This was another interesting week. Only this time it was the mechanics of the market that was entertaining and not the drama. At some auctions there were weights that were greatly over-valued, and others were under-valued. Then at another auction the price relationships closely mirrored the cost of gain (COG).
Five and eight weight steers, along with six and eight weight heifers were the over-valued tickets at auctions with price relationship swings. Selling these weights this week at those sales makes buying back at a profit a breeze. These auctions also provided the opportunity to do a leapfrog trade, which is when you can buy a heavier weight for much less than it costs to feed it on. We could buy an animal that was 100 pounds heavier for only $25/head more.
When it comes to these leaf frog trades, I personally don’t care to do them unless I am buying a heavier animal for less dollars per head. My reason being is that I will run out of time sooner with that heavier animal. These animals all have an end point and the heavier they are the closer to the end point they are. It’s a great thing to save money on the weight gain, this is just a personal choice I make about the value of time.
I never hear anyone speak about the value of time outside of my peer group of sell/buy marketers. To put it simply the longer you own an animal the more profit you should make off that animal, because owning an animal for a longer period of time slows down your turn over.
This week unweaned calves were 5-10 back, and feeder bulls were 15-20 back. A bawling bull calf really shows the value of time right now. This week I bought these unweaned bulls for 45 back of weaned steers. It’ll take time to get a hard wean on them. During that time, I’ll castrate them and put some weight on them. This will greatly increase their value, making it well worth my time to own them
While I’m still on the topic of feeders this week replacement heifers brought a 4-10 premium, and fleshy cattle were at a 7-10 dollar discount. This discount devalues the feed and time in those animals. With value of gain and COG being so close together on most weights, this discount will make it extremely difficult to replace at a profit.
Cow values a challenge
Judging from the volume of wet bag cows I saw this week calving is not going to well in the local area. When I compare the value of those cows to the value of bred cows it is not worth the time to buy them and rebreed them. The cost of running them out for a year is too high.
When I compared the value of pairs to breds, it is clear that it is worth the time and effort to calve out bred cows. This week I was shocked to see pairs that I considered junk, (I want you to keep in mind it really has to be bad for me to consider them junk because I look for value) greatly over value some really nice bred cows.
When I compare the cost to keep a cow per year, in my local area, to what it’s been costing me to buy calves for the last year it just doesn’t pencil out. Now to be clear I am comparing the cost of status quo cow calf producers not least-cost producers. People get really upset with me when I mention selling cows.
Here’s the deal, the paradigm of cow calf operation being in the business of selling one calf per year out of one cow doesn’t look to attractive right now. What is attractive is selling certain classes of females and replacing them another class of females. For a lot of people the attachment to their cows is much stronger than the desire for a positive cash flow.