February 3, 2023
At a Glance
- Sell/Buy marketing offers options for profit across the industry.
- Author is using the approach with cattle his daughter owns.
- Fun with Math exercise shows this practice at work.
We have a winner! Today I am announcing the winner of the Cornerstone Cattle Marketing DVD set I am giving away, that was made by Ann Barnhardt. Ann received 53 entries from three different countries, the United States, Canada, and Australia.
I am excited to announce that 21-year-old Haley Johnson is our winner. Haley grew up on a ranch and is currently a student in Boulder, Colo. Haley showed initiative by jumping in with a self- nomination. Congratulations Haley!
Putting Sell/Buy to work
I have mentioned that learning this material changed my life. I am going to revisit one of those changes this week. Some of you already know that I am using the Sell/Buy method of marketing cattle to fund my daughter’s future. She has her own feeder cattle that we turn over periodically throughout the year. We reinvest the profits back into virgin buying more cattle for her. We do not take any money out of this program because mom and dad are paying her living expenses since she is only 12 years old.
There are a couple points behind this. One is it teaches her life skills. The skills she learns from marketing these cattle and helping to take care of them, to communication skills, and being mindful of finances will all serve her in adult life no matter what vocation she decides to go into. I am also pushing to make her independent. If she decides to go to college, she can keep the cattle she has and try to get by on the income they generate, she can liquidate them and go to school without any loans, or she can graduate high school and have a really strong start with a business of her own.
Here is the really cool part. When I started this, I bought her 5 head of fly weight heifers when she was a month old. This was done as a loan from me. I turned those original 5 over for a few years, keeping the profits to repay the loan. After that I started reinvesting the profits into virgin buying her more cattle.
Don’t miss that part, I got my original investment back and we have been adding numbers ever since, by using the cash flow from the trades.
If I had taken that original money and invested it into a more traditional Educational Savings Account or a 529, with a 12% annual return we would barely have $30,000 when she graduates high school. Remember this is on the original money, there were not any additional contributions.
Time for Fun with Math
When Ann was teaching the Sell/Buy schools she had a blog like this one. It was her that originally started the Fun with Math. I haven’t done one on here for a while so let’s take a look at one we did with some of my daughter’s cattle.
We sold 805-pound heifers at $164.50, and bought back 485-pound heifers at $180.35. This trade gives us a Return on the Gain (ROG) of $1.40. Her Break Profit Cost of Gain (BPCOG) was $1.24. This swap gave her an excess profit of $52 per head. There was already $65 profit figured into the BPCOG, so this trade gave her almost $120 profit per head.
Here’s the really awesome part. That profit will be reinvested back into virgin buying more heifers for her. If her next trade is close to $100 per head profit and she virgin buys more cattle after that one she will have a light load lot of her own feeder heifers. At today’s prices that would be about $80,000.
$80,000 worth of value in cattle in 12 years and I have my original money back, plus the teaching tool this is for her. Or I could’ve invested it in a traditional ESA and maybe have $30,000 in 18 years and I don’t get my original money back
This is the power of Sell/Buy marketing. This is why I call it life changing. One thing that I strongly appreciate about it is that it is steady. None of these manic highs and lows you experience with other marketing methods.
Sell/Buy allows us to examine all kinds of relationships between different animals. Here is another Fun with Math. I sold some old broken mouth bred cows. Their Intrinsic Value(IV) was slightly lower than the Actual Value (AV). I sold them and replaced with 590-pound OCV heifers. Their IV was $85 lower than that of the cows I sold, and their AV was $145 dollars below that of my cows. These heifers were also undervalued to fats. So, I sold $85 of value into the market and got paid $145 for it. I sold old broken mouth cows and now have young girls that have their whole productive life ahead of them. I didn’t take a beating on old cows like most people do, I cashed in on them.
To do these things and interpret the market we need market literacy. Ann still has more DVDs for sale if you would like to order one. I also have a marketing school coming up at the end of the month.
Congratulations once again Haley. At your young age the power of Sell/Buy will compound.
Thank you, Ann, for your help in this drawing.
Thank you BEEF for allowing me to use this platform for the drawing.
Cattle market view
This week I can sum up the female markets rather quickly. The only female that is selling under her IV is the fall bred heifer. In fact, she would bring more dollars per head if given a shot of Lutalyse. Second calving cows have the widest spread between the IV and AV. If a sale barn vet calls her a five-year-old she lost $500 in value that quickly. From there on she steadily declines in value at roughly $75 per year of age.
The feeder market found its equilibrium this week and strongly stated it does not want and will not pay for six weight steers. The VOG on cattle weighing under five will easily cover the COG. On cattle weighing over 600 the VOG seemed to depend more on the auction we are looking at. Some auctions had a VOG that easily cover the COG and others it was getting a bit thin.
But when we compare relationships between weights there are outstanding trades to be made in both sexes of feeders. That is what matters.
If we are selling fats, we need to examine these relationships closely. With the drop in fat price at a quick glance it seems most #1 feeder steers are over valued. However feeder heifers are still under-valued to fats. The eight weights my daughter sold were under-valued to fats, and over-valued to the four weights she bought.
The trades pinpointed in this week’s post prove that the cow calf segment can be profitable, while the stocker segment is prospering, and the feed yard can pull in some green backs at the same time, and we all know that the packer is making bank too.
The opinions of Doug Ferguson are not necessarily those of beefmagazine.com or Farm Progress.
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