The owner of a livestock and machinery marketing company in Huron, S.D., has launched an online site aimed at creating a place where cattle producers can forward contract their cattle.

Kim Ulmer, owner of Huron Continental Marketing, has created the American Mercantile Exchange in response to volatile market conditions he believes have been created by the Chicago Mercantile Exchange. While forward contracting happens on the Chicago exchange, he said, those contracts are bought and sold by speculators often without the actual purchase of cattle.

“They regulated themselves out of delivery,” he said.

Of the 90 million cattle in the U.S. each year, Ulmer said, maybe 300 loads of cattle are actually sold on the Chicago Mercantile Exchange. That’s 12,000 head, he said.

The first contract sales on the American Mercantile Exchange were Sept. 3. Four loads of cattle were up for sale and all four sold, he said in a phone interview last week.

“It’s in its early stages,” he said. “But it’s important to give it a try. If you don’t do it, what’s the other option?”

At this point, Ulmer said, sales will be limited to cattle that are close to sale weight until the mercantile has a larger database of buyers and sellers.

Ulmer said selling cattle through the American Mercantile Exchange differs from an auction barn because it eliminates the need for the farmer to bring the cattle to auction and sell on a particular day. Through this process, he said, buyers and sellers are both vetted to ensure the sales represent the actual purchase of cattle and that the sellers are licensed, bonded dealers. All cattle for sale are reviewed and photographed before the sale.

Once the cattle are sold, he said, delivery agents handle the next step.

Once a price is negotiated, a delivery representative is there who goes on site and makes the sort as negotiated,” Ulmer said.

Because South Dakota doesn’t allow for online auction sites, the American Mercantile Exchange was set up as an Indiana corporation, Ulmer said. His company and others will then be associated as listing, delivery or marketing representatives.

“The main thing is to protect the 700,000 family producers,” Ulmer said. “Nineteen thousand livestock producers went out of business last year.”

Ulmer has been critical of the Chicago Mercantile Exchange and its affect on livestock prices.

“We feel like there’s nothing else we can do to get this corrected,” he said.

With current market conditions, prices rise and fall every 30 to 60 days, Ulmer said. By selling on the American Mercantile Exchange, Ulmer said, farmers can arrange for the sale of cattle when prices are high instead of waiting for cattle to reach sale weight and taking the prices offered the day of the auction.

As it’s set up now, Ulmer said, auctions will be scheduled every other Tuesday. Eventually, he said, he’d like to have weekly auctions followed by timed auctions on Wednesday, Thursday and Friday for contracts that don’t sell during the live auctions.

Ulmer said his goal is to have contract sales across the U.S. For now, he said, the contracts will be from the Upper Midwest.

“The people involved are producers concerned for the future,” he said. “We want to show how cattle actually get sold.”

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