Always be ready at the auction

Be prepared in 2023-- even if that means coming home with an empty trailer.

Doug Ferguson

December 30, 2022

6 Min Read
artwork of cowboy riding market
Watch each Friday for Doug Ferguson's Market Intel blog on Beef Producer and BEEF magazine.vectorbomb-ThinkstockPhotos

I’m going to start this week on a personal note.  I want to say Thank You to all those who reached out the last couple weeks. The success stories I have heard from people that have been to one of my schools, and the expressions of gratitude people shared for what I write on this blog and a discussion group I am a part of.  Thank You!

That’s what this is supposed to be all about. If people learn something that benefits them and they can prosper from it that makes the cattle business stronger. If people at the producer level prosper, and they can if they do things a certain way, we can fend off vertical integration. If we can prosper at the producer level whether it is cow/calf, stockers, grass fed, or feed yards we will attract our kids to want to be a part of the business and I can’t think of anything better than that.

On another personal note I have a special announcement next week. I am so excited I can’t hardly stand it.  So be sure to check it out, it’s going to be a wonderful opportunity for someone.

The last few weeks some people have called and shared with me they have an extremely high Cost of Gain (COG).  This was mostly due to feeding a premium quality feed to their cattle.  Of course, we discussed ways they can cheapen up their rations. The good news is that they raised this expensive feed and are charging themselves fair market value for it.  They are trying to make sure they don’t give the feed value away.

Here is a glint of possible good news. There were not many sales this week due to the holidays.  Some of the sales and market reports I looked at showed Value of Gains (VOG), of $1.70 to $2.10.  I also saw some market reports where the VOG was extremely turbulent and unpredictable. VOG was up and down from one weight class to the next, with swings from $0.57 to $2.02. 

My suggestion is to keep an eye on this and know the market you are selling into. I write on here regularly that the market will help us if we are patient. For those of you with a high COG you will need to be ready to act quickly. Your turn won’t last long.

Some of you are not happy with the price you got for your calves the last couple weeks. Your cattle didn’t bring what cattle sold for the week before. Some of you looked at the forecast and saw there was a blizzard, or extreme cold coming and made the logical decision to get rid of the chores. Guess what, the folks that bought those cattle didn’t want to go out in the weather and take care of them either. That’s why the price softened.

Same thing with the bawling calves that sold this week.  Some outfits have hired help and they need to be fair to their help and give them time off this time of year to be with family.  Since some outfits are short on help they are not going to take in any new cattle, and if they do it sure won’t be bawlers. This left a shallower pool of buyers for these calves.

Some people do what they always do until enough peer pressure and headlines convince them to do something smart. There are people who always sell in January or February, that sold their calves this month and deferred the check. The chatter is they had to sell them because feed cost is high. 

Here’s the rub, they weaned these calves and fed some weight on them through the bottom of the VOG trough we’ve seen lately. Now just as it was going to begin paying to feed the weight on they sold them. This answers the question of if it pays to wean. They provided the service of weaning them and they fed weight on that they didn’t get paid for, so no it didn’t pay to wean.  The people that are feeding their calves into positive VOG territory are getting paid.

I need to explain what I mean by the trough. The light-weight cattle have a high VOG, the middle weight cattle have a low VOG and the heavier feeders have a high VOG gain again. I imagine it as an upside-down bell-curve or a trough.

As you can see there are some simple selling bloopers that cost or prevent people from maximizing the value they could get for their cattle. This money that is always left of the table is an opportunity for the folks that have the market literacy to spot it. This opportunity in an $80-$100 billion per year business, is exactly why someone can get in on the ground floor, starting from scratch, and prosper in this industry.

Another bullet point that was brought to my attention that I need to explain is what Sell/Buy marketing is. I have two definitions but I will share this one: It is a real time cash flow reckoning.  Reckoning is the process of doing a calculation. 

We use dollars as the medium of exchange in these calculations to discover price relationships between different animals. It is done in real time because we exist in the present and so does the market. This way there is no guessing what the future will bring, and there is no looking back hoping history will repeat itself. We can clearly see what we can or can’t do to prosper ourselves right now. That is control.

Right before Christmas I took in some female sales. These sales were extremely volatile. I watched two sales online that were four days apart and the barns were only an hour apart from each other. One barn had a fire sale, and the other was a dud. I didn’t expect that at all. It proves the point you must always be ready. 

Can you imagine how upset someone feels right now because they went to one sale and got skunked, so they decided to stay home and skipped the other sale when they could have bought a train load?  Sometimes going home with an empty trailer is the best thing we can do. But oh man to skip that other sale, yikes!

All of these female sales offered opportunities. Last week was the first time I’ve seen some bred heifers sell below their Intrinsic Value (IV) in a while. One sale even sold heavy nine weight bred heifers for less dollars per head than a 950# feeder heifer would bring on their weekly sale.

I know one sale barn checked in 700 head more females than they were expecting. This is always welcome information to a buyer. Be patient, as the sale goes on and other people fill up there will be opportunities to come. And there were many. 

For those of you who like the cow bell curve, I’d explain it like this. You ride the ski lift up, then it slopes off slightly from the bred heifer, to the 4 year-old cows, and from there the ski slope gets steep.

Wishing you a prosperous New Year.  And don’t forget to check back next week for a special announcement!

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