August 20, 2021
To start this week I’m giving a shout out to a special group of people that deserve some recognition. This week every school in the area is back in session and that means local auction barns have lost some good help. Auctions were a bit slower paced this week without them, and it made a difference at load out time to without those eager youngsters.
A few weeks ago I wrote about getting out of your comfort zone, and right after I wrote that piece, I had to back my words. I have never been on a Zoom conference and never planned to be on Zoom. Then Jared Luhman who does the Herd Quitter podcast asked if I’d be a guest on his show, and we had to do it over Zoom so he could record it. I needed help from Jared and my wife to figure it out. You can listen to it here. Jared is the only podcaster who requested an interview and then followed through to make it happen so this is an exclusive
I will also be speaking at Husker Harvest Days next month about cattle marketing
Sometimes the most interesting thing to watch at an auction is human behavior. Peer pressure and the need for acceptance is strong. For the last 10 months I have been on the receiving end of some stupid comments. People tend to huddle around the guys that are chirping at me, and they want to fit in with them. This week I overheard them talking about how long it’s been since any of them have seen the correct color ink on a close out. For this reason I am glad I don’t fit in with the cool kids.
Another thing about human nature is we love to copy. There are very few innovators in this world and a ton of followers. Here’s what has me scratching my head. Since we love to copy why do so many people copy those who lose money? If we are going to copy we should be sure to copy those who are successful.
Three approaches to success
For 20 years I have read and studied material about successful people. There is much to cover on this topic but for the purpose of this blog I can boil it down to three things.
First is discipline, which is the ability to give yourself a command and follow it. The peer pressure and need for acceptance will try hard to pull you away from your command. The command is simple: make a profit. If the cattle we are bidding on get too high, making them over-valued, we simply stop bidding. If we cannot make a profit doing what we are currently doing, then we need to stop doing that and do something different. Both these things are easy to do and easy not to do.
I’m sure you all agree with the last paragraph, that those things are easy to do or not to do. It is peer pressure and the need for acceptance that make them difficult, and this is the second point. Everything I have studied about successful people always covers going against the grain. If you see a crowd of people going one direction and you notice two or three people going the other direction, you should follow the few going the other way. These are the few who will succeed while the masses are just mediocre. This is copying the right people.
The third thing is the little daily habits. While these things seem mundane and insignificant, they have a way of compounding over time and can make or break a person. This is where successful people in the investment world tell us to stop going to Starbucks everyday and invest that money instead. I like coffee so I won’t follow those people there. Instead I suggest studying business mechanics, sell/buy marketing, and managing the inventory triangle. This means getting up early and spending some time at the kitchen table going over market reports, and calculating Value of Gain, Cost of Gain and how managing it affects Return on the Gain. There are other things we should be reviewing and studying at the kitchen table. I am singling out these things because marketing is the focus of this blog.
If we do these things and get a good grasp on them it will keep us on track to reach our goal, which is to make a profit. Remember those guys I overheard this week saying that they haven’t seen the right color ink on a closeout for a while? Black ink matters. With enough black ink we can afford black coffee when we get up early.
All this stuff sounds simple which it is. Yet very few people will do it because our paradigm makes it hard. A paradigm is a multitude of behavior habits, and it's our behavior that gets us our results. If we think back to middle school and high school fitting in was essential to survival. We had to conform unless you were one of those few who had enough inner strength to reject it. This becomes our X paradigm. It is extremely hard to change or shift a paradigm because we are dealing with the subconscious mind.
We were programmed at a young age to conform and fit in. We were also given a certain way of doing things that we repeated over and over. Then as we get older someone asks why we do things a certain way and the standard response is “because we’ve always done it this way”, even though we really don’t know why we do it that way. That’s the power of a paradigm.
The idea and the paradigm
A new or different idea is called a Y idea. The X paradigm and a Y idea are like oil and water, they don’t mix. X will reject Y because it is fighting for survival in your mind, and it doesn’t want to be replaced by Y. This is why some people know better but won’t change and do better. We have to give Y enough thought and energy to push X out and take over in our mind. It’s a difficult process and that is why simple things that can lead to success, or black ink, are hard to do.
A lot of cow calf operators don’t think it's necessary to look at market reports on a regular basis because they are not close to selling anything. Right now the female market varies quite a bit around the country. Breds and pairs are selling well in one area, making them over-valued. But then just a few hours away cull cows are worth more than bred cows. The baby calf market is hot in some areas and the best way to market a pair is to split them and sell them separately. And in a completely different area bred heifers will bring more if the seller is willing to pay for an abortion shot. Open feeder heifers weighing 700 pounds are outselling bred cows in some areas.
This wide range of prices and wide range of types of females is exactly why we need to pay attention all the time to what the market is doing. Really do some due diligence before doing something in the female market. Ask yourself and ask the stockyards questions like: should I really give the abortion shot to my bred heifers, or should I ship them farther away to sell them?
On the feeder side of things the highest VOG is on cattle weighing under 600 pounds. Over that weight it can get a little hit and miss because geographical spreads affect price. A three hour truck ride and change the value of some feeders by $100 per head. At those auctions the VOG easily covers the COG on cattle over 600 pounds where the other auction won't.
Last week there wasn’t much of a roll back on heavy feeder heifers. This week that changed and the roll back dialed down their VOG compared to last weeks.
This week feeder bulls were 20-35 back, unweaned cattle were 7 back, and replacement quality heifers could catch a 7 dollar premium in some areas.
With all the price spreads across different areas and different classes of cattle there is a lot to keep an eye on. It creates an abundance of opportunity as well.
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