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Stuck in status quo?

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Watch each Friday for Doug Ferguson's Market Intel blog on Beef Producer and BEEF magazine.
Taking on changes to your cattle marketing approach means being flexible and moving out of your comfort zone. But if you do you will be rewarded.

Yesterday I got a phone call that jazzed me up. A young man that has been reading this column and listened to my interviews on the Herd Quitter Podcast is starting to figure out the concept of sell/buy marketing. He told me about a trade he did, which was a good one. However that wasn’t the best part. He told me he was going to the auction to buy some bred cows, but ended up coming home with some under-valued four weight heifers instead.

The reason I like that part as much as I do is, he went to the sale with a plan, yet he had enough awareness to change his plan and seize an opportunity when it was presented to him. He didn’t get locked in to one idea, he didn’t try to fight the market to make something happen, he simply just took what the market offered him.

Yesterday I spoke with another producer as well. This guy was mentioning to me he needed to make some changes. He already knows what changes he needs to make, and he shared some of these ideas with me and I agree they are good ones. Here’s the thing, he didn’t stop there, he continued on offering up all the reasons he didn’t think they would work.

When this second producer stopped to ask my opinion, I had to agree with his assessment on why the ideas would fail, but my reasoning was different. I told him ideas, or programs are no better than the manager working them. If he doesn’t believe they will work, or won’t commit to them 100% then I can guarantee he won’t get the results he wants, which will only solidify his original thought, “It sounds good but it probably won’t work out as advertised”

Coincidental as it may seem, yesterday of all days, I listened to my favorite podcast and the topic was literally on the difference between these two guys. The podcast I like listening to is now called “Think Rank” and you can still find it under “Monster bull”. The podcast is primarily focused on bull riding, yet David and Holly Berry do an outstanding job explaining how the topic applies to bull riding, life, and business. Before you take my recommendation and click the link, understand that if some language offends you there are safer podcasts for you to listen to. monsterbull.com/blog

Here’s the quote from that podcast that brings this all full loop “Do you hate losing so much that you’re willing to change? Or do you hate change so much you’re willing to lose?”

Changing your mindset

There is a lot going on in the minds of these two cattle producers. What it comes down to is this, the second producer is letting his mind stop him from trying to make changes that will probably help him succeed. The first producer is acting on new and foreign ideas to him to figure out how to win. If you click on David and Holly’s website you’ll notice these words “Winners do winning things”.

In my marketing schools I talk about X and Y ideas. X represents the existing paradigm, or status quo, and Y is the new idea. High performance achievers, the winners in life, are constantly chasing Y ideas to replace their X. In other words they are always trying to change, to improve.

I read in a book a few weeks back that “status quo” is Latin meaning: “the mess we’re in.” The second producer is going to maintain the status quo, even though he wants things to be better, even though he has solid ideas on how to improve things. Why would he do that? Because it is familiar, and familiar is comfortable. Even though it means failing, it’s comfortable. To change means we have to get out of that comfort zone.

I have mentioned here before that the concepts I write about are easy to do. They are also easy not to do. Both producers made a decision. The first one changed his plan and took advantage of an opportunity in front of him. It was easy to bid on, buy and take those heifers home. It was also easy for the second producer to decide to do nothing. Here’s the thing, most people in this business are in the status quo, and they desperately want to stay there. That means the bar is set pretty low (I said what I said). If we can adopt an idea that is different, even if it’s so slight that most people can’t even notice it, we will have a great advantage.

Markets offer opportunity

This week the Value of Gain on fly weight steers has eroded away to the point it’s below the Cost of Gain in a dry lot situation. The VOG on steers shoots up into positive territory when they reach six hundred pounds and stays there until they weigh nine hundred.

Heifers are a different story; they have an attractive VOG throughout the entire spectrum. They are also seeing a significant roll back from steers.

This week feeder bulls were 6-30 back, the size of the discount was region specific. Unweaned cattle were 6-18 back, and replacement quality heifers caught a 7 dollar premium.

This week was a sell/buy traders paradise, if you’re like the first producer and willing to remain flexible and take what the market is giving you. It’s been a while since I’ve pointed out the market is trying to help us, if we just are patient and allow it to.

At an auction this week in western Nebraska there were many opportunities to generate some awesome cash flow by utilizing the relationships between different weights and classes of cattle. First, I want to set this up. Imagine three boxes that are different sizes, one small, one medium, and one large. These represent price relationships. The small one represents under-valued. The medium sized one is over-valued to the small one and under-valued to the large one. Of course that means the large one is over-valued to the other two.

At this one sale we could sell weaned seven weight steers and buy back bawling eight weight steers, and the market would have paid us $20 to take 102# home and wean them.

Staying at the same auction we could also sell the unweaned eight weight steers and buy back weaned six weight feeder bulls. This is assuming you have the feed to bring some cattle home. This trade eliminates the weaning process, puts a large lump of cash in the pocket, and we still have an animal in inventory that we can easily add some value to

Notice in these two examples the unweaned eight weight steers were under-valued in one trade and over-valued in the other trade. They are the medium sized box.

At the very same auction it was also possible to sell nine weight heifers and replace with feeder bulls. Here we are generating some serious positive cash flow and upgrading our inventory from heifers to a set of cattle that can easily be upgraded to steers.

Different classes of cattle, at differing weights and near endless opportunities. As illustrated above it’s the mindset and awareness level of the producer that’s going to determine if one can capitalize on this. If this is something you need help with, I currently have 7 spots left in my December marketing school.

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