September 1, 2023
Female sales are getting more exciting! For reference all the comparisons I am going to lay out here are for large and medium frame number ones, and I am not paying attention to color. These females sold over their intrinsic value throughout the spectrum.
I am going to start with first calf heifers in their first trimester. If they sold in the top one-third of the market the seller got a little more for them than what they have in them. While this is not great, I see it as a positive because this is the first hint we’ve seen of a signal to be breeding these girls. Only time will tell if the signal holds or gets stronger. Heifers in the middle third of the market were selling for about what a producer would have in them at this point. Again, I see this as a positive since we haven’t seen that kind of demand this deep into bred heifer sales. And of course, the bottom third of the bred heifer market are selling for less than open feeder heifers.
Local cattle markets
Keep this in mind. Where you live this could be different. In one part of Texas, I am told they are selling everything due to dry conditions. In another part of Texas, it is paying to breed heifers right now.
Calving heifers = making money
Fall bred heifers that will calve in the next 60 days had some strong demand. The producers that sold these are probably happy they did.
I am not recommending anyone try this trade without knowing exactly what it is you are doing. I have seen this trend for some time now and that makes it worth a mention. The market is paying people to calve out first calf heifers. If someone sold first calf spring pairs they could replace with first calf fall calvers and the math tells me that we would be selling $300 value into the market and getting paid a little over $1,000 for the service they provided.
Again, you must know how to make accurate comparisons between the females. If this trend, and remember trends fade away, holds for a while it could be a good way for a young person with the energy to deal with calving heifers to make some money to get things started.
Making a swap
For those who don’t want to calve these young females there is an option. Because of the difference in demand between spring and fall calving heifers it is possible to sell the fall calvers and replace with someone else’s spring calving heifers. This swap brings in $600 to $1,000 per head while selling only $350 value into the market.
As good as these may be the most over-valued females are the ones coming with their third calf. So there is still some appreciation value to be captured if we hang onto them a bit longer. This means trading these out is even better. Some of these were sold as pairs and they were flirting with $4,000 for the pair. This puts the seller in a position to buy back two spring bred heifers and still have a lump of cash in the pocket.
No big value captures
Females that were five years old and over had some nice over/under valued relationships as well. They just didn’t have the big value captures like the younger ones do.
The relationships I mentioned were from female specials. If the females were replaced at the local weekly auction the margins could be even better.
I know it gets painful for producers when I talk about selling young cows. The paradigm of the 10-year calculator is strong and there is the argument about them coming into their prime and milking better. The thing is this is a marketing blog and when has the cow/calf producer ever been able to sell a calf and make $600 to $1,000 cash flow, not to mention they have to wait an entire year to do it again. With these sell/buy trades we can capture this positive cash flow and increase our turnover, which will increase cash flow some more.
Producers now have a better idea what their winter feed supply looks like. We are now coming out of the summer slump and the volume of females at the monthly specials will gradually increase. Pay attention to what is happening in the female markets, because I just don’t think you’ll want to miss out on the action. Again, and I can’t over state this enough, you must know how to accurately compare relationships between breeding stock. It is still very possible to sell value into the market and not get paid what that value is worth. That is a horrible move and we don’t want to do that.
Value of gain
On the stocker side of the business the Value of Gain (VOG) remains strong. It is clear this is a weight gain business right now. There is one hiccup in the spectrum and that is seven weights. The VOG drops right there. Not a big deal, just sell the six weights so that we don’t devalue our feed by feeding it to an animal that won’t be adding value to it. And if you currently have seven weights the VOG up to eight hundred will get you out of it.
I haven’t written this on here for a while, but the market does have a way of helping us. We just must be patient and wait our turn. When it is our turn, we need to go when we see the signal, or it may not come back around later.
Cost of gain
It is our cost structure that creates the relationships between animals. I would certainly hope that the Cost of Gain (COG) is below these VOG. This sets the stage for stocker operators to execute some nice trades with positive cash flow.
For a short while, locally, cash corn had a positive basis keeping it above $5.00. That positive basis went away this week and corn price has a 4 in front now. This has some people feeling good when coupled with the size of silage piles. Some of these heavy feeders are getting bid up to the point they are over-valued to fats. The traditional way of marketing doesn’t work because we are guessing we can get some cheaper gain on these animals to get them to the finish line. I’m referring to projected break evens. The reason it doesn’t work is because this mindset ignores price relationships. Just like the female side, as good as things might look there is a way to screw it up, and some people will find that way. Again, we must know how to accurately compare.
It all boils down to making a choice. We can choose to learn how to compare and have that level of awareness and skill. Or we can continue to gamble.
I will be speaking at Husker Harvest Days Sept.12-14.
Jason Warner from K-State will be on at 11:00 a.m. talking about “Navigating Drought Situations in Your Cow/Calf Herd”
I’ll be on at 11:45 a.m. talking about the “Working With the Immutable Laws to Prosper.”
Mary Drewnoski from UNL will take the stage at 12:15 p.m. “Tips for Selecting and Managing Grazing of Annual Forages.”
My final marketing school of the year will be Dec. 5 and 6. This class is currently one-third full already.
The opinions of Doug Ferguson are not necessarily those of beefmagazine.com or Farm Progress.
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