Livestock price relationships matter – Beef Magazine

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Doug Ferguson | May 13, 2022
It is that time of year where the runs get a little thinner at the stockyards. The thing is there was just a little bit of everything this week, so that means there was something for everybody. The other thing that stood out was that prices were greatly affected by location.
Sell/buy marketing works with everything. The last couple weeks I have received emails from people that have gone through my marketing schools, and they have shared some profitable trades they did with sheep and goats. These trades included marketing breeding stock and feeders.
I have heard some people make the remark they should get out of cattle and get into goats and sheep since the prices for them are much higher. The profitable trades shared with me were only possible because of the relationships between the classes/weights of the animals. Those same relationships exist in cattle. If you can’t make money utilizing relationships in cattle you won’t make money in other species either. Higher prices do not mean profit.
I only get to attend horse sales during two small windows of the year since they are mostly on weekends here. This is because of my daughter’s basketball schedule. I have been going to some lately and I have to admit I was shocked how much horses have gone up since I was last able to go to an auction last fall. It is easy to joke that the high price of fuel has people looking for other means of transportation but the new highs hay set this week quickly take the humor out of that.
When I mention horse sales, I must make it clear that I am talking about the regular monthly sales at your local cross road sale barns. When prices go up for something not all classes go up at the same time or same amount. This has reopened opportunities to do some profitable horse trading. Horses that are well broke and have some work history are selling very strong. If you can start colts or handle a young green broke horse, there is some real appreciation value to be captured just by getting some saddle time on them. The way horses were selling last year, a well broke horse was only a few hundred dollars more than one that’s never been saddled.
I mentioned the new high that hay put in. If I can sell my hay for that price, I have to charge myself that price when I feed it, to capture the opportunity cost. This bump in hay price will raise my daily feed cost 25 cents per head per day. Couple that with what I am paying for fuel running to auctions and getting cattle out to grass. With these input costs going as high as they are we must really know what we are doing as far as inventory management and marketing. It will not be difficult to realize who has it figured out and who doesn’t. I have a marketing school coming up in July for those of you who could use a little help: mrcattlemaster.com/marketing-school/
On to cattle. I mentioned location has a lot to do with price, and what you may be seeing right now. This week our weather got hot and it gave the female market the boost I was expecting since we received rain here. Just 100 miles west of me a stockyard there was expecting more than 500 head of cows. This place will sell cows on a different day than feeders once fall run starts. Usually by this time of year the cow sale gets moved back to the regular feeder sale day. Right now that is not the case. They are still experiencing a drought sell off. Because of that kind of volume of cows coming they are keeping cow sales on a separate day.
Feed yards have enjoyed a much overdue price spread between feeders and fats making finishing cattle a sweet deal. Feed yards doing what feed yards do they have now pushed feeder steers too high making them over-valued to fats. But again, location has a lot to do with that. The bulk of the over-valued feeder steers are being sold north of I-70. Feeder heifers are still a great buy back when replacing fats, no matter the location
The geographical spreads are widening. The first question that pops into people’s minds is “are cattle really that much better (in that other place) that they bring that much more?” The answer to that is No. We must think about where these cattle go to be finished, where are the feed yards located? There is a transportation cost to get them there. We are all well aware of the how the price of diesel affects our operation as an expense, but we fail to realize how it affects the sale price of our cattle.
Bottom line is we are price takers. We can’t turn to our customer and ask them to pay $5 a hundred more because the price of fuel went up. So when people are buying cattle the price of transportation gets deducted from the bid price. With the price of shipping the cattle going up the geographical spreads are widening.
For quite some time the Value of Gain on six weights was horrible, and I repeatedly wrote here we should not be in the business of making six weights. That deal has turned and turned hard. Six weights have a VOG just as high as flyweight cattle in most places. When there is a shift in VOG like this something has got to give, and it is seven weights that gave up ground. The VOG on them, and pretty much anything bigger is well below Cost of Gain.
Knowing and understanding your numbers, coupled with inventory management is unforgiving right now. Feeder steers are undervalued to fats, and their COG is higher than their VOG. If we own feeder steers, I would not get to jumpy just yet. Price relationships change. We must know our numbers, have an educated idea of what the cattle weigh, and be ready. Be ready to sell them when the market signals that it is ready to take them off your hands. These windows of opportunity can open and close quickly.
The opinions of Doug Ferguson are not necessarily those of beefmagazine.com or Farm Progress
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