale, Ala., capped off the million-dollar weekend with their third JMS-managed sale in six years. Their trust in the organization and its ability to merchandise cattle was clear as they “turned JMS loose to select what they wanted” for the sale.

John Rankin commented, “JMS knows the cow, they know the buyer, and they are doing a good job.” The sale average on 241 lots reached an impressive $2,869.81 and proved to be an example of how the national Jersey organizations can help dairy producers reach maximum profit with Registered Jerseys.

Identification and Records Paramount

One feature that has always set JMS apart from its peers is the commitment to the AJCA and its database of permanent identification, performance records and animal ownership.

“One hundred percent of the animals we sell are identified and ownership is transferred at sale,” commented Smith. “This is significant as JMS now accounts for nearly one-third of the transfer of ownership applications that are filed with the AJCA.”

This work takes on even more significance as the need for animal and premise identification increases. Dairy producers on both ends of the deal recognize the value of this work.

“It is extremely important to me to have the paperwork handled,” remarked Broumley. “When I purchased animals from other cattle merchandisers, many of them did not get the paperwork done. That means that some of the records will be lost.” For a herd that plans to merchandise down the road, the price of lost information cannot be measured.

Adapting to Change

While it was a desire for a change in milk markets that led to the creation of JMS, it was ability to adapt to change that helped JMS thrive in an evolving dairy industry.

The organization got its start marketing elite Jersey genetics but today is also known as a very commercially based marketer of Jersey genetics.

Early on, the revenue from private treaty sales and public auction was nearly equal. For the first 20 years, gross sales from private treaty totaled $168 million and from public auction totaled $198 million. In 2004, the $7.4 million revenue generated from public auction was nearly three times the $2.8 million earned from private treaty sales.

“Initially, JMS had no equipment,” said Smith. “Five or six years in, our sale equipment was a two-wheeled, single-hitch trailer that Fred Stout pulled behind his car. We tied tubs, feed equipment and anything else that we could to the sides and top of the trailer.” Simple as they were, these initial purchases were the push that enabled JMS to get its start in the business and earn a reputation for managing a sale well.

“Today, we have the whole works – a 30-foot trailer, tents, sides, sound system and everything else we need to do a sale anywhere, anytime,” Smith proudly remarked.

In recent years, the key to revenue growth has been the development of the high-volume consignment sale. Changes in herd sizes and locations have mandated changes in the way cattle are bought and sold.

One of the most successful high volume consignment sales managed by JMS was the New England Jersey Breeders’ Spring Sale, in April 2000. The offering more than tripled that of the previous year and averaged $1,025.84 on the sale of 298 females, mostly open heifers. In keeping with recent trends, purchases were made in volume, as just seven dairy producers from California, Iowa, New Mexico and Texas took home more than half the consignments.

During the past three years, “we have continued to grow the number of animals marketed at volume sales and increased the number of volume sales,” said Lutz.

This past year, eight volume consignment sales (California Gold, Dairyland Protein Sale, Deep South/Southeast Heifer Growers Sale, New England Spring Sale, New York State Sale, Ohio Fall Sale, Southwest Protein Sale, Vermont State Sale) accounted for $2.9 million in revenue and the sale of more than 1,700 Registered Jerseys.

Keeping up with technology is another element of JMS’ adaptability. In October 2000, the organization was the first to hold a sale by silent auction when it managed the Sullivan Herd Dispersal. The auction was held at the AJCA main office, rather than the farm, with no cattle or buyers assembled. Potential buyers were furnished with video clips of all animals selling. Staff members took phone bids on a multiple-line conference call and at a set time, bidding was brought to a close. The concept proved successful as 83 lots sold for an average price of $1,432.53.

Today, buyers and sellers look forward to the Jersey Stars of the Silent Screen Sale, held during the World Ag Expo, in Tulare, Calif. The past two years’ editions have featured another trend that is proving popular for JMS: the auction of pen lots of animals.

JMS Success Parallels Breed Success

Jersey Marketing Service cannot be successful unless the Jersey cow is successful. It was the foresight of early leaders, who made end roads in milk marketing, and generations of dairy producers, who bred the right cow for the marketplace, that laid the groundwork for the milestones of 2004.

“The success of JMS means that all the programs of the organization must be effective,” Meyer summed. “It means that we are serving the dairy producer in the way we hoped to do in the beginning. It reflects the value of all programs, old and new.”

“We’ve come a long way from where we started in 1971,” said Smith. “But even as the breed grows and more people become involved with Jerseys, the challenges and opportunities are the same as before. It will be as important as ever to maintain a high level of credibility and integrity.”

Smith continued, “As the popularity of the Jersey cow grows, so will the opportunity to do business with new people and prove to them our credibility.”