February 4, 2022
It’s always amazing to me how things go in spurts. What is more amazing is how people from different parts of the country, who do not know each other will call me and tell me the same thing. When this happens, I see it as a sign of what I am supposed to write about. Two words stood out to me as people reached out to me this week: dispersal and pizza
Last week I wrote about getting serious about this business. In the past I asked: Do you hate losing so much that you’re willing to change, or do you hate change so much you’re willing to lose? With the amount of dispersal sales coming up the next two months we know where those people stand. There are only two reasons to get out of business. First you are retiring and second you are not making any money. The second one can be fixed
At my marketing schools I tell this story. There are two gyms in the same town. The town has a population of 12,000 people. They both have the same equipment, they are trying to attract the same clients, and hire from the same labor pool. It is a small town, its only 5 miles from one side of town to the other so location is pretty much the same. What I am getting at here is the environment and resources are the same for both businesses.
One gym is losing memberships every month, while the other gym is signing up new members every week. The difference is the successful gym has a certain way of doing things. Most of these things are so small they look insignificant from the surface but it’s what makes the difference.
In the Chip Hines book Cow Country Essays I wrote a chapter about how I made the difficult changes to make my cow herd consistently profitable. I was doing things the conventional way. This included everything from grazing to substitute feeding to the selection of sires and replacement females. When I learned to enterprise out my business, I was shocked to find my cow herd only made money when the feeder market was high. I ran those numbers over and over certain I had missed something or made a mistake. Eventually I had to accept the truth. I had to make a decision, get serious and make the changes or get out.
Making the changes was the easy part, and I did it in a rough way. I didn’t do it gradually I just ripped of the band aid. This led to a rough time, but it was a short period of time. Forcing my cows to eat what was attached to the ground for 300 days, instead of feeding them caused some of my “best” cows to fall out of the program. Best meaning the pretty ones with the best body condition and pedigrees. It was my lesser visually appealing cows that bred back and thrived in the new program. I went from what I called a fat and fluffy herd to what I called a rough and ready herd. Rough and ready was profitable.
Many of the changes I made would go unnoticed by most people. The thing that stuck out was the look of the cows. The other thing I should mention is this was a closed herd. I write on here all the time about trading cows to make money, but I was not doing that at the time, and I still made money. You do not have to be a trader to make money, although it would certainly help. You do have to do things in a certain way if you want to make money. It’s as simple as cause and effect.
Breaking the paradigm
Learning new things is easy. Implementing what we learned is hard because our paradigm holds us back. We will never fully let go of old ideas. We must build a new, better paradigm to replace the old one. In my marketing schools I call this the X-Y factor. Our want is the Y paradigm. This is the profit motive. It must be stronger to replace the old, existing paradigm. Sadly for a lot of people this is the sick and tired of being sick and tired phase. We can change or have a dispersal sale.
We are always told to think outside of the box. Years ago I was asked to give a series of beginning farmer talks. I would question if there really was a box and why I should believe them that there was one. As I have gotten older, I realize there is a box, and it is very real. It is different for all of us.
In this box we all have 24 hours in a day. From there everything is different. We only have so much feed, money, cattle, machinery, labor, a network of people and so on. All these kinds of things are in our box. If we do a good job managing what’s in our box, we get more stuff to add to our box. If we do a poor job managing our inventory we lose stuff out of our box. This is a sign we need to change something.
While it was not strange to have several cow calf producers reach out to me this past week it was strange that several of them mentioned they could make more money making pizzas at the local gas station than they could running cows. That will depend on how many cows you have.
I am assuming they were being facetious but if they were serious there is two ways to split that hair. First, we need to fix that mindset and get some appropriate education. Attending a Ranching For Profit school and a sell/buy marketing school taught by either myself or Wally Olson is a recipe for success.
Second, go get that job making pizzas. It won’t take long before that person hates working there and then the motivation and commitment will come to learn and to change to be profitable in the cattle biz. Some of us need to work those crappy jobs to appreciate what we have or to motivate us to get out of that situation and make a better one for ourselves.
A view from the cattle market
Since everyone that reached out to me this week was a cow calf operator, I wish I had some examples from the markets this week to share but I did not see any female sales this week. What I can tell you is the buyers that typically get skunked at female sales will turn around and come to the regular weekly auctions to buy breds. Only this year that is not happening in my local area. While I am not sure why that is I can tell you that breds on the regular auctions are not worth much, making them a good buy.
This week feeder auctions started out just like last week. Then we saw some feedyards clean up their show lists with the higher fat price and Wednesday the feeder markets changed. While all weights and classes benefited from higher fat price and the drop in corn the heavy weight feeders got the biggest boost. This really changes up the Value of Gain (VOG) midweek, signaling it is a weight gain business.
This changed the relationships between weights and there were two awesome things that stood out. First, fats are slightly over-valued to feeder steers. The margin is not much but it does cover the entire spectrum.
Second, this relationship change has made the market extremely liquid. I ran cattle squares for multiple sale reports (using weighted averages) and I found profitable trades selling every weight of animal from 400- to 1,000-pounds and replacing with animals that weighed 300- to 900-pounds. Just to be clear this was done by comparing only medium and large number ones. I did not use any number twos, unweaned, or bulls in these comparisons.
Some relationship changes were extremely dramatic by midweek. There were trades that could be made with a Return on the Gain of 2 to 4 dollars. I was curious so I kicked the Cost of Gain up using corn at $6.50, and out of all the market reports I looked at and the squares I ran it only kicked out two trades.
Here’s the rub folks. If we look for opportunities and are optimistic, we will find opportunities. If we find something to complain about we will be given more things to be upset about.
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