Let go of conventional thinking and marketing
Once you learn to understand cattle markets, youíll find more profit options.
Doug Ferguson, BeefProducer†
Jun 26, 2020
If you are a young person getting started in the cattle business I have a great read for you. It is a blog titled Ranching from Scratch.
This was authored by Dallas Mount, the owner of Ranching for Profit schools. He makes the point that conventional thinking doesnít really pan out.
His comments were a bit sentimental to me, since I started on the ground floor. It reminded me of a project we had to do for one class I took while in college. We were given a scenario where we were given a ton of money and had to start a cattle enterprise. We could pick stockers, feedlot or cow-calf operations, and whether we were going to rent pasture, buy land or use dry-lot production. We could also buy whatever we wanted for machinery.
We had to gather information on what things cost at the time, come up with a marketing plan and then prove how we were going to be profitable. Our final grade was based on this project. Needless to say, it was all blue sky and clean air. Everyoneís plan showed they were going to be millionaires in five to 10 years, living on easy street.
I was around 18 at the time and didnít know much. I had never heard of sell-buy marketing, so everything us kids were using was based on conventional wisdom. I sat in that room for two hours on the day we took our final exam. I wrote my name on it and that was all. At the end of two hours the instructor came over to pick mine up, I was the only one left in the room. He noticed I didnít touch it and asked me about that. I told him it was all B.S. because I already knew none of this was going to work in the real world, and if we tried the marketing plans we built weíd for sure all go broke.
On the same topic of conventional thought processes, I know a rancher who is really upset that her cows didnít sell for a high price. I asked what type and age the cows that she sold, and when she told me I responded that she probably got ďXĒ amount of dollars for them. She was surprised I knew that, and asked how I knew. I told her thatís all that type of cow has been bringing for months.
She is using the conventional method of holding cows and running them till they are old thinking they have their whole life to pay for themselves. If she understood the idea of market relationships she would have known to sell her younger cows since they were overvalued and replaced with an undervalued female. She could have deflected the depreciation expense and created a positive cash flow.
Letís look at this another way. If you were going to trade off your pickup and buy a new one, you would probably get on the Kelly Blue Book website and look up the value of your truck, then compare to the price of a new one. We do this because we all know the dealer is going to try to rip us off, so we must be prepared to counter. Itís amazing how people donít do that when selling cattle. Then when their cattle donít bring what they want them to bring they get upset and think they got ripped off at the auction, when in fact they got exactly what those cattle were worth at the time. I have repeatedly told people over the years that some of the most important work they can do during the week is to watch their local cattle auction to see what cattle are currently bringing in their area. Even if itís just an hour or so at lunch time. Itís like looking up your truckís value on Kelley Blue Book.
The markets this week ...