August 26, 2022
BEEF always places their disclaimer at the bottom of these articles. This week I’ll just put it right up front that what I am about to write is purely my opinion, and will be a bit politically charged to some.
I have written numerous times over the years about protecting the base of the inventory triangle which consists of money and feed. This week the feed portion I am referring to is pasture. Usually when I write about this, I am making a reference to better grazing management. This week I am writing about it from a business perspective and that of a dream and a legacy.
I just want to put this right up front since I am a money guy. At no point should the pasture or land be sacrificed in any way to pocket some money.
This week I was contacted by a utility wanting to put up wind turbines on some pasture I own. They put up a wind farm just a few miles away from me, so I have gotten to see first-hand the problems that come with them. Building these things requires quite a process involving a lot of trucks and heavy equipment. And then there is the huge hole they dig to fill with cement. I have seen these things spring massive oil leaks and one even collapsed. None of this is ecologically friendly.
All that heavy truck traffic is hard on country roads. If we are going to talk money, we need these roads in good shape and maintained to ship cattle when they become over-valued. That is how we capture the value of production from our land. If we do a good job marketing this is not a problem.
If we do not understand or possess the necessary marketing skills to capture the full value of production from our grass then we may consider selling out, or in this case selling right of way. There are only two reasons to sell out. One is we are retiring and the other is we are not making any money.
The meaning of diversification
Some people will say allowing these things on their land is smart because they are diversifying. In agriculture, the word diversify implies failure. That is how it was taught to me. I was taught to have cattle and crops, so that on the years my cattle didn’t make any money the crops would, and the opposite would hold true on the other years. All this paradigm did was imply that it was okay to fail. Heck it’s all based on a plan to fail. In my marketing schools I talk about multiple sources of income because it implies every enterprise will be a profit producer
In my schools I talk very briefly about grazing and pasture management. With better grazing practices we can build a better solar panel. The solar panel I am referring to is the grass. If we do a better job grazing, we will have a better pasture with more grass growing which is the better solar panel. We then can capture and utilize more free energy from the sun. We will also capture more of the rainfall we get. In whole the ecological processes will improve. I have seen well managed grazing heal many different things in pastures.
With these utilities on the land there is a kind of invasiveness that comes with them. This will inhibit production from that land.
Another thing I pinpoint in my schools is that we can make more money running smaller cows. This is the whole pounds per acre thing. I have never discussed it here because I try to keep my focus on sell/buy marketing.
Think of this for a moment. If we had smaller cows and more pounds per acre, improved grazing management creating and utilizing a better solar panel, and couple that with sell/buy marketing we wouldn’t throw all that out of balance with the invasiveness of a utility.
The guy that called on me was not prepared for that conversation. For me it was not about the money. I have things in place for that. To me he was attacking my dream and my hopes of a legacy. You don’t put a price on that. If you know your worth and the value of the land these guys are no match, and the base of the triangle is protected for future generations to capitalize.
This week we could have sold a 930-pound steer off grass for $1.81. At the same sale we could have replaced with 480-pound steers at $2.20. The Return on Gain (ROG) would be nine cents higher than our Cost of Gain (COG). The ROG is the ratio of dollar to pounds on the swap. In other words how much we are getting paid for the difference in pounds. When the ROG is equal to or higher than the COG we are making money. I say equal to and making money instead of breaking even because we have profit already figured into our COG. So, this trade makes more money than we originally had penciled in, or excess profit!
We can do this all day long with steers, heifers, and breeding stock. At the end of the day we can enjoy a sunset with our family without shadow flicker or blinking red lights. I guess we can say that marketing skill can improve your quality of life.
Cattle market review
This week heifers steadily held their Value of Gain (VOG) higher than the COG. This will allow us to do trades throughout the entire spectrum. The heifer market is extremely liquid right now. The VOG was much more volatile on the steer side, and it varied from one sale to another. If we sold the right weight of steer at the right sale we would be set up for a monster trade.
But what if you didn’t sell that extremely over-valued steer? Geographical spreads are a big factor. A little road trip to a different area will land you in some good buys. There is always the discount for buying feeder bulls which were up to 30 back this week. And the unweaned cattle that were up to 17 back. I always pinpoint these in this column because it is an easy upgrade and trade.
Heading to Husker Harvest Days? You can catch Doug Ferguson live each day at 12:15 has he offers ways to put more money in your wallet with sell/buy marketing. And it’s your chance to talk with him each day. Husker Harvest Days runs Sept. 13 – 15 near Grand Island, Neb. Make plans to attend.
The opinions of Doug Ferguson are not necessarily those of beefmagazine.com or Farm Progress.
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