Take a pause and look closer

Understanding what's happening in all parts of the cattle market can put money in your pocket.

Doug Ferguson

April 15, 2022

5 Min Read
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One day when my daughter was four years old, we were feeding cattle. I got to the end of the bunk line and after turning the tractor around I just sat there for a moment. At her age it didn’t take long for her to get impatient and ask what we were waiting on. I told her sometimes you just have to take a moment and really look at what it is you are looking at.

I pointed out to her that there was a baldie heifer standing at the bunk with her head through the neck rail but it was not eating. I suggested we get her out later and give her a probiotic bolus. We did just that and at the next feeding that heifer was up at the bunk eating. I am convinced that by doing that we caught that heifer early and it saved us from having to doctor her with the expensive drugs the next day or two.

I have been hearing for weeks now that "nothing is working right now." Their perception is that the markets are all screwed up, and it is impossible for anyone to make any money right now. In my marketing classes I point out the natural laws of the universe, one of which is the Law of Polarity. This law means that everything has an opposite. If someone is not making money, we should automatically know that someone else is making money. People that do things in a certain way are often successful, they work with the market. People that fight the market usually lose. We must wake up and pay attention.

Understand all the market dynamics

Last week I read a report from the smart people at the university. It suggested that ethanol plants will have to shut down because the price of ethanol hasn’t gone up enough to match the rising price of corn. This is where the smart people defend a government mandated industry by saying the markets are working. These same folks have also done a wonderful job brainwashing the cattle industry into believing that we can’t survive without distillers' grains. They have the cow/calf people, stocker folks and even the feed yards feeding the stuff now.

They need to pay attention to what is happening before they write such nonsense. I would contend that the ethanol industry hasn’t been in the business of producing ethanol for some time because the price of distillers has gone from begging someone to take it away to being worth more than the price of corn. I priced some distillers last week when this report came out and it was 44% higher than the plant’s corn bid. If I had gone ahead with feeding the stuff, I would have raised my Cost of Gain 20%. These figures don’t even include freight costs.

Now let’s look at the cattle markets and see at what we are really looking at. Remember how people are saying things aren’t working right now. I didn’t say that other people are. We could sell fats this week and buy back ten weights at a huge profit. But let’s pretend our corn price was $8.50. Even if it was that high we could still make $50-$100 per head using sell/buy marketing selling fats and replacing with ten weights.

Looking at this week's cattle trade

I was at several auctions this week and at each auction I saw people buy cattle 80- to 120-pounds heavier than another buyer and only pay $20 per head more for all that weight.

The female sales I witnessed this week were just as rich with opportunity to prosper as the feeder auctions. Almost all females have an intrinsic value higher than their actual value. It is worth pointing out that the female sales I was at were in the area covered up by drought according to the drought monitor map. The only female that had an actual value higher than intrinsic value was the open replacement heifer, and the heifer pair. The general state of the female market is under-valued.

Here’s where we separate the skilled marketers from the rest. While the state of the female market is under-valued, they are trading over and under-valued to each other. For example pairs are over-valued to breds. It is corn planting time here and if the cow hasn’t done it yet she’s late and people are willing to sell them at a discount. Calving windows have a lot to do with female markets.

Replacement quality heifers caught a 3-7 dollar premium. For just a $125 more per head the guy could’ve bought solid mouth bred cows. But, they calve too late for him, so he ignores the relationships between classes.

I admit I pick on the cow/calf people. The reason is they get so hung up on their paradigms, and fiercely defend them. They also complain the most that they can’t make any money. If they could break through their mental rut and be willing to sell bred cows sooner, before they get old, and buy back other bred females they could’ve made a couple hundred dollars per head this week. I truly believe the market tries to help us all at some point. Whose fault is it if you don’t utilize that?

The Value of Gain in the feeder market was much like a broken record (young people are Googling what that means). The VOG was highest on cattle weighing under 500- to 600-pounds, greatly exceeding COG. Over that 600-pound threshold it was mostly lower than COG with an occasional rise above it usually around 700- to 800-pounds, but not every auction saw this bounce.

Geographical spreads remained in place. The price of fuel has raised my shipping costs 25% since January. But even with these spreads a bull hauler is my best friend right now.

Feeder bulls were up to 25 back this week.

The opinions of Doug Ferguson are not necessarily those of beefmagazine.com or Farm Progress

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