New dairy regulations make dent in cattle sales

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

New dairy regulations make dent in cattle sales

May is Beef month and while some of the people who are paid through our cow tax dollars were at their state’s capitals getting pictures taken with the governors, the real cowboys were busy keeping the industry going. Only this week there were some new challenges to work around, that shed some light on the policies that are supported by groups that claim to represent us.

Dairy restrictions and traceability

As I am sure all of you are aware, dairy breeds have travel restrictions. At two sales I was at this week there were some dairy cows that sold. The auctioneer took a moment to review the new rules, a few times I might add. Some buyers made the decision not to even mess with all that and didn’t bid.

All these restrictions do is make life hard for those of us that live and do business on state lines. If you look at a ten-year cattle market chart you will see the hard dip in the year 2020. That is a government made market crash, due to not letting the packer run anywhere near capacity. And here we are going through it again only this time it is over ear tags.

It was also brought to my attention this week that “environmental” groups that have spoken out against cattle production are in support of traceability. Why would they care about that? As a reminder, I have never accepted sponsorship from any of them to put on a marketing school. Not all of us teaching these schools can make that claim.

Female market prices

Female markets this week followed the same trend as last week, and for reference what I am about to write is my observation of sales in Nebraska and Kansas. All females sold over their Intrinsic Value (IV), unless they were in thin condition.

Once a price was established for heifers, there was a slight increase in value for three- and four-year-olds. Five-year-olds took a $400 depreciation hit, then the price held steady until the cow was called a short solid where she took another $200 price drop. And then there was one more price drop when she was called a broken mouth.

What I just described was a bell curve. The bell curve is a great visual aid that will tell us if we need to take a closer look and examine some relationships. It is not a trading tool, or method.

Deflecting appreciation?

Here’s the problem, some people think that when the curve drops off they need to sell off mature cows to deflect depreciation. The flaw is that they are letting dates (age of the female) determine when to sell and not relationships. I have repeatedly pointed out how they are doing turnover all wrong by selling more value into the market than they are getting paid for. Thus, they are not even managing to chase gross margin properly.

Here is what paying attention to relationships could do. It was possible to sell the short solid pair and buy back fall bred heifers. This trade sells value into the market and the producer gets paid more for that value than it was worth.

Cow to stocker trade

The feeder market had a high value of gain (VOG) on flyweight cattle that seemed to taper off as they got heavier. It wasn’t uncommon to see the VOG drop below the cost of gain on the bigger feeders. While this makes things a bit tight for the stocker operations it is a good thing for the feed yards. The heavy feeder heifers are a great buy back against fats right now.

People are now referring to females as endangered species. I have never written about this before even though I do cover it in my schools and that is doing a cow to stocker trade. I will say right up front these trades are tricky. The thing is when we examine all four values these trades work right now. Something to keep in mind is that the stockers will eat less due to their smaller size, so there may be a need to virgin buy some. If we sold a really overvalued breeding animal the trade will have enough cash to cover the virgin buy.

However, there won’t be enough cash to pay expenses out of pocket through the summer. And my last point on that is if you have always been a cow/calf producer and never bought stockers before there will be a steep learning curve on health, herd immunity, and stockmanship.

Breeding cattle

I’m surprised I have not gotten any blow back from writing about marketing females in an aggressive manner. In my schools people do have the concern that when buying other people’s cows, we are buying other people’s problems. I have bought everything from wet bag cows that lost a calf to cows that are close up. My breed back percentage has always been higher than the people running closed herds.

In full disclosure I run more bull power than I really need. I have also had very little calving issues. Most of them will not have very many birthdays if they can’t get the job done. This is why the three- and four-year-olds are seeing such strong demand. They checked the two boxes that matter, they can calve and they can breed back. The only real issue I’ve had is disposition. We all claim to be outstanding stockmen so this shouldn’t be an issue. Out of all the mean cows I have boughten only four didn’t settle down.

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

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