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Make yourself aware of opportunities

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Watch each Friday for Doug Ferguson's Market Intel blog on Beef Producer and BEEF magazine.
Sticking with preconceived ideas of what works in the cattle market could be holding you back.

One summer afternoon I was sitting at a cattle auction. I was focused on the sale until my buddy started complaining about a sparrow chirping. Up to that point I had not noticed the noise the bird was making, but after my buddy pointed it out, I had a difficult time blocking it out and it began to drive me nuts too. Before my buddy said anything I had not noticed that annoying sparrow. My mind had filtered it out, but after bringing my attention to it I could no longer could do that

The very first thing I talk about in my Sell/Buy Marketing schools is raising our level of awareness. We all have preconceived ideas about marketing. Most of which do not serve us very well because they cause our minds to filter out opportunities right in front of us.

This higher level of awareness sometimes reminds me of the red pill from the movie “The Matrix.” And just like in the movie, once you see something you can’t ignore it anymore. This new level of awareness is then yours, you own it.

An example of a higher level of awareness could be seen in two past marketing school participants. They are from different parts of the country yet have similar operations. They have a cow/calf herd, they sell some freezer beef, and they both have trader herds, consisting of stockers, to help increase turnover and add another revenue stream.

They both had the idea that when you sold a stocker animal you had to buy back a lighter animal. In my school I talk about leapfrog trades, which is where we can buy heavier animals for less than we can feed the weight on them. This is one of those red pill moments because most people think a bigger animal brings a bigger check. In reality that is not always the case.

Capitalizing on the market

Both people saw this opportunity open for them this week. One jumped on it and the other hesitated. The one that hesitated called me and asked if he was seeing this right. He then questioned if it was really a good thing for him to do. I pointed out based off the numbers he shared the market would pay him to take the extra pounds home. Soon the market may then signal to him to resell that animal because it has become over-valued, setting him up for another good feeder to feeder trade.

Another thing we discussed is he is giving up time by buying a larger animal. This too was okay because he could finish it out and sell the beef easily since that enterprise is already in place. The premium he gets will help offset the reduction in turnover. He will keep the premium, and not use it on the buy back.

We were discussing heifers and one thing I cautioned him is that in his part of the country he would need to find out if the heifers were bred. To me this was not a big deal since he also has a cow/calf operation in place. If she was bred, he had several options, resell her as a bred on a female special when she gets closer to calving. This may help him capture some added value. He could calve her and resell her as a pair, again capturing some value. Or he could keep her in the breeding herd.

When people first learn sell/buy marketing skills it can be overwhelming. This new, higher level of awareness presents so many opportunities that it seems too good to be true and people get hesitant. None of the opportunities existed to them before because their mind filtered them out. Then once they see them all at one time it comes as a shock. One thing about a higher level of awareness is we will always run out of money before we run out of opportunities.

A couple weeks ago my level of awareness was raised by ranch consultant Allan Crockett. Before our visit I had the belief there was only one way to draw up a drought plan. After listening to Allan he changed my mind. The biggest takeaway for me was that you need a drought plan that fits your part of the country.

Sell/buy marketing can also help alleviate the burden of drought. When the topic of drought comes up people will rush to sell the wrong animals and keep the wrong animals. They will also implement costly strategies. All we managed to do here is kill our cash flow, which is the life blood of a business. With Sell/Buy marketing we can properly identify which animals should be sold, and even possibly buy back animals that may fit the situation better. This allows us to manage our inventory better and generate positive cash flow.

A view from the markets

This week looking at the markets I will just get the broken record part over with, the buy back against fats is the large feeder heifers located south of I-70. When we examine the Value of Gain (VOG) and price relationships between different weights of feeder cattle it gets much more exciting.

The VOG is real strong up to seven hundred pounds. From that point on it just depends on what auction we look at and in which part of the country. Some VOG above 700# in places is still good and in others it falls out of bed. We just need to pay attention to what the local markets are telling us in that case.

In the last few weeks, a $2 VOG would pop up every now and then. This week it is much more regular and I even spotted some rare $3 VOG!

This week some auctions held calf specials early due to the drought. Some auctions that were on the summer schedule are now going back to their regular schedule this month.

This week feeder bulls were up to $40 back and unweaned calves were up to $15 back.

Heading to Husker Harvest Days? You can catch Doug Ferguson live each day at 12:15 has he offers ways to put more money in your wallet with sell/buy marketing. And it’s your chance to talk with him each day. Husker Harvest Days runs Sept. 13 – 15 near Grand Island, Neb. Make plans to attend.

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

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