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The safety net

The key to success is spotting the opportunity in cattle marketing.

Doug Ferguson

May 24, 2024

6 Min Read
Cattle can be a safety net for income

I received a phone call this week from a person that attended one of my marketing schools a few years ago.  Since then, he implemented sell/buy marketing and has been growing his operation by reinvesting all the profits back into owning more cattle and picking up some additional leases. He was living and supporting his family with his off-farm job.  

On Monday everyone that works in his division was laid off without notice. As the others were starting to panic and tears were swelling up in their eyes as they thought about a child that starts college in a couple months or their young children at home wondering what they were going to do, this guy looked at it differently.  He saw it as an opportunity to devote more time and energy to his cattle operation.

Most of us are taught to go to school to get the degree so we could land the security of a good job with benefits, and that cattle will be something that we do on weekends and evenings.  Turns out for this guy that the cattle were the safety net.

Can be done attitude

Also, this week I seen a couple posts on social media from young people that were inquiring about getting started in the cattle business. They received hundreds of replies telling them not to do it and how horrible the industry is. Some responses even insulted their intelligence.  The case of the story above proves why they should do it.  There are things they need to learn, like how to make money to survive.

If the cattle business is so horrible why are these negative people still in it?  If they think it is so horrible and discourage others from trying, what message are they sending their kids?  Do they discourage their kids from taking over?  If not, why aren’t they? 

When I was a kid growing up, I heard all this nonsense.  I couldn’t explain why it was nonsense back then, I was too young and didn’t know enough about it. 

Just nonsense

Today I can explain why it is nonsense.  When we hear this garbage from the ignorant all we must remember is that their self-imposed limitations are not our limitations. And that right there subconsciously is why I think they discourage and hate on new people coming into the industry. The thought of a young person without an agricultural background starting from scratch and succeeding while they are struggling to hang onto a place they inherited is too much.

Being resourceful vs. having resources

For the last year and a half, I have been following a podcast by a guy who started a multimillion-dollar a year company while he was in prison. He started his business by smuggling phones inside.  He had to figure everything out, like how to charge the phones without an outlet in his cell.

The guards noticed he had a website and would move him from one prison to another, and this guy would have to start all over again, which he did.  When he was released, he was able to level up his business quickly and easily, because on the outside he had choices. 

We have many resources available to us. There are good books about ranching, conferences and schools we could all choose to attend. The only thing I would caution about is to be sure the person teaching is actually doing what they preach. Unfortunately, this will disqualify many instructors, but the law of opposites leaves us with the really great ones left to learn from.

Like the guy on the podcast said on the outside he had choices that allowed him to grow his business quickly.  We have the same choices, yet we tend to let the petty insignificant things get in the way of making the decision to go learn the things that will make us thousands and possibly millions of dollars. The story I opened with was possible because that person made an investment in himself, and now that he lost his off-farm job it’s all good and he gets to reap the rewards now.

Our greatest asset

Even if we are going to let these petty things stop us from investing in our greatest asset, ourselves, how about we make a different choice.  Stop throwing shade on an industry we claim we love.

Markets this week

This week the feeder market was signaling it is a weight gain business. The Value of Gain (VOG)signals clearly that it doesn’t pay to make a five weight into a six weight. When VOG is higher than Cost of Gain (COG) even people without any marketing skill can turn a profit. Profitable relationships exist from flyweights on up to fats.  It will require some education to spot these relationships as cattle throughout the spectrum are selling over and under-valued to each other.  What that means is to replace with the wrong animal and a loss is a sure thing.

After I was exposed to sell/buy marketing it became clear to me that people who are incompetent, when it comes to marketing, can easily make money sometimes because cattle have two superpowers. They can gain weight and replicate themselves.  Some people can make money by giving no thought just because of these two things.

Hot female markets

Female markets in Nebraska were hot once again.  All females younger than short solids sold over their Intrinsic Value (IV). The trend of bred heifers appreciating in value up to 3 and 4 years of age held true. There was a slight depreciation when the female was called a five-year-old, then a significant depreciation when she was called short solid. Profitable trades were possible between bred females that were in the same gestation period due to age and body condition. Although the margins were on the positive side, they were thin.

Pairs of the same age and type sold $400 to $1,000 more than bred females. The only difference in the bell curve is that first calf heifer pairs were the high sellers. The depreciation slide dropped a couple hundred for 3 and 4-year old pairs and dropped slightly again on five year old pairs, then taking a significant slide on the older pairs.

Here is the beauty of a female being able to replicate herself. The relationship difference between pairs and bred females opened up the possibility to execute some handsomely profitable trades. While those possibilities were there, there was also the presence of losing trades by selling pairs and replacing with the wrong breds. This is why we must understand relationships and not rely solely on bell curves and depreciation slides to make marketing decisions.

Every week in this column it is easy for me to highlight profitable trades because the relationships exist at every sale. The opportunity to prosper is always there if we learn how to spot it.

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