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

Volatile markets searching for equilibrium

Volatility can build profits for those who understand. Are you prepared?

The market was higher this week. I have watched the prices paid for feeder cattle fluctuate from one auction to the next for the last three weeks. It’s clear the market is searching for some kind of equilibrium right now. There are many factors causing this so I am not certain it will find it any time soon.

This week in the feeder market we saw it all. I saw one auction that was inverted, meaning the heavier cattle brought more per pound than the lighter cattle. Another auction didn’t have much of a price slide again this week. At another auction the market was willing to pay you to take heavy feeders home, meaning the lighter cattle sold for more dollars per head.

To most this kind of volatility is quite upsetting and they throw their sucker in the dirt and look for someone or something to blame for why things are so screwed up. To the competent marketer who took the time to learn the necessary skills, this market is a gift. He has more opportunities than he can capitalize on.

I have mentioned several times before that there are numerous educational opportunities to learn the necessary skills. Some people tease me that I shouldn’t give away my "secrets" when it comes to marketing. Here’s the thing: There’s only a certain percentage of people who will actually take the time to attend a marketing school. And that percentage is small. Out of those who actually go, there’s only a certain percentage that will actually implement it.

One thing I’ve noticed about people is that they do not resist change. The market changes all the time yet they do not abandon it. The thing people resist "being changed," especially if it's not their own idea. As long as they can squeak by or convince the banker to finance them one more year they will continue on the same way.

I read a quote once that was something to this effect: "When one realizes he’s on the wrong path, he who turns back the quickest is the most progressive." Here’s what that has to do with marketing. I am hearing stories of people who are "forced" to sell calves right now. I don’t know the details of the word forced. Is it the banker telling them to sell, or do they have the idea of a target weight/date in their head? In reality it doesn’t matter:, thing is they all need to get more out of their calves than the calves are worth. These people are clearly in a bind where they are being forced to change and they are resisting.

Here’s my thought on that. They like to feed the cows but they don’t like to run the business. What is the purpose of the ranch or feedlot? They probably don’t know (This answer is not that obvious because its different for everyone). They may tell you they want it to be profitable but they will not take the time to learn to market their cattle well. They lack initiative. They lack the necessary desire.

There are two kinds of people who run cattle operations. Those who will it to be profitable and those who wish it to be profitable. For those who wish, the market will let you down.

There were many profitable feeder-to-feeder trades for the stocker/backgrounders to take advantage of. For the feedlots it's much like a broken record; the profitable buy-backs are in the lightweight calves.

The values of gain fluctuated a lot on the steer side of things, even getting below the cost of gain in places. It settled out a bit on the heifers, holding well above the cost of gain. Seven-weight cattle got a boost this week, while the value of gain on nine-weights fell off the cliff.

Feeder bulls were $7-35 back this week, and unweaned calves were $4-9 back. Southern cattle were greatly undervalued compared to the Plains markets.

This week the hay market got a boost as well. It wasn’t too long ago large, round alfalfa would sell for $100 a ton delivered here. This week it sold for $130 a bale with no delivery. This may just be a rare spike but it's certainly worth keeping an eye on.

I am not intentionally leaving out the female markets. I have not seen enough in the offerings to make solid comparisons or establish any kind of trend.

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