Does history repeat itself?

Source: Farm Progress. The original article is posted here.

Does history repeat itself?

A local weather man releases a 8-14 day outlook every week, and every week since last fall he predicted above normal precipitation. I wish I knew the definition of the word normal in that prediction. Is it above our average or is it what we’ve been getting for the last year? This information will greatly change our viewpoint of the word normal. Either way week after week we’ve received little moisture and lots of wind, so we’ve had above normal dust.

The weather

Earlier this year a meteorologist spoke at a local conference. He threw a lot of shade on other forecasters who were predicting weather patterns based of the eclipse and alignment of planets. He stated that the profession was based off science, not science fiction. The science fiction guys so far have had the more accurate guess.

At a hay auction a few weeks ago hay price was trending higher every week. Chatting with the farmers in the crowd all were in agreement that if it didn’t rain soon the price of hay would skyrocket and the price of females would drop. It sounds logical. Here’s what we know now, it did rain and the price of cows dropped anyway. If history was to repeat itself the price of cows this week should have been higher.

Guessing in June

Time and time again, people obsess over these guesses even though most are wrong. Before I began writing this column, I never paid attention to what the paid guessers would write or say. But since this column began, I have paid attention to what they say and how they converge their guesses around the month of June to get a little closer to reality. The fascinating part is that people still pay attention to them.

Fall born heifers?

At the sales I was at this week one thing stood out to me and that was the complete absence of fall born heifers. Only time will tell if the producers bring them to town and sell them withing the next couple weeks, or as yearlings at the end of summer, or if they will fully commit and breed them. Their absence doesn’t mean herd rebuilding, it just means they didn’t come to town with their steer brothers. We do not have an irrevocable committed decision to rebuild the nation’s herd numbers until the bull is turned out with them. Government reports fail to include that important detail, nor do I think they should know that much about our day-to-day doings on the ranch. Time will tell.

Cattle census

Some people are left wondering how they will make decisions without cattle census numbers, let’s call it what it is. While I am on the topic of A being A, let’s call some marketing strategies what they are too. If we take away the census data and the paid guessers are then left shooting in the dark with both eyes closed who will they or their followers blame when the guesses prove wrong? The only info we need is right there on market reports.

Here is what I saw from female sales in Nebraska and Missouri this week. All females that were in good condition sold above their Intrinsic Value (IV). Bred heifers had no fans to bid on them, as they barely brought more than feeder heifers. The producers selling the bred heifers likely had more in them than what they got paid for them.

Bred heifer appreciation

Here is the thing to like about bred heifers right now, they appreciate. Bred 3–4-year-old cows brought $400 more than bred heifers. One more trip around the sun and the 5-year-old cow depreciated over $300. That price was the price all the older cows brought in Nebraska. In Missouri that price held steady until the sale barn vet got a little more critical of their teeth and there was another depreciation hit of $425, followed by yet another when the female was called a broken or smooth mouth cow which at that point, she brought the high end of the weigh up value.

There was a lot in that last paragraph that most people may have missed. First off, I am only discussing bred females at this point. Even after the depreciation bred broken mouth (BM) females are worth more than bred heifers in Nebraska. In Missouri, BM cows are only $250 back of bred heifers. And 40% of the depreciation happens when she turns 5.

Sell/buy marketing

I apologize to long time followers of this column, but I have new readers now and I have to repeat it. 2023 and 2024 have disproven the five-year-old and out program. I write strictly about sell/buy marketing, which is based on real time relationships and not a guess that history will repeat itself. Legit sell/buy is proven, while some of these silly notions the cozeners have made up are easy to blow holes in.

Pairs followed much the same pricing trend as bred females. The reason I am setting them apart is body condition of the cow and size of the calf had a huge impact on their selling price. Three in one pairs that were called around 8-years old had the highest selling price. At $450 more than an open 8-year-old pair with similar size calf. With that kind of premium, a producer wouldn’t have to buy very many, and it would be cheaper to buy a bull. Especially considering their salvage value right now.

Value in the markets

With the 3 in 1 being the highest seller some may assume, she is the most overvalued. That would be incorrect. If we were to try and replace her with a similar age cow (8 years old) that is due in the fall, we would be looking at a bad trade. We would be selling more value into the market than what we would actually get paid for that value. Now if we replaced our 8-year-old 3 in 1 with a fall bred heifer, we would pull off a monster trade! It was even a good swap to sell the BM pair and buy back a bred heifer in the second period.

Some “experts” tell us to deflect depreciation and sell our cows before they get old. They say things like “we shouldn’t be in the business of making old cows” or they can’t see the value in old cows. Then 2023 and 24 came along and underscored the importance of relationships, and smashed planning.

It’s about the relationship

I pinpointed that what I wrote about females was what I seen in two states. I have talked to people that attended one of my marketing schools and they are seeing slightly different relationships. Texas told me that it is absolutely worth buying open heifers and breeding them. Colorado told me bred heifers/pairs are the top of the bell curve. South Carolina and Kentucky told me that old cows are selling just off the scale there. These relationships will be affected by the cost to keep a cow, as much as local sale prices. It is our cost structure that acts similar to a fulcrum on a lever and sets up the relationships. This is why it is important to learn how to spot relationships and what your local market is telling you.

If you want to sell your females for the highest dollars possible you must sell what other people want to buy. Red hided cows were noticeably cheaper than black. Cows bred to a local registered breeder’s bulls sold way off the pace as well. The locals know that caving problems are a given.

The markets

Business The stocker markets were mostly a weight gain business up until the cattle weighed around 7-800 pounds. There the Value of Gain (VOG) slipped below the Cost of Gain (COG). For new readers when we calculate stocker trades we use COG, not cost to keep. This is the only way we can be sure the ratio of dollars to pounds is in our favor, and we are actually doing profitable trades instead of bidding the VOG away on our buy back, which is also poor resource management on top of poor marketing.

This week feeder bulls were up to 30 back, unweaned calves up to 19 back and fleshy cattle took a discount of 15.

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

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