Play to win in cattle marketing

Last Friday, people were scared and freezing up because the board was down. In my schools I show the hole an operation can dig itself into by locking up and trying to ride it out. With legit sell/buy marketing skills we can generate positive cash flow, which will help offset the market decline.

Cash flow

Some people are worried about what the market will do to their inventory valuation. We can’t do anything about that. This week when an auctioneer was trying to get another bid out of someone he said, “It doesn’t matter what you what you pay for them, it’s what you take home.”

I agree with that last part, but it sure does matter what we pay for them. What we do have control over is what we have in inventory and when we stop bidding. Seasoned buyers have all said this line: bought right is half sold.

Don’t be a pig

Going back to spring I ran into a buzz saw at sales. Some people just had to get the cattle bought, and paid way too much for them, so they could get a LRP on them. Now this week, the ones that haven’t resold yet are freezing up and refusing to sell at these prices. I thought we all learned this lesson when we were kids that when we play to not lose, we will lose, because we are focused on losing.

The only way to win is to play to win. I wrote about this in the past. I called these guys pigs. Pigs are the people that are greedy and show up when the market is high thinking, they will make some easy money. I thought we all knew this lesson too; fat pigs get stuck. I had a conversation with an insurance agent this week who sells LRP and has popped in at one of my marketing schools and she told me that their LRP customers should be marketing cattle the way I teach to do it with sell/buy.

Monday was a different kind of day we don’t see too often, everything was up. The dollar, metals, stocks, and commodities were all up. Since there were not any sales last week on Monday I have to compare to sales from midweek. A sale in Kansas traded mixed. Some weights were up eleven and some were down five. The Value of Gains between weights (every 100 pounds) fluctuated between being up 57 to down 67. This kind of turbulence is overbearing to those lacking marketing skills.

Return on the grain

For the sell/buy marketer that has been taught correctly this is fun because the relationships widen out between some weights creating opportunities to prosper. The cozener types say to sell them before the last steer trips in Cheyenne. I wrote about deflecting responsibility onto the calendar recently. Sure, the price was higher then. The thing is, the Return on the Gain (ROG), which is the ratio of dollars to pounds on the swap, is higher today.

If we are in this business to earn money, then ROG is what we need to focus on, not price. To word things differently, even though the price has gone down, we can generate more positive cash flow today on some trades. This is why I love market crashes. It’s easier to generate positive cash flow. The reasons this happens is like I said, relationships widen out, and the other guys freeze up, so our bidding competition removes themselves from the equation.

Right now, the competent sell/buy marketers are executing outstanding trades by taking advantage of the relationships the market is presenting them with, while the cozener types are playing SimFarm to prepare for what is happening now. I’ve said this for years, you must be ready, if you have to get ready then you are too late.

Monster trades

I have been receiving texts from folks that have been to one of my past marketing schools and some have executed monster trades. Some have reinvested the positive cash flow into virgin buying more cattle. I am doing that very same thing with my daughter’s cattle. Her group of cattle will expand by almost 30 percent this year with 2/3 of that expansion happening now. It is the opportunities we take advantage of today that create the opportunities of tomorrow.

Appreciating value

The other people that have done monster trades are pulling the cash into their inventory pyramid. I don’t have an issue with this. Just a reminder that our money inflates. Some people sell time for money, then save that money. Over time inflation devalues that money. Saving money this way really devalues the value of the work they did. For this reason, I am big on investing it into assets that appreciate in value or generate positive cashflow. Since we have no control over what the market will do this is why we need to know how to do ROG calculations.

A healthy market trades up and down, while maintaining a general upward direction. Do not worry about what the market will do, or what the LRP crowd is talking about, or what the board is doing, or what a field rep is saying. Focus on the relationships that the market is creating. The market is overly generous during fall run, therefor it makes more sense to be an active participant in the market than a spectator.

This week feeder bulls were up to 55 back. Unweaned calves under 500 pounds sold higher than weaned calves of the same weight, and over 500 pounds they sold up to 15 back. Heifers are under-valued to fats.

Using what she learned

About every week I share a testimonial I have received from someone who attended one of my marketing schools on the Mrcattlemaster Facebook page. This week I received a text from a father who brought his teenage daughter along to a school. His daughter is a breakaway roper, and she has been executing sell/buy trades with her roping calves and plowing the profits back into virgin buying up more practice cattle. She qualified for circuit finals, and she is giving me credit for helping her get there due to the mindset material I share at my schools (all I did was present it. She did the work).

She won a go-round and had a shot at winning the average. In the last round another competitor caught one really fast, so this girl knew she had to be lightning quick to win the average. She went for the win, instead of playing it safe and settling for a lower spot in the average, and the calf ran through her loop. While family and friends were heartbroken for her, she was in a good mood. Her father shared with me that she realizes she has what it takes to make it to the finals, and she now knows how to get back there.

Playing to win

The young lady also realizes that she just barely missed a championship run and that she now knows how to practice better, and she will clean things up a bit. She stated they will need to make space in the tack room for the trophy saddles she will be winning in the future. This young woman is playing to win, and she just shared with all of us that she has the mindset of a champion. That’s what it looks like.

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