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Learning lessons from a challenging market

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Watch each Friday for Doug Ferguson's Market Intel blog on Beef Producer and BEEF magazine.
Getting out of your comfort zone these days can put more money in your pocket

Four hours can go by quickly or seem to take forever, depending on what you are doing. Four hours is all it takes to land in some big money and prove the beef specialist wrong.

In my local area I witnessed a couple herd dispersals, and some other people consigned some bred cows and pairs along with them. I thought this would give me an opportunity to write about the cow bell curve this week. Thing is the market gave me something else to write about.

Not one female was headed off here this week, all were sold as weigh ups. This sale was advertised for nearly a month and the only buyers at the sale were the regular weekly buyers and even some of them didn’t show up this week. There has been little interest in bred females and pairs here the last several weeks. Anyone that has been to a sale knows this.

A four hour truck ride could relocate these cows to an area where cows are selling for a few hundred more per head to almost double what they are selling for here. This is the part where people give me the whiny talk about paying all that freight. Simple math proves we pay the driver four figures to gain five figures. The cost of trucking isn’t the issue.

The issue is getting out of one’s comfort zone. There is something else in that comfort zone and that is blaming the market. The market was trying to help, thing is it’s up to the individual to make it happen. This means taking personal responsibility which is clearly out of the comfort zone.

Overvalued vs. undervalued

Here’s the part about proving the specialist wrong. I recently read an article about culling criteria during a drought. The cows the author suggested keeping were the over-valued ones, and the ones he suggested selling were the undervalued ones. Sell/buy marketing is pretty simple, sell the overvalued and replace with the undervalued.

The reason something is overvalued is that it is what people want to buy. People want to buy good looking stock, not something off a hit list made from undesirable criteria.

In this case the undervalued cattle were already in place. It’s the open heifers that were pulled off the cows. Plus, as we all know, they are smaller and eat less. Good marketing and inventory management can do wonders to alleviate the burden of drought.

Inventory management includes managing pastureland. Driving down the highway this week I noticed some pastures where I saw more dirt than grass, and the cattle were still there. This is inhumane to the stock and abusive to the land. I saw this happen during the drought of 2012, and even though we have had some good precip years since then, those pastures never recovered like the ones that got proper rest and recovery time.

Buying what we want can get us into trouble because we will pay too much for it. The guy who had the dispersal sale I mentioned above sold his spring calving herd to replace it with a fall calving herd. I guess he read the one about fall calving being profitable.

I don’t know if he has bought the fall calvers yet. I hope so, because that would mean he bought them when most people aren’t looking for them. My guess is he had to sell his cows first to make room for the cows he’s gonna buy. We all know as cows get closer to calving their price usually goes up. He sold his herd for kill cow price and I’m afraid he’ll pay a premium to put together the fall calving herd. Selling the undervalued and replacing with the overvalued only means he’s starting by digging himself a hole.

I see other articles that have the word profit in the headline. Then the article hits on some talking points but never comes full circle to actually making a profit. Let’s put some rubber on the black top and do a Fun with Math. I’m going to do this one out of the feed yard because those people have been kicked around way too much the last year and a half. This is based off Nebraska prices this week

Sell a 1,450-pound fat at $1.24 and replace with 1,080-pound heifers at $1.20. This trade gives us a Return on the Gain of $1.39. If we have a Break Profit Cost of Gain of $1.35 (profit figured into cost of gain) we will make $15 per head more than our original profit target.

This week Value of Gain remained strong up to 700-pounds. From there it fluctuated from one sale to another. At one auction 800-pound steers to 900-pound steers had a VOG of $1.50, and at the next auction the nine weight steers brought fewer dollars per head than the eight weights. The condition, quality, and type of cattle were pretty similar.

This situation is hard to foresee. Call the sale barn to be sure there is some demand for the weight of cattle you are planning to sell. They usually have a pretty good idea what buyers are looking for. Remember at the bottom of all the paperwork at a sale barn it says “We act as agents only”. Make sure they are acting as your agent.

A view of the market

I mentioned geographical spreads in the female market, and this week there are geographical spreads in feeders as well. Feeder bulls were steadily 20 back and replacement quality heifers caught a 7 dollar premium.

Around my local area (local means within a couple hour drive) sale barns are expecting some strip and ship calves. With the forecasted heat wave next week buyers are already rolling their eyes. No one seems to be too interested in weaning those calves next week. Again talk to the sale barn and get a feel for these kinds of things.

ou can learn more at mrcattlemaster.com.

Note: You can get personal insight from Doug Ferguson at Husker Harvest Days, September 14-16 in Grand Island, Neb. Mr. Cattlemaster will be speaking each day at 11 a.m. in the livestock demonstration area on the northwest side of the show lot. It's your chance to meet him and get insights on his sell/buy approach in person. Make plans to attend.

TAGS: Beef
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