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Watch each Friday for Doug Ferguson's Market Intel blog on Beef Producer and BEEF magazine.
Regional differences in cattle sales can bring profits; the key is knowing how your local sales work

This week I have been getting phone calls from the eastern two thirds of the country. People have been sharing what they are seeing with me and asking what I am seeing. The thing is, what we are seeing in the cattle markets is very region specific right now.

Every week I post on here what the discount for feeder bulls was. A young woman called from Tennessee asking where I find these discounts because she isn’t seeing it. I watched a Tennessee sale this week and she wasn’t wrong.

In fact, light weight feeder bulls near her brought more than a lot of the steers. At that sale there were few steers in the offering, but a buyer could easily make a load of bulls. The biggest factor affecting price of male calves was quality, not if they were castrated.

The opposite is true if you look in ranch country. There feeder bulls were 25 back. The discount for a bull is much greater than the discount for an unweaned animal. The signal buyers are sending there is if you do not castrate your animals you are a lousy rancher.

In some parts of the country wheat and grass cattle buyers are aggressively buying flyweight calves. In those markets the Value of Gain is lower than the Cost of Gain up to 500#. But, in a different part of the country those same flyweights are selling sixty cents back.

Weaned cattle taking a hit

The discounts for unweaned cattle are just as region specific. Some buyers want them fresh, before anyone else has a chance to screw them up. Others have had train wrecks weaning calves this fall and will not buy them unless heavily discounted. The discount for being unweaned is 4-20 back this week.

This is not the first time I mentioned on here that health has been a challenge for unweaned calves. The last three weeks I have had numerous conversations with people across the country and weaning has been rough all over. I saw earlier this week a report came out with placement numbers. For those of you who think those reports matter, you can expect one thing: that number is going to go down because death loss is going to take a bite out of it.

Another topic has been color. Some people are seeing a huge discount on cattle that are not black. That is one way to look at it. I have a different perspective on that. We are seeing a premium for black cattle. The combines are getting washed and put away and these farmer types want some stock around to feed their corn to. They have a taste for nice weaned black cattle, and are willing to pay out for them

One thing I tell the participants that come to my marketing schools is that they should go to auctions when they know they will not be buying or selling anything. This allows them to take in the auction in a relaxed state and they will pick up things, and spot opportunities and relationships easier. I follow my own advice and one issue that caught my attention is the price relationships between different quality cull cows.

Sell/Buy vs. Buy/Sell

The relationships between cull cows strongly captured my interest. Last night I got on the internet and dug into what the university types have to say about feeding cows. I was not surprised at what I found when they discuss the economic side of it.

In their papers they cite buy/sell margins, which is the buy low sell high theory. We know this doesn’t work because the market goes up half the time and down half the time. Anyhow their conclusion is that it is only profitable to feed cows when the price of feed is cheap.

None of us have cheap feed right now, but some of us have something the university folks don’t have; market literacy. I ran some numbers last night coupling my sell/buy marketing skill and their feed rations, using a corn price of $6 and hay at $200 a ton. I then looked at my barn cards from the day, I wrote down what every cow sold for, her weight and some notes about her condition and age, and there were profitable trades popping up all over.

I am going to put this right here, tuition to my marketing schools is only $750 and only takes a couple days. Compare that to college tuition and the use value of each.

Hay prices hit a new high this week at some local auctions. I will put it this way, if a cow consumes 4.5 bales at that price she will have consumed the entire value of a five weight steer. I have also noticed the last two weeks driving down the road that there are more cornstalk bales than I have ever seen.

Since the topic seems to be relationships this week, here is a fun one. When I paid for my lunch at a stockyard this week the waitress gave me a handful of nickels when making my change. She apologized for running out of quarters. I had no issue with all those old nickels she gave me since they were old enough to contain silver. She gave me the correct change by their face value, but if we look at the relationship value of this sell/buy transaction I got a good deal on lunch!

I already covered the discounts and relationships above. To trend what we are seeing in the market in the plains states is the VOG has eroded away on flyweight cattle, then gets a strong boost at 700# and remains strong up to 900#. There is a huge rollback on light weight heifers and that roll back narrows up as they get heavier.

A look at the markets

In the south the VOG is highest on flyweights and steadily drops as they get heavier. Southern markets are also under-valued to plains markets.

Last night I also stumbled across an extension newsletter that was released last week. It had what they call the K-State Focus on Feedlot data. It pinpointed that the COG on steers is up 32.8% from the beginning of the year and heifers COG is 37.2%. So steer COG is $1.09 and heifer COG is $1.18 and this does not include interest or yardage expenses. This blows the cattle square all to pieces when trying to find replacement buys for fats in the plains markets.

Relationships and understanding them is key to generating positive cash flow. I pointed out that feeder-to-feeder relationships are awesome right now. Fat-cow-to-feeder-cow relationships are looking awesome as well. Fat-to-feeder relationships are not good. Understand these relationships and you can improve the relationship with your banker.

TAGS: Beef
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