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

High prices alone don't make a profit

Value of gain remains generally good in stockers, but female premiums collapsed this week.

Last week the market was a bit higher on limited sales due to the holiday. We started to see some cattle coming in off grass and as is seasonally typical feeders were eager to bid on them. This week it was quite a bit higher, and that changed what one could do to take a profit. When one door opens another closes.

This week we saw a higher value of gain (VOG) than we’ve seen in a while, especially in cattle weighing over 600 pounds. I went back through my notes and the last week of February was the last time we saw VOG close to what we saw this week. The thing is, as the cattle weigh closer to 900 pounds the VOG erodes rapidly. This tells us that feeders still want the opportunity to feed on some weight.

A lot of people are talking about the sale in Bassett, Nebraska. The prices were high; I even double-checked the date on the market report to make sure I was looking at the right one. When the market acts like this people sometimes fail to see what they are truly looking at. Although the prices were high in Bassett the VOG was the same as anywhere else. If you sold and bought back in Bassett on the same day those higher prices didn’t improve your margin.

The sale nobody is talking about took place in Kentucky. Every weight class there had a VOG over a dollar. If you sold and bought back in that sale your margins were better than if you did the same thing in Bassett, even though the prices were 30 cents lower than Bassett. Neither price or market direction are nearly as important as price relationships.

Now, if you sold a seven-weight steer in Bassett and bought back a four-weight steer in Kentucky, added 15 cents for commission and freight to the four-weight, you could easily make $200 per head. That’s what relationships can do.

I mentioned that another door closed. For the past few months there were opportunities to take some profits in the female market. Pairs and some bred cows have been selling well. This week they were softer. This flattened out the bell curve of appreciation/depreciation. Here’s what that means. Last week you could sell a pair and buy back a bred or open heifer and the animal on the buy-back would appreciate in value. It will now cost you more to make an open into a bred than what she’s worth as a bred. It also means that you can buy a pair cheaper than you can buy a bred for and calve her out. If you split the pair, you now have a cheap calf.

This week one thing remained the same. Unweaned cattle were $5-12 back and bulls were $5-20 back.

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