Temperatures heated up this week and locally some of our grass is showing signs of being hot and thirsty.  Differences in grazing management are showing through, and the base of some people’s inventory pyramid is looking questionable.

Compared to female specials a month ago the market turned up the heat, as well.  I’ve been thinking of how to describe it and the best I came up with is a slow burn.  Due to weigh up prices and calf prices being higher the intrinsic value rose more than the actual value.

Intrinsic value vs. actual value

IV on all females is higher; compared to the same sales a month ago IV rose $100-700. This is comparing animals of the same age, stage and condition against each other from one month to the next. I calculated many females with an IV over $3,000!

On most pairs, including the 3-in-1 pairs, the IV was higher or equal to the AV. While on breds the IV was lower.

While the rise in IV outpacing the rise in AV makes things a bit trickier to find prosperous trades, the market threw another monkey into the woodpile to shake things up. On the pair side, including the 3-in-1, short solids were the high sellers and 5-year-olds brought up the rear.  The AV on the young and older pairs is up a couple hundred dollars from a month ago, while the AV on the 5-year-olds dropped $150.

What the pair market showed us is an inverted bell-curve.  The young females lose value until their sixth birthday.  After that they appreciate again at a rapid clip. After what the market has shown us for over a year now, it is mind boggling to me that some so-called experts are still preaching about selling cows at a target age to deflect depreciation.  The market has been thumbing its nose at them for some time now and they still ignore relationships.  Relying on a calendar to determine a marketing strategy is a fool’s game.

When examining the relationships it wasn’t hard to spot the prosperous trades: Five-year-old pairs were the buy against pairs of all other ages.

Why is the bred market different?

The bred market was completely different.  Bred heifers were the market toppers, and short solids brought up the rear.  This is the classic “she has her whole life to pay for herself” idea, which set up the classic slide of depreciation by age. Between the bred heifers and 5-year-olds the depreciation was $250 per year, then after age 5 the depreciation was $100 per year.  Again, the market is thumbing its nose at what the experts think they know about cow depreciation. More than half the depreciation happened at the time they tell us we would be deflecting it.  These people have an outdated mental model that is not properly equipped to function in today’s market.

Buyer desire is what creates price relationships.  Breds are selling $600-1,000 over their IV.  As I stated above, pairs sold below their IV. Selling pairs and replacing with breds is not a good trade right now. We would sell more value into the market than what we get paid for.  Buyers are paying a premium for the privilege of calving them out themselves.

Is value added adding value?

Runs at feeder auctions were thin this week due to the heat.  In the plains markets the value of gain was in positive territory; it is paying to put weight on.  Heavy feeder heifers were an awesome buy back against fats.  Feed yards need to study their lesson when replacing with steers since steers at some markets were over-valued to fats and at other sales they were under-valued.

In the south, VOG decreased as the cattle got heavier, right up until the stock weigh 800 pounds where there was a sharp increase in VOG. It is crystal clear what buyers in the south have orders for.

This week there were plenty of “value added” cattle in the offerings. Again, just like the female sales, we don’t know what we think we know, as commodity cattle outsold the stock in value added programs.  Value added is only value added if we capture the added value.  One thing of value we learn in 4-H or FFA cattle shows is to be sure our animal shows well.  When the commodity cattle out show the program cattle, meaning they look better and give off the aura of better quality, they will bring more.  It also underscores the importance of knowing the market we are selling into.  Is there demand for program cattle? These sellers fell victim to the siphon hose of paying a fee to enroll their stock in a program and they got nothing in return for it.

This week feeder bulls were up to 40 back.

Learning opportunity

If you would like to learn how to spot price relationships at an auctioneer’s pace and prosper yourself, I have three schools left this year.  The Idaho school is near full, which is later this month.  Then I have two more in Nebraska during November and December.