Awareness is necessary for beef businessAwareness is necessary for beef business
Slow down and look at your entire cattle operation before making decisions.
July 7, 2023
Extended holiday weekends now seems to mean I will receive more calls and emails than usual. That’s alright. However, there are two calls that make me wince when the caller tells me the reason for calling. One is when they decided to sell their cows because they were led to believe it is too expensive for them to run cows where they are located. The new plan is to now become a seasonal stocker operation, and they want to learn about making money running stockers from me. This is going to be part one of two on my thoughts on this strategy.
Slow down and look at the situation
Since my main enterprise is as a stocker operator, I used to support the idea. It is amazing how teaching sell/buy marketing schools has changed how I think and approach things now. Instead of going right out and selling the cows, I think people really should slow down and examine their situation. I am big on the word “awareness.” The best mentor I ever had was always preaching about raising our level of awareness. Awareness is having knowledge of a particular situation.
First off, when attending a seminar, school, or consultation, does the person suggesting selling off the cows and getting into stockers really know all the pertinent information about your operation to make that call? A personal consultation probably does, but there is no way the other two do. To me I think more information needs to be gathered.
I have seen the flip side of this. Someone sold their entire cow herd and then came to my school to learn how to market stockers. Some of these people ended up very angry at the person who recommended they sell their cows. The reason they got so upset was after seeing how to market breeding stock and the cash flow that can be generated from it, they suddenly realized they didn’t need to get out of the cow/calf business. They just needed to change their marketing strategy. Some of these people loved the cow/calf business and really didn’t want to switch, but they followed the advice of a trusted “expert”.
I will make this clear: The people suggesting getting out of the cow/calf business have never been to one of my schools. My schools are unlike any other out there. I get that there is a paradigm on how to run a cow operation and there is a paradigm on how to run stockers. Stockers are perceived to have higher turnover and seasonal which will save on expensive wintering costs.
I want to address the seasonality of stockers. Remember the spring of 2015 when five weight steers were $1,500 and then the market crashed. Those same steers came back to town as eight weights and brought only $1,600. This was not a business model to be in. Or what if you sold cattle last fall, took the winter off, and then this spring you started buying cattle to graze again and the market had gone up significantly. You effectively lost buy back power and took an inventory valuation loss. The point is that you are going to be at the mercy of the market doing it this way.
Not long ago, I wrote on here that the best investments on earth are those that generate positive cash flow. If we sell off all the cattle to get through the winter, we do not have assets generating cash flow. We are effectively out of business, yet we will still have bills to pay.
Some people make the seasonal grazing work. I also know many of them are also sending the cattle to a feed yard to be finished before buying back the next bunch, or they sell them off grass and buy a bunch to go to a custom grow yard. They still own cattle even though they are not grazing on their place.
Buying calves does not equal raising your own
If you have been in the cow/calf business all your life, another thing to consider is that buying other people’s calves is not the same as raising your own. There is a learning curve, and it comes with a cost of tuition, meaning the lessons learned can be expensive and there’s no loan forgiveness out here. Remember it was too expensive to run cows, yet when paying tuition, the previous situation doesn’t seem that bad. I am only trying to make you all aware that there are things to consider before taking the leap.
Next week I will get into marketing with a high cost of running a cow herd.
Our Oklahoma City marketing school is half full, and it is the last few weeks prior to a school that they sell out. After that one we only have one left on the calendar. I will be speaking and giving a workshop in Enid, Oklahoma, on July 19 and 20 at the Crossroads Conference. In September, I will be speaking at Husker Harvest Days.
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