Anger is one emotion that really motivates me. I’ve had some people nudging me for some time to resume blogging. Last week my attention was brought to an article that appeared on Cattlenetwork. It was full of some of the worst marketing advice out there.
Here’s a link. Remember this is bad stuff. http://www.cattlenetwork.com/e-newsletters/drovers-daily/Worth-the-Weight-259959381.html?utm_content=&utm_medium=eNL&utm_source=1017H7692790D8V&utm_campaign=Drovers+CattleNetwork+Daily_20140521&utm_term=&page=2 You should never read anything in Cattlenetwork and take it seriously.
I already confronted the guy quoted in the article. It didn’t go well. At one point I even had to ask him if he was even taking the conversation seriously or if he was just messing around! It became very clear to me in just a few minutes he has no grasp of the North American cattle biz.
Here’s what really bothers me, and is the reason for me writing this. I am afraid someone somewhere read this article, believed him to be and “expert” and is following his advice, which may seriously affect their ability to pay for bread and milk. I know most people aren’t in the cattle biz to make money, that is clear, thing is there are some people who are really depending on those cattle to earn a living. That is something you just don’t screw around with!
I told this guy that all his article needed to say was this, “anytime you can turn a profit, DO IT!” In the article he mentions having leftover feed. People, as dry as it is in most parts, including where him and I both live, feed in inventory is a damn good thing. His advice to feed it to put more weight on your cattle based on Value Of Gain (VOG) is, well, just “beep”ing dumb.
There are three legs you need in the cattle biz, cattle, feed, and cash. If you have all three your business can stand up on its own like a bar stool. So if you can sell your current inventory of cattle and replace them with undervalued cattle, then you should take the profit and start adding value to those replacement cattle. You can’t turn a profit and generate cash flow by holding inventory. Take Walmart for example, they didn’t get as big as they are by holding inventory, or selling for more. They did the opposite, turn inventory over lots of times and sell it for less, taking small margins lots of times.
Now I totally understand the VOG thing. I blogged about it years ago on the YPC Cattle Call page. Thing is it is not something you make a marketing decision based off of.
Now let me explain why this Kat is wrong. He said the market is signaling that it wants us to put more weight on our cattle. I sent this guy weighted averages from multiple states showing that just isn’t so. Hasn’t been for months. The buyers have been telling us for sometime now that they want to be the ones to put the weight on them. Our “expert” confessed to me he based his market outlook off of Salina. You can’t come to a conclusion based off one sale barn, and post it as if it’s a nation wide deal. I know this for a fact. I buy cattle in lots of different states in lots of different barns, including Salina.
Since this Kat is from KS and used 7 weights as an example in his article, let’s look at that. Here is what was written:
In this example, Tonsor pointed out that the feeder cattle market in June compared to May looks to be higher. If the steer sells at a higher price in June when he is 50 pounds heavier, the value of gain (VOG) is projected to be more than $2, around $2.11, which could well exceed the cost of gain (COG) for producers who have access to feed resources.
First off, this guy must be a gypsy with a crystal ball. I would not want to play cards with this Kat. Trying to predict/forecast the future, in this case June, is a form of gambling. Otherwise known as “betting on the come”. Yeah, that always works out well, playa. Like I’ve said before, all it takes is a rising market for an idiot to look like a genius. Don’t even get me started on what he says about December. I’ll tell you this, feedlots are about to start feeling some heartburn, but you won’t hear anything about that for several months yet. Maybe feeders will be higher in June. Maybe not. Why risk it? Take the profit
On the weighted average I sent him from KS a 668# steer brought $2.15 or roughly $1430ish/head. A 728# steer brought $1.91 or roughly $1390ish/head. What was the signal again? Wait, I bet we didn’t hold em long enough and feed enough weight on them. Wrong playa, Thing is, it gets worse the bigger they get. And its not just KS, its every state.
The weighted averages for most states from last week aren’t posted yet. Since I actively market cattle on a day to day basis to pay for bread and milk for my family, I will tell you that the market was inverted. What I mean by that is the market really rewarded lighter cattle. At one NE barn 650# steers brought over $1525/head. 7 and 8 weight cattle didn’t bring that much money. SO, if you sold those 6 weights you could buy back replacement cattle that were 50 to 150# heavier, for even money or even had money left over. Think about that, THE MARKET WAS PAYING YOU TO TAKE WEIGHT HOME!! You could buy 8 weights for roughly $40 head more than the 6 weights. Can you put 200# on for $40? HELL NO. Hey, where’s our buddy with that VOG thingie?
I don’t know what is worse, the fact that the guy put this garbage out there, the fact that the author wrote it and didn’t stop and say “WTF?” We can’t blame Cattlenetwork, they don’t have a brain and don’t want one. Normally this is where I would suggest they all be fired or quit. I’m not going to do that. Having been on the receiving end of vocational terrorism just 14 months ago I know how that feels. It is my sincere wish/hope that these Kats take some time to learn sound marketing skill, and critical thinking skill and share THAT with the world.
Think about this. Suppose you do what I say, and take the profit and replace with other cattle. Suppose the other guy is right and the market goes up. Now you are set up to take two profits and replace again, making it even easier to pay for bread and milk.