This week I read a statistic that stated one-third of cattle operations are showing a profit this year. Given all the griping about the markets, bankruptcies and complaining about losing money I’ve heard the last several months I am surprised it's that high.
For the two-thirds that aren’t making money I'd say the bad news is that things probably won’t change until you do. We can’t change our results until we change what’s going on inside our heads. With the new year coming up it may be a wise decision to make a resolution to learn better marketing skills.
Even though prices have come back up to the range they were before the Tyson fire, it's a natural fact that some people were making money before that happened, while others were losing money. The same natural fact holds true after the fire. The difference between making a profit and losing money is in how some people execute.
The bad news about prices coming back up to previous levels is that some people can no longer blame the packer for losing money. They are going to have to take responsibility for that now. The good news is that you can’t really initiate change until you take responsibility.
While the markets are region-specific this week, it's also a fact that some people in the same region are making a profit while others are losing money. So no region has an advantage over the others. No segment of the industry has an advantage over the other. In the same township there are cow-calf operations making a profit while their neighbors are going broke. The same holds true for feedlots.
This week I spoke with a few friends who live in different parts of the country from me. We were comparing notes on what we were seeing taking place in the market. In my area, weaned calves are bringing more than non-weaned. Weaning is certainly adding value in my area. One of my friends is seeing the opposite in his area. Non-weaned cattle are bringing more in his area. He volunteered that the non-weaned cattle show better. Due to having some harsh weather in recent weeks the weaned cattle look a bit rough.
Normally when he and I compare notes we are buying the same weight and type of cattle. This week we bought different types of cattle. The reason is that in our different regions, the cattle that we can add value to are different.
Normally I note that southern markets are undervalued to Plains markets. That is not the case this week when looking at steer prices. When I make the comparison I add in commission, freight and a little more for having to handle long-haul, highly stressed cattle. For what steers are bringing in the South we might as well just buy steers here. Heifers in southern markets are still undervalued compared with Plains markets.
Last week I noted that the roll-back between steers and heifers closed up a bit. This week is seems to have blown wide open again. I sat at one auction where heifers were $20-30 back from steers in all weights. Some of this was caused by farmer buyers only wanting steers.
In looking at market reports from Kansas, Missouri and Nebraska the trend is a big roll-back on the lighter-weight cattle, but then that roll-back tightens up on the heavier cattle. I took some time and averaged the prices. On four- and five-weight cattle the roll-back was in the high $20s to low $30s. On six-weight cattle it narrows up to $15. On seven- and eight-weight cattle it closes to $8 to $10.
When I compare the value of gain of four-weights to eight-weights, heifers have an 18-cent advantage. Even though steers have the advantage of a cheaper cost of gain it's not good enough. When I compare the prices of eight-weights to four-weights and give the steers a normal 10-cent cost of gain advantage the heifers still make $50 per head more.
I also noticed that in some regions bull calves are not much cheaper than steers. In those regions it would be wise to pass on buying bulls and just buy steers. In other regions bull calves are $20-30 back so it's definitely worth reaching under one to change him.
The last couple weeks there were a lot of special female sales. When I compare the prices from those sales to the prices paid for bred cows at regular weekly sales, the cows at the regular sales are cheaper. In Nebraska a solid-mouth bred cow is roughly $300 cheaper on the regular sale. So you could sell and replace with the same type of animal and go home with some extra cash. I know some cow-calf guys are cringing at the thought: This is an example of what turnover can do for you, and you’ll still be calving cows.
A usual trend is also taking place in the bred-cow market. May-calving cows are selling at a discount to February-calving cows. While there should be some discount due to the cost to carry, the discount is greater than the cost to carry. After the harsh weather and mud during calving last year I can’t figure out why more people aren’t jumping at the chance to buy these late-calving cows. It's my opinion that if it's too cold to plant corn it's too cold to calve cows.
The opinions of this writer are not necessarily those of Farm Progress/Informa.