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Practical lessons in marketing cows

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Watch each Friday for Doug Ferguson's Market Intel blog on Beef Producer and BEEF magazine.
Understanding what the customer wants, and managing your expectations, can put more money in your pocket.

This week’s column is going to be all about cows. The feeder run was light this week and the best way to describe it was things got out of balance, which was great if you were buying. I also want to mention that I will be speaking at the Missouri Livestock Symposium in Kirksville MO. On December 3.

I was rather excited for this week since it started the swing of the seasonal female sales. I attended a couple of these. I feel it’s important to share that with you because to me true expert status is not achieved through the bloodline or by a degree, it is earned by doing.

This experience has given me unique perspectives that I have utilized to add my own original content to my Sell/Buy marketing schools. You see, math is an awesome thing because it is fundamental and never changes. Math keeps us out of trouble by showing us what we can or cannot do to prosper. One thing I have learned about the cow business is there are so many intangibles, most of which are perceived. Managing these intangibles is what separates average from excellent, and I despise average, and I hope you do too.

Before I get into the good stuff, I want to explain myself. I write these columns and teach marketing schools because the cattle business has been very good to me. I am extra blessed to be a part of it. By doing these things I feel I am giving back. If I can help other people succeed the cattle biz will prosper and thrive. Keep that in mind because some of the things I am about to write may be abrasive to some, all I ask is give it some thought then decide for yourself.

The cattle customer dynamic

From what I see most people that sell cows are expecting two people want to buy their animal. I am going to make this simple, if you expect your animal to sell well, you must sell something that other people want to buy. Recently I wrote about knowing who your customer is. I realize you are not going to personally know them so how do you accomplish this?

If you are selling at a stockyard your paperwork will say they act as agents only. Make them do their job. Call them and ask them what buyers are looking for right now, and what they think the price may be.

Most of the time people sell an animal to deflect a problem. An original reoccurring theme on here has been that the market will come around and help you, you just have to be patient. Farmers seem to understand this. There is a time to plant and a time to harvest but there is the time in between that gets us from point A to B. Marketing cattle is no different, time must pass before an undervalued animal becomes over-valued. A real world example showing this will follow.

Some people prefer to calve their cows in the summer, as nature suggests. But the mainstream prefers do to it much earlier. So, what do we do with these summer calving cows or the cows that fell out the window of winter calving? Mainstream operations will just dump them when the planter starts rolling. This is fighting the market by selling what you don’t want and the market senses this and punishes you. Again sell what others want to buy.

Real-world cattle marketing

I bought these bred cows earlier this year. I calved them out and resold some this week as pairs. They got rolled into a fall herd (the calves were late summer born and the cows were open). I bought what no one wanted (under-valued) time passed, and I sold what people wanted (over-valued). I had to wait for an opportunity and be ready to act on it. I also made sure I wasn’t just selling something to get rid of it, I made sure they showed well. When we sell an animal we must be selling some value along with it, especially with breeding stock.

This is a Sell/Buy marketing column, so what’s the buy? I bought some black bred cows of the same age that were bred to calve inside the window. In order to do these trades we need to be able to boil females down to their core intrinsic value (IV) to make accurate comparisons or utilize the math. The pairs I sold have an IV that was $280 higher than the cows I bought. That sounds silly to some, and I’ll address that below. It’s like I said sell some value along with the animal. When we compare the actual values (what the animals really sold for) there was a huge difference. I sold $280 of value into the market and got paid $800 for it!

When it comes to marketing there is a huge systemic thinking problem in the cattle biz: we have no idea what we are doing. In the real-world example above I had two buys of really under-valued cows, which proves the point. The Law of Polarity says that everything has an opposite. If someone is losing money, someone must be making money. This is why I teach marketing schools. I can give people the skills and knowledge to be on the right side of these transactions. I can help fix the thinking problem. For the young people this is why you can get in on the ground floor, start from scratch, and succeed, but you need the market literacy to make it happen.

One more example from the week. First-calf heifers that weighed over 1,050-pounds that were AI bred were the most over-valued animal. But the bred heifers that only weighed 9 something only brought the equivalent of 5 cents over the scale. Sell what people want to buy. It’s going to be easy to put some weight on them and resell them before they calve. I can capture some monetary value on the cattle and add value to my feed.

Let’s discuss cost for a bit. Several hundred people have come through my schools this year, and some have opened up their books to me. I have noticed a trend. In Canada the over-heads are much higher than in the States. It seems the Canadians are more serious about the business subsidizing the household, or in other words paying themselves. In the States the direct costs are much higher, we love spending money on our animals.

Cost is like the fulcrum on a lever. If we can slide that cost down, we gain more leverage and more opportunities open up to us. A change in cost will change the relationships between cattle. I have seen the simple fundamental task baffle a marketing expert before. This is why experts need to actually practice what they preach, and we need to be careful who we listen to. There’s an old quote that “Theory without practice is empty”. Here’s my angle I am warning my readers of this because I want them to succeed and not be lead astray. Vet your experts.

Maximizing your opportunities

Some of you all have a strict criteria for selecting and culling, and you have spent the big bucks buying the best of bulls. You think you are entitled to a premium for your genetics when selling cows. First off, the bad news. If you roll them into a monthly female special, you need to realize no one cares. We all have things we like, and the other buyers there likely haven’t heard of the program you are buying bulls from. At best you may have a sale barn reputation. So, if you roll ‘em to a monthly sale save the hot air. A buyers first job is to be an appraiser, and they like them in “sale condition”. Give them what they want, and get them fat.

Now the good news. I will not argue that these females deserve a premium. The thing is value added marketing is only value added if you capture the added value. This is why the females should be sold either private treaty, you bring your own buyers to the monthly special, or some seed stock producers offer special influence sales. These influence sales are a great selling tool because buyers looking for what you have will be shopping there, and everyone knows they’re willing to pay a premium. That’s another thing to be aware of, people including yourself, will pay a premium for the things they want to buy. Again sell them what they want along with some value.

There is much more I could write about on cows, and I am running long. There are many intangibles that need be managed and addressed. Why keep an old cow around? How to offset the high cost of developing replacement heifers due to production lag? And where to sell?

Set the standard of excellence for yourself and keep the needle pointed in the right direction and you will prosper.

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

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