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The market brings plenty of opportunity

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As many of you already know I spent the week in Grand Island NE. for Husker Harvest Days. My family and I had a good time there and we all learned some things. I have a long list of people to thank for different things. I appreciate you all and I hope everyone had as good a time as we did.

I’m going to share a big take away I got from the show. I think of my Great Grandfather sometimes and all he saw in his life. He went from farming with a team of horses to seeing man on the moon. While in Grand Island I saw technology, on the agronomy side, that almost makes Star Trek look outdated. I am now convinced I will see more advancement in my lifetime than my Great Grandfather.

As a dad I found another thing to appreciate about the show. My 10 year old daughter would see something that she thought was pretty cool and she would ask me why we don’t have one of those. I would tell her to ask the sales rep what it cost. When she did she got to find out what sticker shock feels like. She knows how many calves she owns and what they are worth, so very quickly she knew the math didn’t add up. From a marketing and business stand point she was learning the value of money compared to things.

One day while drinking coffee at the hotel the energy was high among the vendors that were also there. I got to talking with some of them and they were all looking to hire people. I asked what the requirements were, and several told me the applicant “had to be able to breathe on their own.” I realize every generation has its challenges and thinks other generations had it easier, but if that is the requirement to get a job in agriculture, I seriously doubt there has ever been a time where it was easier to get in to ag.

I realize not all of us want a job like these, we would rather be on the productions side. I see this as a means to an end. It’s a chance to learn, get experience, and network. I want to pull the word experience out of there for a moment. Experience gives us the chance to see what works and maybe even more importantly than that, see what doesn’t work.

I got a chance to talk to a fair amount of people in their 20’s and early 30’s. One thing stuck out about this age group. I was surprised how many of them told me they are trying to figure things out, and the one thing they all do is take a look at the mainstream status quo producers in their area think to themselves “what is the opposite of what they are doing?” These young producers are the innovators.

Perspective on cattle, hay market

Now, let’s get into cattle markets. I spent a lot of time on the phone this week talking to cattlemen from different parts of the country. Most of our conversations were discussing market reports. During our talks I asked them why certain weights of cattle were so cheap where they were. I’ve done this a while so when I see cattle of a certain weight are pretty much being ignored it tells me something is up.

If it happens at one or two sales it may just be that there is not a second place bidder. Someone will see this hole in the market and jump in and run these cattle up at auctions later in the week. This didn’t happen. Yesterday I talked to an auctioneer buddy of mine in that area and asked him about it. He told me those cattle are extremely risky right now and because of that he doesn’t think they are cheap.

Due to the weather conditions and dust in their area he informed me the guys that are buying them are having a hard time keeping them alive. He took it one step further when he made the remark, that the people who can take them in and keep them alive and straighten them out have a valuable skill, and wondered why more people don’t learn how to do it.

Some hay sales around the area caught my attention. Hay hit a new high this week. I spent time during my presentation discussing the inventory triangle, of feed, money, and cattle. As a reminder feed and money are the base. People are transferring money from one side of the base to the other side as feed. Cattle gotta eat, but here is my concern. It is cow/calf people buying the hay. At that price a cow only has to eat 5 to 6 round bales before she consumes the entire value of her five weight calf. I am concerned that some people will eventually run out of money and/or feed and that will cause the inventory triangle to collapse. If this happens it will have disastrous consequences.

Our second biggest advantage in the cattle business is knowing how to manage our inventory (number one advantage is knowing how to market well). If we know how to manage inventory well, we will probably be able to calculate our costs accurately. I say this because if we are managing our inventory well it's probably because we understand the value relationships between things.

So today I am going to add advantage 2.5, being able to accurately calculate costs. I spoke to several producers, and even some experts this week who are struggling with this. We must know how to accurately calculate our cost so that we can capture the full value of our feed when we market cattle.

A look at the market numbers

This week feeder markets were lower. I do not discuss fat cattle on here very often, simply because they have been under-valued for way to long. In the second half of the week heavy feeder heifers backed up enough to become a profitable buy back to fats!

The drop in feeder price chipped away at the value of gain on feeders. For the most part fly weight cattle still have a strong value of gain. Seven to eight weight cattle also have an attractive VOG. Something is overvalued because that is what buyers want, and right now buyers are signaling they want eight weights.

This week feeder bulls were 15-25 back, unweaned cattle were 10-14 back, fleshy cattle took a 10 dollar hit, and replacement quality heifers caught a 7 dollar premium. I can sum up what these numbers mean in one word: opportunity.

TAGS: Beef
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