First off I want to remind all of you to watch out and be careful this time of year. Harvest has finally gotten up to full song in my area and already I’m hearing stories of freak accidents. Also, while taking my daughter to school this week we got stuck behind an accident on the highway. I have sat still on highways more this year than the previous 20 years put together due to accidents. Pay attention and beware of that "other idiot."
While driving this week I couldn’t help but notice a few things. First, I’ve seen a lot of new iron in fields this year, even though we’ve been told the farm economy is in really bad shape. Then I noticed places where the cattle pens are just a total mess. I know exactly how hard it's been due to the weather this year, but it's like these guys have given up. All these operations I drove by (admittedly judging from the road) are run by differing personalities with different strategies. While one guy's personal economy is booming the other guy's personal economy is going bankrupt. This is just a natural cycle. Businesses boom and bust at the same time, in the same industry, in the exact same location. The difference is between the managers' ears.
The doom and gloom chatter we hear on the radio has nothing to do with us as individuals. When we hear of “average” farm income going down remember that these statistics only tell us what a smoothed-out data set tells us about what the masses are thinking. As individuals we are not smoothed-out data sets, so focus on what you must do to be successful. Statistics have nothing to do with you.
I’ll share this example of what I’m talking about. This week I put together a load of four-weight calves. After the auction was over this guy came up and started talking to me. He shared with me that I bought some of his calves and the price I had to pay to own them doesn’t cover his cost of producing them. I have some cows, and I know what it's costing me to keep them every month. If I did the same kind of marketing everyone else does I could easily sell calves off those cows and make money, but only because I put a lot of thought into how to run those cows and keep my costs low.
This brings me to another point. I’ve been getting a lot of questions about female appreciation/depreciation. If you can’t sell that four-weight heifer and make a profit there is no way you can retain a heifer and breed her; that’s what the market is telling us right now. If you can make a profit selling that four-weight heifer then you most certainly can capture some value retaining her.
I want to go back and touch on those operations that looked run down. These are fairly new operations. A couple have one thing in common, both operators are in their 30’s and both worked for the same guy when they were younger. When they started their own operation they copied their former employer. I’m sure by now they’ve figured out their old boss is subsidizing his cattle operation with his other enterprises. Here’s the thing: People are lazy, meaning we don’t like to think. But we love to copy, and there’s nothing wrong with that as long as the people we are copying are successful. Choose wisely.
This week the market favored weaned calves. Unweaned calves were $8 to $12 back.
Here’s some results I saw in northern Kansas this week. These were groups of 25 head or more black, number one steers.
516 pounds at $164.25 - weaned
666 pounds at $152.50 - weaned
671 pounds at $135.30 - unweaned
713 pounds at $153.35 - weaned
As you can see there is value in weaning the calves, and no bragging rights in having cows that wean big calves. Another thing I should add is that if you do wean them, commit to it. I’ve seen a lot of short-weaned cattle (two to three weeks weaned) and buyers are sitting on their hands when those sell. It would be better to sell them right off the cow than with a short wean.
Here’s why the short wean is a bad thing to do. First, there is the stress of weaning them plus a change in their diet. Then there is the stress of hauling them to auction. Couple that with the stress of the sorting and then the comingling, followed by another change in diet when they get to the new owner’s place. This is a big challenge for the new owner and not many are capable of meeting it head on. These short-weaned cattle give the impression the seller doesn’t care, about his cattle or his customer.
One last story. Followers of this blog may recall I sold some grass calves this summer and the cash flow from that one load paid the pasture rent for all three loads. The replacement cattle were turned out on the regrowth. Even though the bills were paid I had to charge something against them for eating the grass. I wasn’t sure how to do this, so what I did was took all the expenses from the first set and divided it by the days that I owned them. I charged the regraze cattle that same daily cost. This made their cost of gain a bit high. Still, I was still able to replace them at a modest profit. The regraze cattle were purchased during the market meltdown. I was able to put some weight on them and advance them. There are three points to this story:
1. Don’t panic and freeze up during market meltdowns.
2. Turnover is a powerful tool.
3. Manage your feed budget (in this case grazing management).
This week the value of gains were strong on steers through the entire spectrum. In the Plains markets it was well over $1. In the South it was right around 90 cents, with the exception of seven-weights. Those boys jumped above $1 value of gain. On the heifer side it was a bell curve. Fly-weight heifers have an attractive value of gain but it really picks up between 500 and 700 pounds, and from there it falls off and may end up costing you more to put on the weight than it's worth.
The female market got a nice boost this week. The pairs I saw sell this week were $400 higher than last week. The increase was probably due to more pairs in the run this week attracting buyers.