To my Canadian friends. I like you, but you must understand that sharing is not caring, you can keep your season to yourself, I will not be hurt by such selfishness.Thank you for reading this post, don't forget to subscribe!
Regular readers probably already knew that what I was going to write about this week would focus on the weather. I’m going to remind you all that you have an excuse to be hot. Next week I will be presenting at the Regenerative Legacy Summit. You can register here at The Regenerative Legacy (agsteward.co), free of cost. This is a virtual event and I have been told that videos will be offered for playback but you must register. There’s no excuse for not signing up because you have work to do.
For all of you who didn’t click the link, there is an excellent range of speakers available. Steve Campbell will present on cow fertility. With the number of cows that have opened up over the last few years, I think every cow-calf producer on the continent would love to. Ranch consultant and business coach Alan Crockett will also be involved. Most of us are guilty of building a lifestyle around our business, on the contrary. Chris Miles is the anti-financial advisor we deserve, and he will be presenting on increasing your income. There will also be other presenters who will discuss soil health, reducing inputs, estate planning and many other topics.
The weather is definitely an unwanted challenge. Last year, people in the north had to face severe winter. Some of them who studied at my marketing schools call me up and tell me that the school mentality part of me really helped them get through those tough winter days.
Half a year later they called me and told me they had so much grass they didn’t know what to do with it. Perhaps we’ll be just as lucky after all this, given the drought across the region.
The only thing cooler than the weather is the thoroughbred heifer market. Sales have really cooled off since Thanksgiving and the beginning of December. I’ve been tracking the sales of thousands of these young moms and have been collecting some interesting data. I may share some of this at the virtual summit next week and will definitely share it on upcoming Intel blogs.
Here’s something that regular readers may miss. During the summer and fall I wrote regularly that a $5 shot of Lutalyse would add $500 in value to a heifer. Most of the heifers sold in the Central Plains states over the past two weeks were sold at or even below producer price. The few that were sold above cost are selling at only 4% more than the manufacturer’s price. This happens when we ignore real-time market signals and place bets on what is to come.
It was believed that 2023 would be the year when the price of heifers of the breed would increase, but this did not happen. I have started referring to the bred heifer market as dead equity, because that money could have been invested in something better. If we are in business, it is our job to deploy capital and we should take that job seriously rather than gambling.
What have your reared calves done?
What happens if you have kept a calf? If you plan to sell them, or you have to sell them, all is not lost. Open replacement heifers are valued slightly less for them. There will be a portion of the positive cash flow after the costs are paid. Another thing that is notable and hard to ignore is that second calving females are selling for 9% more than breeding heifers. The sale of the first calf should cover the cost of rearing and add value to the factory. I’m going to talk about this at the Legacy Summit. Here’s a taste: When we try to market bred heifers we sell them with a checklist of things we did to them, buyers are interested in what the heifer has done .
Females of all breeds are selling for more than their intrinsic value (IV) unless the vet points out that there is some wear on their teeth. Short Solids (SS) have a huge drop in price and from there they sell below their IV. There is little depreciation until the vet calls him SS.
weather vs cattle market
Weather has certainly played havoc with feeder markets and continues to do so. I have received notices from all sales centers in Nebraska, Missouri and Kansas that the sales for the first half of next week have been canceled and the dates of the women’s sales are being rescheduled.
Most bonds declined in value, with some falling as low as $20. What was surprising to some was that some weights were a few dollars higher but this was on the heavier weight feeders. This changed the value of profit (VOG) dramatically. Last week there might have been a drop of 25 cents, and this week the drop was 9 cents. This caused the VOG of some weight classes to skyrocket compared to the previous week.
I’ve had this conversation before with people who sold cattle before the storm. They are upset because the market was down 20% from last week’s price. They feel as if they are doomed. The point is, the man who bought the cattle saw the same forecast that the seller did.
The buyer was willing to do what the seller was not willing to do and that was care for the animals in bad weather. There must be a sufficient decline in price to encourage buyers. In this case they both got what they wanted. The buyer got a good buy, and the seller got a break from working in the cold weather. I say this in all my schools “If you want to run away from work, you might as well run away from money.”
cost of profit
The path of mathematics is the only path. The weather spoiled everyone’s plans. A producer who went to one of my schools sold cattle this week. Based on what the market told us last week, we can all understand why it did this. Cattle shrank more than usual due to the stress of the storm. This caused their cost of profit (COG) to skyrocket.
It is our cost that determines what is over- or undervalued. His plans went awry due to weight loss and high COG. He looked at some other markets and took advantage of the geographic spread to find cattle that were undervalued. Storms spoil things. these things happen. Learning sell/buy marketing can help you ride out the storm.
The opinions of Doug Ferguson do not necessarily reflect the opinions of BeefProducer.com, BeefMagazine.com or Farm Progress.