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Watch each Friday for Doug Ferguson's Market Intel blog on Beef Producer.

Markets may be ugly, but profits are there

Even in these markets the opportunity exists to sell cattle and buy back at a profit.

Once when I heard Bud Williams talk about marketing he emphasized a point that it’s up the person marketing their cattle to get their share. When you sell an animal the feed guy gets his share, even if all you purchased from him was mineral. The pharmaceutical company gets their share. Same with the truck driver, the stockyard, and the list goes on. So you must market your cattle in a manner that you get your share.

Lately there has been wailing and gnashing of teeth in the fat-cattle market. The winter has been tough. This morning a local weather station listed the statistics for February compared with the average and it’s a month cattlemen will not forget. Feeders are complaining about packers making money hand over fist and making lousy offers, which they perceive as rubbing salt in the wound of poor gains and lighter weights. A small segment of cattle feeders are pushing for feeders to unify and push back against the packers. To me this goes against all common sense. Why would an industry rally against their customer? A business only exists for one reason, to provide a service. It should make a profit to be sustainable, but it will only exist if it provides a service. If that service is not needed the business will fail.

So how do we get our share amid all this doom and gloom? I took a fat cattle bid of $1.25, using sell/buy marketing with a cost of gain of 95 cents on steers, and $1.07 on heifers. Then I compared that to last week's weighted average for the state of Nebraska. One could easily sell fats and replace at a profit buying seven- and eight-weight steers, and seven- through nine-weight heifers. One could also pick around the edges of four-weights. Five- and six-weights are out. I just outlined what is under-valued and over-valued whether it’s a fat-to-feeder trade or a feeder-to-feeder trade.

King Solomon said “in all your learning, gain understanding.” Learning and understanding simple basic marketing principles will allow you to thrive, even in these times. Without this understanding what you don’t know can kill you, as far as your business is concerned. We don’t need to fight things beyond our control, just embrace what is easily available.

This week was similar to last week as far as what I saw in the markets. Locally our sales were cancelled due to the tough weather. When we did finally have a sale every buyer around showed up. I noticed this week buyers seem to be split into two groups. Those who are sick of fighting the weather and won’t bid, and those who have fought it enough they don’t care anymore and will just buy regardless.

The cow sales are taking longer, as is normal this time of year, due to an increase in volume of wet bag cows, and people selling off some bred cows that either don’t fit their program due to calving late or culling off to stretch feed.

TAGS: Marketing
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