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Plus, Doug Ferguson might have the perfect graduation gift for graduating seniors who want to be in the cattle business.
May 12, 2023
A comment I hear repeatedly from people who have attended one of my marketing schools is that the sell/buy method takes all the emotion out of it. There is only a small amount of the population that can do something and not have any kind of emotion. For the rest of us there is going to be some kind of emotion attached somewhere in the process.
Ever since I was young, I wanted to raise cattle for a living. I was told by everyone around me to go to college, get a degree and land a job with benefits and cattle would be something I do on evenings and weekends. I blew off this nonsense because it was unbelievable to me. We have an $80 billion dollar per year industry and everyone in it is doing it as a hobby or some kind of public service? What a load of bull. This way of thinking earned me a reputation as a kid with a bad attitude. It also put a chip on my shoulder to figure out how it is possible to be profitable in the cattle biz and make a living at it.
For thirteen years I searched and struggled to figure out how it was going to be possible to make a living raising cattle. The best I came up with was to be diversified within the cattle business. I had commercial cows, registered cows, even tried raising some club calves. I also had a fat cattle enterprise. This kept things afloat because these different groups of cattle sold at different times of the year giving me cash flow periodically. I had to budget and be intentional with my money to make it stretch to the next pay day. It was always a struggle and it tested my nerves, and patience.
I then attended a sell/buy class taught by Ann Barnhardt and that is when I found my answer on how to make it all work and make money in the cattle business. I fell in love with the idea of sell/buy. I made up my mind in that conference room that this was what I was going to do the rest of my life. Immediately upon my return home I got on the old dial up internet and pulled up a market report from my local sale barn and began running cattle squares. After I ran squares for the entire spectrum I would change the Cost of Gain (COG) and run them again just to see how the relationships changed. I had new information that enabled me to boil things down and compare them, instead of forecasting break evens. I held the control and that power excited me to no end. I hope I did well enough to illustrate it, but I am emotionally driven by the sell/buy method to succeed. It gave me one of the three things I wanted most in life, to raise cattle.
Looking at marketing from a different perspective is challenging. The old paradigm is hard to let go of, after all it is a thinking habit. Once I implemented sell/buy to each different group of cattle I had they were all positively cash flowing and the struggle eventually went away. It doesn’t matter if the market is going up or down, I am able to utilize it and generate positive cash flow. That makes raising cattle fun. Just about every week now I hear from someone who attended one of my marketing schools and they share a success story with me. These people never tell me about the cattle, they tell me about the numbers and how the positive cash flow and the paradigm shift changed their lives. They are emotionally charged by the results they are getting and this only re-enforces to them to keep doing it over and over.
Information makes people think, emotion makes people act. Finding trades that hit their numbers makes them excited and creates an emotional response that drives them to take action and execute the trade. They are still being driven by emotion, it’s just that now their emotion is tied to the numbers. This may be why when Ann highlighted great trades on her website years ago and she titled it “Fun With Math”.
Imagine for a second what test scores could be like if we taught kids how to prosper themselves from math instead of the boring brain-dead manner in which it is taught. I bet that would emotionally charge them enough to raise their grades. Speaking of the youngsters, an awesome graduation gift would be to send them to one of my marketing schools. The younger they are when they learn sell/buy the more powerful of an impact it will have on their lives.
Getting these young people to one of my schools will also have a huge positive impact on the cattle industry. There was the piece written about Tyson trying to take over the cow/calf segment. This generated an emotional response of fear and anger. First off this isn’t new, its been around for all of my adult life but it sure made it’s way around social media lately. Secondly if we are armed with the right information and can prosper ourselves we won’t be scared.
This week I watched more female sales. The prices paid didn’t have any bragging rights attached to them. Pairs with calves weighing over 200 pounds sold above their Intrinsic Value (IV) regardless of the age of the cow. This illustrates how buyer desire makes the market. These big calves fit their calving window of the pairs they already have at home and are expected to be a desired weight at the time they want to sell them. A calendar is a poor choice of tool to use to determine when to market cattle.
Bred females and pairs with new calves at side sold below their IV. Here is something interesting to me. When I calculate the IV I use my cost to run a cow which is 33% lower than the UNL cow/calf budget that was shared on BEEF months ago. If I use that cost to run a cow the breds and pairs with new calves sold right at or above their IV.
This illustrates perfectly how cost is the fulcrum on the lever of price relationships. These females are worth more to me than they are actually worth, yet at the same time they are right or over-valued to the conventional producer.
Here is the good news. When we compare actual values and IV of different females to each other there was still an abundance of opportunity to prosper ourselves by executing some trades.
We could’ve sold a 5-year-old pair and replaced with a heifer pair of the same IV and still pocket $450 per pair. We deflect depreciation by rolling the mature cow and set ourselves up to capture some appreciation with the first calf momma. Looking at prices paid by age in a few years when the teeth of the 5-year-old show some wear she will lose $500 in value. The trade off is breeding the heifer back.
We could’ve sold the heifer pair and bought 4-year-old bred cows due any day and pocketed $700 per head. The extra cash will be needed since it will take longer to get the calf to market.
Here’s two questions to wrap up. Can you capture these kinds of numbers producing and selling calves the traditional way? According to the UNL cow budget its not even close. That leads me to the second question. Are you emotionally driven by the numbers and cash flow that can be captured by being willing to market some breeding stock? Or are you more emotionally driven by the gamble of building up your genetics to earn bragging rights for pounds weaned?
Just like I did last week I am turning the keyboard over to my wife in observance of Mental Health Awareness Month.
As a mental health therapist working with clients daily, it is not difficult for me to discuss suicide, depression, and being able to ask someone if they want to die or kill themselves. When a client is in crisis, we are trained to ask very direct questions because they will be answered honestly and we can get the client the help they are needing. I recently searched that Ag producers are twice as likely to die from suicide as compared to all other occupations. This is alarming to me, even living in a rural community.
In this industry, I still hear often, "just pull yourself up by your bootstraps." I'm also going to share with you the three leading causes of suicide by ag producers:
Looking at these three factors we need to be more open to talking about mental health/emotions in our own daily lives and seek out that "go to" support person. Most everyone has a phone in their pocket today, call your buddy/support and don't be afraid to talk about how you’re doing (it really does help the brain to process the emotion and help increase the "happy hormone" that is released in the brain.
And knowing that we have all felt down/depressed at times, seek out supports and if you continue to feel this way after a period of time and it starts to affect your overall daily functioning, then seek out mental health services. Be the bigger person in this industry and seek the help, so you can be successful and lead in this industry!
The opinions of Doug Ferguson are not necessarily those of beefmagazine.com or Farm Progress.
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