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It’s all about your market philosophy

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Watch each Friday for Doug Ferguson's Market Intel blog on Beef Producer and BEEF magazine.
If producers make money with cattle despite all that is going on in the blame game right now, it implies the blame game is fake.

Every week there is a story that develops in the market and at individual auctions.  I pay attention to this and that is where I come up with things to write every week. This week is different, I received two separate emails that I feel should be discussed.

The first email was from a cow/calf producer that admitted to freezing up when it comes time to sell their calves. They admitted that they knew if they’d just sell the calves when the market was good they would make a profit. They will consign the calves to the local stockyard but then fear and doubt creeps in and they cancel their consignment. They also admitted that they understand that by holding onto the calves sometimes they are devaluing them by making them heavier since sometimes the cost of feeding more weight on them is higher than what the weight gain is worth. They wondered if a few certain things were to blame.

The second email was from a discussion group I am fortunate enough to belong to and that thread was focused on the cattle industry’s fixation on the blame game (blaming others).

Who’s fault is it?

I want to focus on the blame game first since it was in both emails. I am going to paraphrase a Jim Rohn speech to fit the cattle biz:

‘Why can’t you make any money with cattle?

It’s the government’s fault because they haven’t regulated the packer

It’s the governments fault because they over-regulated me

It’s the corn market creating this corn to cattle spread

It’s my neighbor’s fault because he charged me too much for the hay, I bought from him

It’s China’s fault because they aren’t keeping up their end of the trade agreement

It’s the stockyard’s fault because they sold my calves late in the day’ (end of paraphrasing)

Some people can do this all day long. Jim goes on in that speech to point out that by the time we blame everything we have and declare it’s no good we have nothing left.

Jim points out that when we do this we have a lousy philosophy. If we changed our philosophy we could improve our results. One thing I have learned is our results are a direct reflection of what is going on in our mind. I spend some time talking about this in my marketing school.

After I attended a sell/buy marketing school it took a little while for the concept to settle into my brain and become my new paradigm. Changing paradigms takes a little time. Once it was fully engrained there I have been able to spot profit making opportunities like they are shot from a signal flare. Playing the blame game is like wearing a welding hood, it shades our judgment and we miss opportunities because we are already thinking up our excuse.

Change the way we think

Moving onto the freezing up issue. This is something I can relate to. Going back half my lifetime ago when I rode bulls I could be on a hot streak that came to an end at the worst times. I could never figure out what was wrong with me until several years ago when I discovered and became fascinated with the Law of Attraction(LOA). While learning about the LOA I learned about what some call the monkey mind, which is our inner voice that talks negative to ourselves. I figured out then why I choked in big moments.  It was because I was focusing more on failing than on winning. This is what it sounded like “you have the points lead going into the series finals. Be a real shame if you blew it and embarrassed yourself.” That’s all it takes and we are focused on failure. We have a funny way of bringing about what we think about.

Maybe this reader’s monkey says things like “The sale barn will probably sell your calves late in the day after several buyers have leveled off their cards and your cattle won’t get many bids.” Or “Your calves are smaller than your neighbor’s. Your cattle won’t show well because of that and an entire year’s work will be an embarrassment”.

Or maybe it is the blame game that holds some of us back. I recently watched a documentary with legendary tennis coach Patrick Mouratoglou. The interesting part is where he talked about talented players that intentionally threw matches. No one ever could figure out why some players did this. A pro tennis player doesn’t just hit a ball out of bounds or just stand there and let a ball go by.

Thing is he finally figured it out. The only thing some of these players heard since they were little was that they were talented. They were never praised for their skill or work ethic. As a result they thought all they had going for them was talent. So when they were struggling or losing to a player who was perceived as less talented they would throw the match. Later there may be some story about not liking the playing surface. He discovered that if they lost to a “less talented” player it implies they are not as talented as they think and they’ve lost the only thing they think they had going for them.

If we make money with cattle despite all that is going on in the blame game right now it implies the blame game is fake. If the blame game is fake and we don’t make money next time we know it’s our fault. If the blame game is fake then we realize it’s our fault we didn’t make money in the past. We now need to take responsibility for ourselves. Bud Williams is credited with saying “ranchers are okay with losing money as long as they have someone to blame it on.” Maybe we are like the tennis player that throws a match.  We freeze up, even when we know better, in order to hold on to the blame game, and shrug off responsibility.

I’ve wrote before that marketing schools wouldn’t exist if there wasn’t a need.The blame game is part of the reason there’s a need. Whether you come to a Wally Olson school or mine, or you order Ann Barnhardt’s DVD you will gain a new philosophy and fundamentals to succeed and put that monkey mind back in its cage.

Let’s examine the blame game a bit. A feed yard sells 1415 pounds fats at $1.20 and buys back 915 pounds steers at $1.29 laid in. This gives them a return on the gain of $1.03. If the cattle that were sold had a cost of gain of $1.12 this feed yard just bought a $45 per head loss.

The stocker operation that sold those nine weight steers replaced them with 515 poundss teers at $1.65.  This gives them a ROG of $0.82. If their COG on the nine weights was $0.85 they just replaced at a $12 per head loss.

Who’s fault is it they lost money? It’s their own because they didn’t quit bidding.  When Jim Rohn talked about having the discipline to do simple things that make a difference, he would say “Easy to do. Easy not to do.” It’s easy to keep bidding and buy a loss. It’s just as easy to quit bidding when the price of replacement cattle exceeds their efficient market value.

I always come back to this point, the market tries to help us. Nine weight heifers would have been a profitable replacement buy for the fats and four weight steers would have been a profitable replacement buy for the nine weight steers.

This week the value of gain was attractive up to the 600 pounds range. From there it drops off, dipping below the COG. The market signal is clear buyers would rather feed the weight on themselves even with $7 corn, than to buy weight.

This week feeder bulls were $12 back and southern markets were undervalued to plains markets.
 

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