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Watch for changes in the market dynamic

vectorbomb-ThinkstockPhotos artwork of cowboy riding market
Watch each Friday for Doug Ferguson's Market Intel blog on Beef Producer and BEEF magazine.
A new set of buyers enter the sale barn and it they can upend pricing

A cattle buyer told me that every week is an interesting one in the cattle biz. This week certainly backed his words. With the much needed boost in fat price, and harvest being officially over feeder markets got interesting.

Many people do not realize that culture changes quite a bit from one part of the country to another. So when I say harvest is officially over what I mean is that the seed corn hats came to the cattle auctions in Nebraska this week.

As I have stated before a cowboy hat will rarely, and very close to never, outbid a seed corn hat. We saw that this week. One thing is for sure the farmers know what they like. They like weaned and pretty, and proved they were willing to pay for it.

At some auctions this willingness to pay for what they like created an interesting dynamic. The value relationship within the weight class they were buying changed greatly. The cattle that the farmers like became greatly over-valued to plain cattle and especially No. 2 cattle.

Another thing we see taking shape right now, that I haven’t quite figured out yet, is the affect the fat cattle rally is having. I am wondering if we are just seeing some confidence in the market or if it is greed. Either way it is human emotion, and it is having an effect. Fear and greed will do more to affect a market than anything else. The signal here is clear, cattle feeders want heavier feeder cattle.

A trend to watch this winter

When we compare number one feeders to each other the Value of Gain is getting squeezed with the farmers buying in on lighter weight cattle. With the demand from feed yards the VOG is strongly signaling it is a weight gain business. If this demand from feed yards holds up until planting time next spring maybe we won’t hear the stale joke about not doing a good job marketing corn when the farmers sell off their chores.

One thing to remember when buying cattle is to not buy what you want. Buy what is under-valued. If we buy what we want, we will pay a premium for it. It is much easier to add value to something that is under-valued than it is to add value to something we paid a premium for.

Another thing that was strongly apparent this week was understanding the market you’re selling into. This is presentation or making sure your cattle show well. I saw a very nice set of weaned bull calves sell that were ignored by the farmer types. Had these bulls been steered they would’ve caught a premium instead of taking a discount. And staying on the topic of bulls, don’t sell banded cattle until after the bags fall off. There was a group I saw this week that no one wanted to bid on because they had that smell. Banding is like weaning, if you start it commit to it and finish it.

Lighter weight heifers continue to take a huge roll back, but that spread narrows as they get heavier. Here’s the thing about the heifers, they are the profitable buy back to fats.

A look at the cattle markets

Southern markets were under-valued to plains markets. Feeder bulls were 14 back and unweaned cattle were 12-20 back.

With the fantastic weather a lot of us are experiencing and the up-tick in the market there are many willing sellers right now. A lot of stockyards had more cattle this week than they expected, and demand from buyers matched the increase in supply. If you are thinking of selling, I would suggest you call ahead and get your spot reserved. We are getting into that time of year where sale barns get slammed and may not have enough pen space for all the cattle coming in.

Here is something for those of you interested in cows. While the female specials have been hot, breds and pairs that are being sold on the regular weekly auctions were shockingly off pace from those specials.

TAGS: Beef
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