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Here’s an idea to consider: Hold your calves untill you can sell at a profit.
May 13, 2020
I got an interesting email recently from Kyle Barby of Beaver, Okla. in the form of a letter to the editor, with another idea to set the cattle market aright. It’s long, so here’s a slightly edited version:
After watching what has been going on recently in the news about our cattle market, I have decided to speak up. These are my opinions, but I believe they are based in sound logic. It is not my intention to offend anyone with this, but I feel like I need to get the information out.
I am writing to you today as a fourth-generation cattle rancher. My family has been in the industry since my great-grandfather homesteaded in the 1890s. Each generation has seen at least one major market disaster in their lifetime. Now it is my turn. I cannot sit idly by and let my industry be taken advantage of. So, it is time to speak out, especially to the cow-calf industry.
People have started to complain about the packing industry taking too much profit for themselves. Some people want government regulations or other programs to make the packer share in his profit. I will admit by the looks of it, that the packer is making themselves a hefty profit. But I do not have access to their company financials, so I can only speculate.
I do not know what their exact overhead costs are or any other expenses that arise in their company. Just think of the number of employees they have to pay; the line workers in the plants, managers, truck drivers, accountants, lawyers, and the list goes on. Who are we to say as Americans that they are making too much money or that they can’t have that much? That is not the free market capitalist system.
The true free market system enables all of us to be as successful and as profitable as we desire. It just requires a little bit of hard work. We say we want the government out of every aspect of our life. Until the packer industry takes too much money, now we need the government to come and rescue us.
The answer is not more government regulations. They can’t seem to get it right on any other subject in America, so why do we think they can do it better now. It is up to us as individuals to set the standard and take charge.
Related: Finances and your ranching future
Here is my solution to our problem. The cow-calf industry needs to immediately stop selling calves at below profit level. What do I mean by that? Well, let’s take some numbers out of the air and say it costs a ranch $700 to raise a calf to 500 pounds. Then that cowman goes to the sale barn or any cattle auction and sells the calf for $700 per calf. The cowman just broke even.
Let’s just say that number didn’t include his salary, insurance, or any other expenses that may arise. That cowman is now underwater. When a producer takes cattle to any kind of auction, the auction works for the producer. Why do we take whatever the buyers will give us?
Set a price to make a profit going in and stick with it. If the calves don’t sell for your price, then take them back home. Even tell the auction company before the calves sell that this is what I want and if I don’t get that I am taking them home.
If every cowman did this what would happen? The auctions would not be selling any cattle until a profit was made. Think about the chain. If calves don’t get sold, then stocker cattle won’t be available for grazing. If that happens, then cattle won’t go to the feedlot. If cattle aren’t in the feedlot, then cattle won’t go to the packers and ultimately beef won’t be on the shelf.
So, who really has the control over the market? We do, the cow-calf industry. Without us you cannot start the chain in motion for any of the other sectors in the industry to work.
Why do we blame others for buying cheap cattle when we sell them cheap cattle? We blame the stocker, feedlot, and packer sectors for stealing our cattle by getting them cheap. Well, we signed the papers and turned over ownership to them.
If you want to stop losing money, then stop selling cheap cattle. Hold out for a price that can make you a profit. Now, I am not saying that we need to gouge all the other sectors of our industry. We all need to come together and each make a little profit. If any one of the sectors of our industry fails, then all the others will fail.
One thing I know that will come up is, “Well the banker said I had to sell, so I can pay my loan” or “I have to sell so I can pay those bills this month”. I understand exactly where you are coming from. But don’t you think that it is better to hold off selling temporarily to get a good price then to sell immediately and get a discount?
The reason why this concept is so hard is that everyone has a different profit margin. Some people can raise cheap cattle; some people raise expensive ones. For example, we have all seen the price spread on cattle that are 60 days weaned compared to those that are freshly weaned. Your neighbor may even get a premium for his genetics.
However, the price has to start somewhere. The cow-calf industry should be the ones to set a minimum price for our cattle. It is the nature of our industry that there are so many farmers and ranchers that have cattle all over the United States.
That does make us a unique industry compared to pig and chicken producers that own the entire chain from start to finish. I believe that it is time that we got together and agreed on a minimum price for our calves. We should not take anything lower and work together as cattlemen and urge our state and national cattle organizations to stand with us.
Government and regulations are not the way and will only complicate our situation. We in the cattle industry are fighters and have weathered many storms. We will weather this one, but let’s do it ourselves without help from government overreach or regulations that cripple or industry. This may not be the right solution for you or it may be. Let’s get the conversation started and think of logical approaches to a solution.
What do you think of Kyle’s idea? Will it work for you on your operation?
Senior Editor, BEEF Magazine
Burt Rutherford is director of content and senior editor of BEEF. He has nearly 40 years’ experience communicating about the beef industry. A Colorado native and graduate of Colorado State University with a degree in agricultural journalism, he now works from his home base in Colorado. He worked as communications director for the North American Limousin Foundation and editor of the Western Livestock Journal before spending 21 years as communications director for the Texas Cattle Feeders Association. He works to keep BEEF readers informed of trends and production practices to bolster the bottom line.
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