It was puzzling to me how within the hour of Trump getting his ear pierced the hard way that people from all over the United States were tweeting “facts” about the attempt.  Where did they get that information?  At the same moment the mainstream media was calling it “popping noises.”  I would think that a person would be able to look at these tweets and think to themselves, how does someone in California have all these facts about the attempt within 45 minutes and is sharing it on social media? It must be BS. Yet, to my amazement, people believed the tweets they were reading.

It reminded me of a Tic Tok video I seen a few months back.  Some guy went to an auction and was shocked that cattle were selling for 35 cents, so he went home and made a video about collusion, and market manipulation crashing the cattle markets.  I can’t share my thoughts about this, but I did force myself to follow up on it, since he gave us the location of the sale barn.  Not being able to find a market report online I called the barn.  When I asked about the market report the person on the other end seemed annoyed.  Obviously, I wasn’t the first bargain hunter to call, that video was seen by thousands of people.

Double check the facts

The sale barn rep told me that the weather was bad that week and they had a light run, selling less than 100 head.  The feeder market wasn’t reported due to light test and the top selling weigh cow sold for $1.35, which is what they were bringing at that time.  Now I am drawing the conclusion that the person who made the Tic Tok doesn’t understand auctioneers. They probably started the cow at 30 and sold her at 35 and he didn’t realize there was an implied dollar in front of the 35.  Again, the problem was reading the comments under the video is that people believed him.

Even the sell/buy cozeners participate in the silliness. Last year, one shared a Facebook post of a group of eight weight steers that sold and because of the price they brought he said, “the good times are here.”  Those of us that actually pay attention realized that those steers were undervalued to fats and undervalued to lighter weight steers.  The feed yard that bought them was having a good time, but the seller sure didn’t.

Market reports can be wrong

This week on a USDA market report I read the reporter’s comments. He called the market 2 to 3 lower this week.  I look at this report every week and knew this was wrong.  The local radio station will read the comments on air when they give market reports.  Compared to last weeks sale, 4 weight steers were 23 lower, 5 weights were 3 lower, 6 weights were 15 lower, 7 and 9 weights were 5 lower and 8 weights were 2 lower.  Heifers sold the same way.

Examine the market report

People want this kind of quick blanket type market information.  It is just so tedious to take a couple minutes and actually examine a market report and study the relationships that exist.  The thing is that is exactly what we need to do in order to have reliable information so we can figure out how to prosper ourselves.  If a producer is too lazy to do this due diligence, why does that producer think they should be entitled to make money?

Notice how the market mentioned above was down this week, and that some weights were much lower than others.  Selling the eight weight steers and buying back the four or six weights was actually a much more profitable buy back than it was last week.  I stress this in my schools, not all weights drop at the same rate.  This kind of market volatility opens up some wonderful marketing opportunities.  It is not market direction or getting the high price that makes marketing fun, it is capturing big time positive cash flow.  We are surrounded by fake news all the time by people who try to seem smart. The thing is you can not fake positive cash flow.  It is one thing to be a theorist it is completely different to be a practitioner.

The dividing line

This week I70 was the dividing line again with cattle south of there having a Value of Gain (VOG) higher than Cost of Gain (COG).  North of there some weights had a VOG much below COG. Some of these northern markets even had some big-time leapfrogs.  For example, at one sale 5 weight steers brought $70 more per head than 7 weight steers.  If the guy that sold the 5 weights replaced with the 7 weight the market paid him to take weight home.  To be clear I am comparing the same type of cattle.

Rethink your cattle strategy

Some states are in severe drought right now.  I have received texts from people sending me pictures of corn that isn’t even waist high, and it is brown.  Some ranching experts tell us to disperse our cows to preserve our grass and bring money into inventory.  These experts haven’t studied their lesson. 

Last year, I witnessed people around me implement this strategy and they sold pairs due to the drought here. Those pairs brought $2,200, and when they realized they had enough winter feed on hand they tried to buy back some bred cows.  The thing is the market went up and bred cows were bringing over $500 more than they sold pairs for six months earlier.  They ran out of that money they had in inventory quickly, and now this year they are understocked for the grass we have, and their inventory is not even close to what it was or should be.

Destock your herd

I looked at markets this week from areas that are in severe drought. Both pairs and breds are selling below their Intrinsic Value (IV). Sell/buy marketing is done head for head based on relationships.  I tell those that come to my schools a way to destock is to drop weight since smaller animals eat less.  If a producer in this drought sold pairs and replaced with 5 weights they would destock by 65% and still have the same number of head (counting the pair as one unit). If they would do this, they would sell $1,260 value into the market and get paid $1,400 for that value. 

To be clear on the 5-weight price and am averaging the value of heifers and steers.  The VOG from 500 pounds to 800 pounds is well above COG, so there is some handsome value capture due to the appreciation value.  Currently, 8 weight heifers are selling for $120 per head less than bred cows, and 8 weight steers are selling for the same price and bred cows.  If selling 8 weight steers and replacing with bred cows the producer could buy $160 value for even money. 

Generating cash flow

There are multiple opportunities to generate positive cash flow in this drought market.  Legit sell/buy marketing can alleviate the burden of a drought by helping the producer destock to preserve grass and generate positive cash flow at the same time.  Some people that have attended my schools have implemented this strategy with outstanding results in a drought situation.  Those that dispersed and waited found themselves dead in the water later on and are in a worse situation, but hey it’s not their fault, they don’t control the weather or the markets.  They haven’t taken ownership of their business either and that is their fault.