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

Bigger margins versus more turnover

Markets this week show plenty of profitable trade opportunities, if you understand how to analyze them.

With some sale barns on their summer schedule, it now seems some of the market reporters have taken the summer off. It’s my opinion the only job at USDA that has any value to the producer is the market reporters. Thank you to the reporters who are still showing up.

In the market reports this week I found a lot of black diamonds, commonly known as Holsteins. From a three-weight steer all the way up to a 10-weight steer, there was only a four cent slide. I have backgrounded some Holsteins off and on over the last several years, and when I compared my cost of gain to the value of gain, the black diamonds look more like rotten rubies. There just isn’t a feeder-to-feeder trade that looks appealing to me.

The price of a calf is neither overvalued nor undervalued until it is compared to the price of another calf. In Holstein feeder steers, the price relationships are just flat. But if we compare it to the price of a fat Holstein steer, then all Holstein feeders are undervalued. That price relationship is where the black diamonds shine.

When you know and understand sell-buy marketing it can show you how to figure what can be done, if there is a profit, and when to do it in order to make that profit.

Over on the beef side there are all kinds of opportunities to make some profits in feeder-to-feeder trades and fat-to-feeder trades. In most of the country the best value of gain is under 600 pounds. I noticed that the value of gain holds higher in the southern states this week, so those producers can do all kinds of profitable trades with all weights.

I want to touch on one last topic, and that is turnover. The fat Holstein to feeder Holstein trade has some good profit in it. The profits that can be made on the beef side have smaller margins. Here’s the thing to realize about these two options: The beef cattle trades will not require the producer to put on as much weight before profit potential is realized. This allows the beef producers to take smaller profits more often. The profits that can be made right now on the beef side, if taken 3-5 times a year will add up to more than the one big profit from the Holsteins. This helps add a little more value to the time the animal is owned. While the black diamonds shine, they just don’t have the carat, color or clarity to excite me much. I’m not bashing Holsteins, there are reasons to feed them. I am just making a straight marketing comparison.

The market offered a $5-10 premium for thin cattle, while taking a $10 discount for fleshy cattle, and $20 off for bulls. Bidding competition was tough for steers of all weights, stretching margins a bit thin. There is better profit to be made on the heifer side right now.

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