Over the past two weeks, some readers have contacted me and expressed some confusion about what they were reading on BEEF. They feel that my articles are going in a completely different direction than the others. We must remember that when something is posted on this site, it is BEEF’s job to share the information. It is up to us to decide what we can use.
In the last month I have started referring to some Allied Industrial Groups as the Siphon Pipe Group. They are the ones trying to squeeze money out of cattle ranchers and bringing nothing of value back. It’s a wide range of people. It could be the industry groups trying to sell you a membership, to the feed seller calling you.
There are a lot of people selling gimmicks that only exist to compensate for poor management decisions. This includes academics, forecasters, people who analyze trends, and people who teach in schools without actually doing what they teach. Simply put, these are the people who don’t really have a say and don’t care if you make a profit at the producer level as long as they get paid. That’s why I said what I said a few weeks ago about the need to do a better job of vetting our experts.
I wonder if these people would take their own advice if they were to sign the front of a six figure check for the stock they just bought with their spouse looking at them a bit sideways telling them that better job . It reminds me that we have a Facebook page. You can go there and see what I bought this week.
What is the right question?
One way that helped me sort through information when I was younger was to ask the simple question “What does this have to do with me making a profit?”
One article that has generated a lot of discussion is the one on livestock risk protection insurance, to protect us against the market downturn. I’ll just post the disclaimer here for BEEF, that’s how I see it. We complain, some even brag about losing money, for so long someone had a brilliant idea, to sell us insurance because we lack marketing skills. He does not take advantage of us; it is to provide a service.
Think for a moment. Insurance companies are in the betting game. They know the odds of something happening. We buy their product to eliminate risk. They wouldn’t be in business if they paid more than they took in.
Every example I’ve ever seen in LRP has shown multiple policies side by side, usually spanning multiple years. Half of the policies shown have been paid out, which gives the impression that it is a break-even point or that it does not matter. When we take a closer look at the numbers, we see that more premiums were paid than what was received as a claim. This only increases the cost of production over time. It’s not something we want to do if we’re trying to make a profit. With sales/purchase marketing skills, this service is useless.
There was an article about holding cattle during a market downturn. It was about discussing things that have nothing to do with making a profit. In my marketing schools, I have slides that show how maintaining livestock during a recession can plunge us into a deep pit.
With our sales/purchase marketing skills, we transform inventory during downturns. As we run, we generate positive cash flow. This cash flow will help offset the decline in inventory value. We can’t control what the market does, but we can control how we use it and what we have in stock.
Focus on what matters
We’ve also heard all kinds of rumors about Choice/Select propagation and the need to improve our genetics. If we examine this further, we realize that is all it is, just buzz. I dug into this topic this week and I don’t know how smart people have overlooked some seemingly simple things, maybe their information was dated? It doesn’t matter at the producer level, but it makes me question their motivation.
This is what matters at the producer level trying to make a profit. I’m going to give you a buyer’s perspective if you’re selling at auction. Cattle rush to the ring and buyers have seconds to make a visual assessment. The weight is then displayed on the screen and then the only thing that matters is the bidding call. No consideration is given to your genetics or the price you paid for the bulls. The auctioneer only says these things to make the seller feel good
Another cattleman and I were talking about this earlier in the week. He and I will both finish the junk cattle and we’ve both been in the situation where we had to roast them. Discounts on some were offset by premiums on others putting us on par with the cash market. The junk cattle are average.
If you’re selling cattle on the rail and trying to get a bounty, I’d be careful not to keep the heifers. I made this mistake years ago and I can tell you that a cow’s carcass traits make them tough keepers. In fact, none of my draft cows were there to have the third calf. It’s hard to catch bounties when the factory is closed.
A view of the market
This week feeder cattle were mostly higher. Now, not all cattle weights increase at the same rate. This changed the value of the gain again this week, and in a more positive way. It also changed over/undervalued relationships. One thing I noticed is that while prices can vary a bit from sale to sale, the VOG across the heifer spectrum was about the same from sale to sale. other. How’s that for balance? The steer side has seen more volatility on VOG due primarily to buyer interest or lack of interest in bidding on steers under 500 pounds. This means that some auctions have shown huge VOG of flyweight steers while others have only shown modest VOG on them.
A really positive point is if you have sold fat and repurchased those 10 weight feeders. There is a huge margin there. Of course, the polar opposite is the person who sells the 10 weight lifters.
Women’s sales surprised me again. The ominous words of six weeks ago are replaced by strong optimism. Young females are seeing more and more requests every week, with young couples stealing the show. If you’ve been through the hassle of calving the first heifers, you can really cash in your tokens right now. As we get into the old solid mouth cows, the value drops sharply. I’ve seen a lot of good older cows selling just above the scale. These moms have an intrinsic value far greater than their real value.