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

Cattle marketing is like a dirty diaper

Prices may be drifting down, and all over the board, but author asks whether you can improve your position.

If you’re the type of person who shoots trap, this week’s cattle market was for you. In looking at market reports from across the country it appears prices paid were in a shotgun pattern; all over the place. And if you did your marketing right you hit your target.

A guy I know sold some cattle this week. The market was down again this week and he didn’t feel too good about it. He sold the same weight and same sex as I had sold two months ago, and got the same price I got at that time. He knows he missed the recent market high and that’s what has him upset. That is his perception of what happened. Thing is, he sold an overvalued group of cattle. Two months ago, the cattle were in the most undervalued group. My perception is that he still did a good job selling those cattle.

Let’s examine the shotgun pattern by focusing on three sale barns. Sale barn A will be my base point. Sale barn B is three hours northwest of sale barn A and sold seven-weight steers for 28 dollars more than sale barn A. Sale barn C is about three hours southwest of sale barn A and three hours south of sale barn B and sold seven-weight steers for nine dollars more than sale barn A.

So, are seven-weight steers under- or overvalued? The answer is it depends on your situation, because they are both in sale barn A and C. You see, in all three sale barns they are overvalued compared to four-weights.

What if you sold fats this week and needed to replace them. In sale barns A and C, seven-weight steers are undervalued compared to fats, while seven-weight steers in sale barn B are overvalued. So you see a weight group of cattle can be both over- and under-valued at the same time. This is the Law of Relativity. Nothing can have a undervalue or overvalue classification until you compare it to something else, and that classification can change depending on what you compare it to.

In the female market, pairs with calves weighing 150 pounds or bigger were significantly overvalued compared with bred cows north of I-70. South of I-70 the price spread wasn’t nearly as great.

When my daughter was born and I would change her diaper and I would talk to her and tell her that by getting rid of the dirty diaper and replacing with a fresh one she was improving her position. That’s kind of what marketing is, improving one’s position. This week the market, even though it was down again, gave us all an abundant opportunity to improve our position. The problem is most people are focusing on market direction as a bad thing, or are focused on the negative headlines. They are focused on the dirty diaper and ignoring the fresh one.

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