July 14, 2024
Commitment leads to success in cattle marketing

This week I received a phone call from the wife of a past participant of one of my marketing schools. She told me when she enrolled her husband, they were under financial strain that was hurting his relationships with the family, and that he attended my school under protest. 

After my school he implemented legit sell/buy marketing, and their cash flow greatly improved.  She told me over the last two years that he took my advice to invest in themselves and bought some books I recommended and also followed my recommendation to attend a “Ranching for Profit” school.  She summed it up by telling me I got her husband back.

Amateur vs. pro

I did not get her husband back. All I did was present some information to raise his level of awareness and make some suggestions.  It was he that had to do the work.  He showed his commitment level to the world. When we are interested in something we do it when it is convenient. When we are committed to it, we do it no matter what, we accept no excuses and are focused only on results.  The difference between amateur and pro is commitment.

Raise the standards

This example also shows us the difference between wants and standards.  Wants don’t get met, standards do.  We all want to be profitable. Most people don’t study their lesson though. When the want doesn’t get met, they blame someone else.  High performance is built from the framework of high expectations. This is why I am always pushing people to raise the standard.

I wrote this years ago and I think it is fitting to remind readers of it.  Most people try to be average and that is what holds the average down. For this reason, it only requires a little more effort to be better than average.  It takes a much higher level of commitment and effort to be elite.  To be elite we have to do the little things extremely well while no one is watching us.

I mentioned studying your lesson above. So, let’s do that. A Nebraska market sold four weight steers for over 80 cents a pound more than a Missouri market sold four weight steers for this week, based off of weighted average. Nebraska sold ten weight steers for $20 more than Missouri did.  Here’s the rub, the Missouri market had a higher “Value Of Gain” (VOG) than Nebraska.  If this is a weight gain business, then the sellers in Missouri were getting paid more for the weight they put on those steers. The VOG at Nebraska from three weights up to ten weights was $1.37, and the VOG on the same weight range in Missouri was $1.53.

Making money

I know some of you are thinking about the quality of the cattle, and that is not lost on me.  There is a difference. I also am aware that in the Missouri area, the “Cost of Gain” (COG) is cheaper than it is here in Nebraska. I am not so concerned about the type or quality of the cattle as I am about making money.

Cow calf producers may be thinking this doesn’t apply to them. You people need to study the same lesson. This helps answer the question of whether to wean or not. The Nebraska market had a leapfrog in it. If you were to wean calves and put 100 pounds on them during the weaning period and then sell them you would end up subsidizing the buyer, by giving your feed and weight gain away.  The one thing I can’t comment on is if there was a discount for non-weaned cattle.

Value-added marketing

If we continue to study our lesson we would learn that some cattle caught a premium.  Spayed heifers sold 12 higher than non-spayed heifers, and “fancy” steers sold 14 higher, and “fancy” heifers caught a premium of 34 cents.  Cattle that were enrolled in NHTC program sold 15 back. My definition of “Value-Added Marketing” is that it is only value added if you capture the added value. The spayed and fancy animals captured the added value, and the NHTC cattle did not.  I have no problem spending money to make money, but we must recover that cost and then some, otherwise why bother putting them in a program?

Cost is the fulcrum on the lever that creates the relationships between cattle.  I ran some cattle squares to calculate the “Return on Gain” (ROG) if selling fats and buying back.  A reminder with sell/buy marketing we capture our profit on the buy back, and ROG is the ratio of dollars to pounds on a swap.  This is how we know if we are making a profitable buy or not. This is what gives us control over whether we have positive cash flow.  The five, eight, and ten weight steers were all a profitable replacement against fats out of Missouri and delivered to Nebraska.  None of the #1 steers out of Nebraska were profitable replacements. Eight weight and heavier heifers out of Nebraska were profitable replacements. 

Making money vs. losing money

My daughter asked me once if we buy someone’s cattle and we make money does that mean the seller lost money? The answer is it depends. It depends on the seller’s cost. The cattle out of Missouri were under-valued to fats. A stocker operator in Missouri could’ve sold eight weight steers and replaced them with four weight steers and captured a huge profit margin.  Those eight weight steers were both under-valued and over-valued at the same time depending on what we compare them to.  The cow-calf producer that sold the four weights should be profitable also if their costs are in line. Everyone wins.

An opportunity

We caught a rain here and I took some time and watched some female sales in the south. On average breds sold right at their “Intrinsic Value” (IV) or below. Breds that were fat sold over IV.  Number 2 breds sold steadily $500 below their IV.  I know some people are concerned about buying thin cows. I am a believer that pregnancy is an indicator of health, therefore thin cows do not bother me. In fact, I see them as an opportunity because if I can get some flesh on them I can advance them.

I didn’t see enough pairs sell to really make a fair comparison.

Market reports

There was another thing that got my attention. These auctions weighed up a lot of bred cows.  These females sold a few dollars higher than open cows. When I checked the market report later the breds that were weighed up were not listed in the bred cow part of the market report, they were listed in the weight up part of the report. This made the weigh up portion of the report look inflated.  Some marketing cozeners say they like to look at market reports to get a feel for the market.  If all they did was look at black and white numbers on the page to get a feel, then their feel for the market would be skewed. This is a lack of commitment and a low standard, they need to study their lesson.

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