Changes can happen quickly in life and cattle market

Earlier this week I stopped at the local convenience store. When the clerk handed me the change, I looked at it and in my hand were silver coins. The face value was the correct change due and a small amount that wouldn’t buy anything. The melt value was over a dollar. I have mentioned on this blog several times where this very same thing has happened to me.

I have noticed on Twitter this week some basketball coaches are looking for recruits. The commits they thought they had didn’t show up and didn’t bother to tell anyone they weren’t coming. One coach posted she had four vacant spots. What if you were the kid that didn’t get an offer and couldn’t afford to go to college. Sending that coach a text message might change everything.

Earlier this week I went for a run on the local trail. In the past I have noticed after a while that I am no longer seeing footprints from other runners. This week I paid attention to where they turn around. It was either at a landmark or a mile marker. All I had to do was go 10 yards past the mile marker and I ran farther than the others. Those 10 yards are the razor’s edge. That is all it requires.

Be patient

Now imagine if you were the kid that didn’t get an offer. You have this job that you hate, and the pay is horrible and you’re still living with mom to save up some money to eventually go to college. You stop at the convenience store and notice the silver coins the clerk gave you. You take a couple minutes to go a few blocks up the street to the bullion dealer and while you’re there getting your coins appraised you scroll on your phone.

Noticing that coaches are looking for recruits at the last minute, you send the message to some of them that you’re available. You land a spot knowing you will not get any playing time that season. But you go that extra little distance and work hard, learn and improve your game. Next season you’re a scholarship player and a starter. None of this would have happened if you had sped out of the parking lot of the convenience store upset you had to go to the job you hate.

Cattle marketing view

Here's the point of the story for cattle marketing purposes. Another thing I noticed on Twitter this week is some people are calling the cattle market some bad words. Yet the last two weeks I have shared success stories from people that attended one of my marketing schools. Those people went the extra ten yards by putting in the effort to come to a school and as a result they have a different way of spotting opportunities the masses don’t. Even as bad as some people perceive the market to be right now, I received more testimonials this week.

Breakeven vs. profit

The method of trying to hit a breakeven is a failed method. We know this. It is why we heard all the false messages when we were younger about not being able to make any money in this industry. What is confusing to me is the masses are still trying to do it, that is insanity.

If people had market literacy, they’d notice something. A short time back they all had their pom poms out about how great the market was. Today they throw their sucker in the dirt because the price is down. The Value of Gain is the same this week as it was when they were excited. The people that know how to market cattle by calculating a Return on the Gain (ROG) are generating positive cash flow right now. That little bit of marketing skill is the razor’s edge.

Pasture rent

I noticed a producer from Kansas complaining about how he won’t make any money with his stocker cattle because the pasture rent was too high and therefore his cost of gain is too high. He posted what his cost of gain is, so I used that number to run a ROG. It would be possible to sell those stockers and replace them at a profit.

Last month I bet he was excited about his situation. Then the price dropped and now he’s upset. As I mentioned above the VOG is the same today as it was then, so the opportunity is similar. This underscores the difference between break-even perception and ROG perception. We can go broke breaking even. We know it is a failed method. I know we know because people open their mouths and inform the whole world how bad it is. What I don’t understand is why they keep doing it.

Cattle inventory

The last few weeks I have noticed something I’ve never seen before. A producer could sell a three in one pair in the first period and replace it with a bred cow in the first period and the value capture is much higher than the actual value of the calf at 500 pounds. To word it differently, by selling the pair it is possible to sell the calf for more than it is actually worth at 500 pounds. Only the calf weighed 400 pounds, and I know that because the calves were weighed separate. What a wonderful time to have some pairs in inventory that could be marketed.

Handling depreciation

The people who throw their sucker in the dirt would never notice this because they are stuck on the idea of weaning calves and selling them and running the cow out until she’s spent and worth nothing. Also take notice I didn’t mention anything about the cows’ ages. These trades I calculated were aimed at keeping the cow’s ages the same. When switching stage of gestation, it was possible to get paid to buy back younger females. That is how we should be looking at handling depreciation, by utilizing relationships, and not the conventional way which is another proven method of failure. Yet some people say to market the cow based on the number of trips she’s taken around the sun or giving her an entire decade to pay for herself.

I was curious why everyone is so upset, and I did look at CME Feeder Cattle charts. I just shrugged my shoulders and thought so what. I know the relationships that exist in the saw dust. I know where my money comes from.

The opinions of Doug Ferguson are not necessarily those of beefproducer.com , beefmagazine.com or Farm Progress .