A couple months ago I ordered a load of liquid feed. As the driver was filling the tank, it burst open. This was the beginning of a short stand off with my feed supplier.

Since they set the first tank up at the yard for free, I thought they should do that again. I know some of you are laughing at that because there was no chance this was going to happen in this new era of: the customer is wrong.

In the end, I was told I was going to have to purchase a tank, either on my own or through them. Experience has taught me in this case to price one on my own. It has also taught me how often I was going to have to repair and replace the pump. I allocated these costs for the next seven years, which I thought was an extremely generous amount of time for this equipment to pay for itself. But given the high price tag, this amount of time was necessary.

This liquid has always been on the spendy side, and I will admit I would grumble about the price and then turn around and reorder more because it was convenient. I decided to take the time and price other options from other suppliers.

I ran the numbers with different supplements to compare how it each would affect my cost of gain (COG). One supplement stood out, and it would save me $7 per one hundred pounds of weight gained.

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This caused me to think back to this spring when I marketed two loads of feeder heifers and my profit margin per head was $32. I want that margin to be a minimum of $50, but given my COG, and the structure of the market at the time due to grass fever and LRP speculative buyers driving the cost of replacement cattle up, this was the best I could do.

That $7 per hundred on 250 pounds gained would have put me at my desired minimum $50 per head margin. This was the threshold for me. The price of convenience was too costly. I had received a text from the sales representative during this time period that after all the years I had used the liquid supplement he expected that I would see the value in it. He was right about that. I found the value I was after.

This is another one of those siphon hoses I refer to on here with regularity. Feed reps need to understand we are not running 501c3’s and that we are not here to fund their company sponsored trip to Cancun. It also got me thinking that it’s been seven years since I received a quilt lined coat from them, which during that time I should have received several for what it was costing me.

Permanent savings

I was listening to a podcast this week and the host was reading lines from Andrew Carnegie’s autobiography. One line he read: any savings in costs were permanent. That permanent savings would have shown itself, especially in those two loads of heifers I marketed.

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Those two loads also prove another point I make in my marketing schools. I tell participants to be willing, and emphasize the word willing, to take small profits. If we are willing to take small ones, the big ones will come.

This fall, the big one came my way and it was the largest profit per head I have made since implementing sell/buy marketing. If I had held those heifers like many people would have done in hopes of a better pay day, I would have done well to execute a push. A push is pretty much a break-even trade where we replace the cattle and cover the expenses but there is not any profit in the trade. The ratio of dollars to pounds difference is equal. This is a win when in a pen from hell situation.

We have been led to believe to cut costs to starve a profit into the business. Some, and I am guilty of this, refer to being least cost producers. The only way to be the least cost producer is to produce nothing.

We know how this is working out – it is why people grumble about not making any money in this industry. The statistics tell us time and time again this strategy isn’t working out too well. The reason is the market goes up half the time and down half the time, so it only bails us out half the time. Remember the definition of insanity, doing the same thing over and over hoping for a different result.

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Cost acts as the fulcrum on a lever. If we have a lower cost, we can get a better bite and move a load with less effort or open up more relationships between different groups of cattle giving us more buyback opportunities with improved margins.

It is still possible to be profitable with a high-cost structure. This will require marketing skill. That is what kept my profit streak alive with those two loads.

Some of the people who have attended my school in the past thought they needed to get out of cows and calves because it was costing too much to run a cow where they ranch. If relying solely on selling the calves produced, this would prove correct.

However, after attending my school, they realize they don’t have to get out of cows they just need to market some of those females. The margins marketing females is oftentimes better than just selling the calves they produce.

Some people take this cutting cost thing way too far and end up sacrificing performance from the cattle. If the cattle don’t show well on sale day they will be discounted. Unfortunately, the discount often outweighs the cost savings.

The whole point of cutting costs is to open up more relationships and maximize those relationships.

Current trends

This week the value of gain (VOG) was well above the COG. The operation that has cut costs and the cattle will still show well on sale day are primed to realize unreasonable profits. Unreasonable profit means there will be more of it than what was penciled in. Legit sell/buy marketing pencils a profit in as an expense.

This week feeder bulls were up to 27 back. Fleshy cattle were up to 10 back. With feed being cheaper and no real weather challenges, it is easy to get them too fleshy. This is a prime example of not marketing the cattle and the feed well.

Unweaned calves under 550 pounds were up to 17 back and over 600 pounds up to 24 back. The unweaned calves over 600 pounds left a huge margin on the table, so putting that weight on them didn’t make any sense. Normally I would say this was a case of subsidizing the buyer.

I have chatted with some people who bought these heavy bawlers and they don’t think the cattle were discounted enough since the weaning period has been over challenging. You better believe they’ll remember that next time.

As of the morning of November 1, there are only five spots left for the December school. Sign up for Mr. Cattlemaster Marketing Schools here.