marketing cattle

[farmers_son]

Grassfarmer: I am not talking about a market average. I am talking about the top price paid for a given weight of calves. I can only say I wish I was at the sale to see your calves sell. It would seem possible that if there were only one group of quality calves at a sale and the rest were of lower quality then it might appear that the one group brought a premium. I would question that if the same calves were put with other calves of similar quality if a premium over the other top calves would be realized. Obviously some calves bring more than other calves but you can’t beat the market. There are things you can do to make sure you are not one of those getting the lower price however.

I gather you sell breeding stock. I have seen top purebred breeders sell their cull cows in the ring. These cull cows looked great and literally shone. Although the seller did not get more than the going market price for his culls I would say that there was some good marketing going as a positive impression was formed among the people in the stands who might remember that breeder next spring when thinking about buying a bull.

I put some numbers together a few years ago that showed if an individual could truly get consistently more for his calves, say $45 a head, than the market was paying everyone else that within a generation that individual could own the entire industry. Obviously that would never happen as others clued in to how that person was earning a true premium then they would do the same and the premium would disappear.

[greybeard]

There is no doubt much of what is said here is absolutely true. Good, market ready cattle will always sell better than the type’s grassfarmer describes.
Most of the time markets remind me of pro wrestling. Order buyers pound on the table and glare at each other. Sometimes they will even get up and pace back and forth.
Then things settle down as a bunch of second stringers go through. People doze off or go get coffee. The regulars talk about how so and so really ran that new buyer, taught him a lesson!
In fact, I think most suffer from a severe lack of local buyers. If order buyers are the only ones buying it will be very orderly, as FS points out. We were told years ago that it was cheaper to have an order buyer buy your backgrounder calves. As FS points out the only ones above the trend line are breeding stock purchased buy locals.
Maybe locals bought your calves at a premium, as they will truly benefit from any savings in health. If they are going on a truck with 60 unrelated calves as part of a larger order it’s hard to conceive the true buyer, (not the order buyer) is willing to pay you much premium for either preconditioning or age verified. How do you sort age verified out of a load when there were only two other lots to fill an order from?

[blackjack]

...i think you nailed greybeard...someone one in the crowd wanted grassfarmer's excellent calves that were outside the normal buyers...i have found an order buyer can save me a couple cents a pound or more than if i try to buy my own... personally i like to sell them on the satelite so i know whether i like the price or not...though i just sold some 9 weight hfrs on the showlist i should have saved grass and sold them as 7 weights...lol...as for shrink why would you guys not have your calves weighed at 3%... if your not selling big bunches i have to agree with cowman and the presort...your just asking to get slaughtered if you take them to town and drop them off...

[grassfarmer]

Been away all day so there are lots to reply to.
Cowman, Yes I made money with my calves, I'm a low cost producer remember with crazy ideas like calving on grass and feeding cows some straw. In fact the calculation I ran for a discussion with kpb a while back shows that I broke even with the calves over the weaning to sale period. Given the estimated off cow values this year and the price collapse there has been since then I think this is no mean feat. It proves that by differentiating my calves from the crowd by adding value in terms of animal health and buyer appeal I am earning a lot of extra income most years by this process. I am selling now because I do not have confidence we can make more net income with this calf crop however long we keep them. If the markets move lower in the spring we have the option to buy cheaper calves although this would require renting summer grass and as we increasingly seem to be getting constricted in this industry to working on $20 margins (if we are lucky). I think I'd rather just send a cheque to my investment advisor who can earn me a 15% return with no work on my part and probably less risk than the cattle.

F_S, your trend line still doesn't seem very different from comparing your cattle to the average. Maybe comparing to the market average was the wrong terminology I used. I was in fact comparing them to cattle in the same weight range and in lots of more than 5 head. Bottom line comes out the same we still got close to 10 cents above the trend line by my rough calculation.

Greybeard, I think that it is easier now than ever before for feedlots or any buyer to keep track of where the animals came from - the eid tag will tell them and I'm sure the feedlots will look for this data. I know I am selling cattle that will not give them health problems - our death loss from weaning to sale (usually anywhere from 2-5 months) has been 0.4% over the last 6 years. Given the rate of pulls, treatments, deaths and poor performance sick calves give the feedlots they do want healthy calves.

Blackjack, we had quite a healthy ring of buyers - around 12 main ones. Three guys buying cattle for their (or a neighbours) farm feedlot operations. About 3 larger feedlot buyers and the rest order buyers. We had 6 different buyers on 9 pens of cattle so there was a wide base of interest in the calves. My top price 5 weight calves were bought for a guy who is going to background them and grass them next summer.

[rkaiser]

Hate to throw a curve at you grassfarmer---- but why not go another step further? You have already made a step into the purebred door --- why not go at it whole hog and show the ultimate pride in your product and confidence in your choice? Yes the purebred thing takes a bit more time and energy; even more yet than your auction barn prowess. But there is not more pure free market left on this planet that compares to a good honest bull auction.

Competition drives you, and success is measured by your ability to retain customers; first with acceptance and then satisfaction.

I still have to market my cull cows from time to time through the auction barn, and dread that trip to town each time. The only thing that keeps me entertained about the trip is the bows on the backs of those cows, that I have no choice but to gift to some lowly industry scoundrel. Our cull steers and heifers continue to be custom finished and marketed through choices other than the multinational pirates unless I am backed into a corner. No room for middle men in my world - they all have families to feed, but mine comes first.

Just my two bits folks. Hope you all have a great Christmas and 2007 puts a few extra bucks in your pocket for those things you want the most.

[cowman]

grassfarmer: Thanks for giving me your insight into how you see this market. I always like to see how other people think.
I've decided to roll the dice on these calves. I don't expect to make a lot(or maybe any) money on these calves...but who knows! A big crop everywhere next year, an open border to older cattle...maybe another big blow up in the middle east? Could make for a hot market next fall!
Maybe I am an eternal optomist! LOL

[cowman]

Willowcreek: Tell me more about this impending disaster? How do you see that coming about? I thought you boys had pretty well elected the smartest bunch of politicians in the world and were going to clean up the evil Bush administration?
Is a devaluation of 50% in the American dollar realistic? Who tells you this stuff?
As for following the "experts"...well I seldom do! They usually don't have a clue what they are doing? As far as "futures" go...they are a best guess...usually based on what happened yesterday...and made by "experts"?

[grassfarmer]

Yeah, Randy we are getting there slowly. Getting into keeping bulls till two year olds is hard though - we have more customers than bulls and they keep taking them younger than that. We are producing some embryos at this moment that will save me a few years genetically in the race to where we are going. Give me 3 or 4 years and I'll be good to go with a bull and female sale! I still like Purecountry's idea of a joint "hardy" or "efficient" F1 and purebred female sale bulls. You boys provide the blacks and I'll do the reds.

This thread was about selling commodity cattle though and that will remain the way most producers market their cattle for the forseable future so we have got to try and make it as profitable as we can within the constraints of the current rigged marketplace.

[Willowcreek]

Well cowman-- its like this- you can't keep borrowing forever without having some source of paying the debt envisioned...The US now has an $8 Trillion debt (?) and is still selling out its income sources. A lot of that debt is now in the hands of folks who would like to see us go down the tubes- China, Iran, Russia, Venezuela .. They wouldn't mind losing a little to gain a lot.

I don't know about how Canada is-- but I can tell you down here in the rural area, nobody believes our government when they say their is no inflation- not with fuel, heating, fertilizer, chemicals, all going up 100 % in the last year- and all other products- food, clothing, etc. rising accordingly because of the transportation costs.. When GW says there is less than 2% inflation, folks around here just outright laugh..

Heres a couple of links to articles out of true conservative publication- altho these are estimating only a 35% dollar depreciation.

http://ranchers.net/forum/viewtopic.php?t=15264

http://ranchers.net/forum/viewtopic.php?t=15263

I just don't think the situation the neo-conservative bunch that have been running D.C. and selling out our country to the rest of the world, have put us in is a very healthy situation-- and especially one where your carrying a lot of debt to operate as a 35-50% devaluation is going to mean it will take a whole lot more to cover those payments.....

Next 6 years could get interesting!!

[farmers_son]

Willowcreek: You overlook what many scholars believe was one of the most significant causes of the Great Depression. I am referring to U.S. protectionism.

Many economic historians consider the Smoot-Hawley Tariff a factor in deepening the Great Depression. The Smoot-Hawley Tariff Act "imposed an effective tax rate of 60% on more than 3,200 products and materials imported into the US," quadrupling previous tariff rates.

Unemployment was at a troublesome 9% in 1930 when the Smoot-Hawley tariff was passed, but it jumped to 16% unemployment the next year and 25% unemployment two years after that. The annual rate of unemployment in the United States never got back down to the 9% level again during the entire decade of the 1930s.

As countries resorted to protectionism, the general amount of international trade radically decreased, causing the world economy to slow.

The Smoot-Hawley Tariff was especially harmful to agriculture because it caused farmers to default on their loans. This event may have worsened or even caused the ensuing bank runs in the Midwest and west that caused the collapse of the banking system.

In part as a result of the Hawley-Smoot Tariff and other countries' responses to it, the post-World War II world saw a push towards multilateral trading agreements that would prevent a similar situation from unfolding. This led in part to the General Agreement on Tariffs and Trade (GATT) in the 1950s and the associated rise in U.S. and global prosperity.

I believe you when you point out the hurt in rural America. I would suggest there is a correlation between this hurt and the increasingly protectionist stance of the U.S. government. In regards to the cattle sector, the U.S. cattle producer will not successfully raise their live cattle prices by lobbying for U.S. government policies that would effectively create a pool of cheaper live cattle next door in Canada. I am referring to the present non science based restrictions on trade with Canadian live cattle and the pending implementation of MCOOL, plus delays in implementing Rule 2.

[cowman]

That is pretty interesting stuff farmers son! Might make old Willowcreek think a bit?
Willowcreek: Well you've been fighting a pretty costly war? I don't think that was too helpful for the old bottom line?
Now whether you thought that was a good idea or not, I don't know. But I do know that you should be supporting those boys over there...and I am sure you are!
Bottom line is these Muslim guys are nuts and they hate you guys? I don't know if old George picked the right fight...but these crazies aren't going to go away...and someone had to say Enough is Enough! My personal thoughts are the US made a big mistake...but you guys have to pay the price and I would hope you support your leader...right or wrong? Because if you don't...you can kiss your ass goodbye? No more Vietnams.

[Willowcreek]

That is part of the problem cowman-- we (the US taxpayer) have been paying to keep the world free while many of the other countries of the world that are shirttailing on this freedom and the US's trade are doing/paying nothing. It can't continue that way.

farmers_son-- I am also aware of the fact that many of the scholars credit one of the major causes of the Great Depression as the fact that the US had too much money invested in/loaned to Europe, which most the European countries defaulted on after WWI...

Unless the US's huge trade deficit is turned around there has to be a crash, since even a farmer/rancher knows you can't survive forever just borrowing money and owing more daily with no income source to repay it...

And it has been one of the main goals of the multinational corporates/Bush neo-con Republicans to lower the valuation of the US dollar to make it easier to incorporate in Mexico and Canada into the North American Union...

I wonder what color the "amero bills" will be?