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

Markets reduce calf value of gain

Profit opportunities shift to upgrading by weaning, preconditioning and packaging.

Earlier this week at a cattle auction I saw a big range in quality throughout the entire sale, and the prices paid for those cattle naturally was a reflection of their quality.

During that auction my young daughter had a short conversation with a large and successful cattle feeder. In a nutshell, he explained to her that in order to become the next CEO of his operation the person will begin as a tank scrubber. That person will do such a good job scrubbing tanks they get moved up something else. And this will repeat until one day that person no longer takes orders, he or she will be giving them. By working their way up the ladder they will have learned every job and aspect of the business, making them ready to lead.

I know that some people will doubt it’s that easy to work your way up. I’ll agree that for a person to do it, they must possess certain qualities. I’m not going to take the time to discuss them all, but I think there is one that is worth mentioning. In order to become a strong leader that person will first have to be a good and intelligent follower.

I’ve gotten a lot of compliments on my ability to write about and explain this marketing thing. I have spent 15 years studying and learning from the best, and I’m still on that journey. You see, it comes naturally to me today, but it wasn’t always that way. I meet people from time to time who are struggling to understand sell-buy marketing.

 My advice is keep asking questions, keep studying, and keep networking with people who are knowledgeable about sell-buy principles. I understand that people are sometimes scared of the market. I understand trying to learn a new and different marketing technique can be overwhelming. However, knowledge replaces fear and will eventually make space for confidence. It’s kind of like how people such as me upgrade cattle; we can upgrade ourselves by first being intelligent followers. There is an incubation period for anything. While you may be struggling to understand things today, in a short period of time it will become natural.

Official Calfhood Vaccination (OCV) heifers caught a $5 premium this week. Now nothing can be overvalued or undervalued until we compare it with something else. While that premium over feeder heifers may look to be overvalued, those OCV heifers are undervalued to first-calf bred heifers. So, one animal is both overvalued and undervalued. This is where knowledge and understanding of price relationships is key. It will guide you in how to utilize this female.

I saw first-calf heifer pairs only bring $125 more than bred heifers. I think this is judgement call. Is it worth it to calve out bred heifers if they only increase in value by 125 bucks? You have feed and labor and what if one loses a calf? Now she’s a cheap heiferette. I’ll add my disclaimer here, I do not like calving cows as much as I like weaning calves, so to me it’s not worth it. I realize more people like calving so maybe it’s worth it them. Knowing and understanding yourself is highly important in these decisions.

If that heifer can calve and breed back. the good news is her value continues to go up. Bred cows 3 years old were the peak on the bell curve this week. From 3 years of age to 6 years of age there was $100 of depreciation per year of age. After 6 years of age the depreciation picks up to $200 per year. I got some blow back a couple weeks ago for suggesting selling these cows while they are in their prime, but this is a marketing blog, and the market is giving a signal that there is a way to deflect that depreciation expense.

Short solid cows are selling just a bit over the scale. I know some guys who buy these and have had good luck running them out and getting more calves out of them. When they sell them as culls there is very little depreciation in them. This is another option the market is giving us, and as some people pointed out these are proven cows.

For stocker operators like me the market is giving a different signal now. While we enjoyed a period of good values of gain (VOG) and putting weight on calves was paying, the VOG is not there now. The way to add value to calves now is in weaning, preconditioning and packaging. There are some good geographical spreads right now to take advantage of, and that can help add value to cattle. Sell-buy marketing makes is easy to quickly pick up on this market signal, and make sure we don’t hold these cattle too long, making them undervalued. Stockmanship skill will make it easier to add value to cattle in a market with small VOG.

This week unweaned cattle were $15-20 back. That’s a good opportunity to add value in a small-VOG market. Lightweight feeder bulls were $10 back and larger feeder bulls were 25 back. Southern markets were undervalued to plains markets.

There was a handsome VOG with flyweight cattle up to 500 pounds. Over that it just isn’t paying to put weight on. There was a spike in VOG from 700 pounds to 800 pounds. It’s times such as these that having a scale is worth the chips. With scales we can weigh our cattle and calculate our costs accurately, cost of gain, and evaluate that against the VOG. This will help make sound marketing decisions.

The opinions of the author are not necessarily those of Beef Producer or Farm Progress.

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