Farm Progress is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Serving: United States
artwork of cowboy riding market vectorbomb-ThinkstockPhotos
Watch each Friday for Doug Ferguson's Market Intel blog on Beef Producer.

Ignore the news, focus on profitable trades

Analysis says profit opportunities exist nearly every week. This week is no different.

There is a lot of information in the news this past week. Swine fever in China is getting a lot of attention, and bringing out the speculators. The board took a hit, and the price of cattle seems to be falling out of bed. A meatless "meat" company saw the price of their shares skyrocket. The packers face all kinds of lawsuits.

A question I ask myself when I hear these things is, “What does this have to do with me making a profit?”

The answer is, “Not much.”

These all are things beyond our control. The thing is, they are all funneled down to a very fine point that is within our control, and that is called a bid. We can control our profits by knowing when to stop bidding at auctions. We can refuse or accept a bid on the cattle we currently have in inventory.

Some people find it difficult to believe I can make more money in a bear market than a bull market. The secret lies in this fact: Not all classes of cattle drop at the same rate, creating some attractive spreads between weights. To give you an example, I have been saying repeatedly that fly-weight cattle are undervalued. Every week I calculate the value of gain on the different weights of cattle. This was the first week I saw those lightweight calves post a value of gain at almost $2. Just to be clear, this is calculated at the same auction.

Even though cattle prices were down this week, and significantly down in some weights, the biggest opportunity to make a profit shows itself at the same time. This is why headlines and the opinions of some market commentators just don’t matter. Knowing the value of your stock and how to profit from them is what matters.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish