Don’t rely on technology, learn the way to a profit

Out of 25 years of buying cattle, Monday will be one of those days I remember. I was buying cattle and someone else buying cattle for me at another auction and suddenly our phones won’t work. While the other buyer and I were able to text each other by getting on the sale barn’s WiFi, we had no way of communicating with drivers. This caused one buyer five figures since he couldn’t communicate with his drivers they drove five hours the opposite direction they were supposed to. The inability to communicate with a customer left some order buyers high and dry. The phone outage was a mess for the players in the game.

I warn the participants that attend my marketing schools that something like this would happen, and that they need to know how to run a cattle square by hand. The cattle square is the algebraic equation used to calculate how much can be spent on a replacement animal and still hit the desired profit target. When technology fails and some people are relying on it to do the most important work in the business, which is marketing, they are left with no idea what to do. It baffles me why some people put themselves in that position.

Some have asked me to build a spreadsheet doing these calculations for them because doing it by hand over and over is tedious.

Related: Don’t buy ‘em books about the cattle market

Relationships

First off what the hand does, the mind remembers. This is the only way to be able to see relationships develop at an auctioneer’s pace because after enough times it becomes subconscious.

Second, they do all the other work involved in caring for the animals then on the day when its time to generate cash flow and profit a simple math calculation is too tedious. My question is if they can’t do the last and most important step of marketing why do they think they deserve to make money on the cattle?

Keep in mind

A few things on the calendar coming up. I will be speaking on the Regenerative Legacy Summit that is held on October 22-23. It is online and free. The Regenerative Legacy Summit (agsteward.co) A lot of people have come through our schools, and I have noticed a few things. I will be sharing those and discussing the word “Legacy.”

Our school on December 3-4 will sell out soon. For those who prefer a smaller class size the November 5-6 school is the one for y’all. Both schools will be held in Beatrice, Nebraska. Marketing Schools – Mr Cattlemaster

A joker in the deck

All week long I have been wondering how I would describe the markets this week. It would seem simple to do, they were mixed. The best way I can think to describe it is there are a few jokers in the deck. Some people show up to a sale and are plowing hard into flyweight calves. It happened at one of the sales I was at this week and this guy overpaid for those calves. This one guy caused me to change my plan on the fly, using a sharp mind and not technology. I bought cattle 250 pounds heavier than what he bought and only paid $40 a head more for them. At other sales where this kind of buyer wasn’t present cattle sold on a more normal slide and the Value of Gains was attractive.

Related: This week’s lesson: Weaning matters in the cattle market

Another joker in the deck is showing up and buying five weight and lighter heifers. It is easy to spot on market reports as there will only be a $5 rollback, while on other reports the rollback is $40.

Weaning calves

This week feeder bulls were up to 25 back, and unweaned calves were up to 14 back. The discount gets even bigger if they weigh over 600 pounds for both bulls and unweaned.

Some people think they are entitled to a premium for weaning and giving a round. Notice I wrote there is a discount for unweaned. By weaning the calves money didn’t get left on the table. Even though harvest is full song right now sale barns are urging consignors to wean the calves, and I don’t think they are wrong since they will have a hard wean come late November and December. Something to consider right now is it’s dry and dusty and locally this week we’ve had lows in the 40’s and highs in the 90’s. Weaning is requiring a bit of effort meaning it will need to be a priority.

Related: Drought threatens again in Southwest

Marketing skills

I’ve been getting a bunch of calls from folks interested in attending one of my schools. The most frequently asked question is about a market crash and timing the market. No one can time the market, lets get that right. People that think they are smart talk about it but all we have to do is look at the results from this buy low sell high strategy and see they gamble and have a horrible record.

The legit sell/buy method is the only way to thrive during a crash because we are looking at two things. First is the ratio of dollars to pounds on the swap. Second sell/buy shows us the relationships in real time thanks to the cattle square, so we are looking at the market for what to buy back against what we already have in inventory.

The trick is to be “willing”

I just finished up the most profitable trade I’ve ever done in almost 20 years of practicing sell/buy, despite the fact that the market dropped. Not all weights and classes drop at the same rate which creates even more attractive relationships. By trying to time the market we are really fighting it, whereas by focusing on relationships we simply just take what the market gives us.

I tell every class I teach to be willing to take small profit margins, and I emphasize the word willing. If we are willing to take small margins the big ones will come. Last spring when the grass cattle, and LRP buyers bid the VOG out of cattle I took small margins, and like I said now I got huge ones. If a producer gets greedy and holds out for huge ones every time, that producer runs a risk of running in the red. Sometimes a small margin is all that there will be. A small positive margin is better than one in the red every time. Not only that but the opportunities we take today set the stage for the opportunities of tomorrow.

Don’t sit on the sidelines

In legit sell/buy the best day to buy is today, because there is always something under-valued in the offering. If we wait and try to time the market, we are losing the time value of money. If we are in business, it is our job to deploy capital and be intentional while doing it. It is also our job to produce something. If we sit on the sidelines waiting for the time to be right we are doing nothing and in turn gaining nothing.

Now think about this. I just had the best lick ever in my career and there are people all over social media complaining about how horrible the market is right now. That’s the difference in marketing knowledge, skill, and paradigms.

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