Just as the winds are starting to pick up outside with the latest round of blowing cold and snow about to strike again I have been trying to put the pieces together of a very complicated picture trying to shed some light on the question on many producers minds… “what is going to happen to these cattle markets?”
To be clear, I am a big proponent of the ideology that, “you get what you pay for” so keep in mind that my perspective is free… with that being said, I would like to offer my insight shaped by not only the same farm magazines that are sitting, both your desk and mine, but also recent personal conversations that we at Wright Livestock have had with literally scores of producers across a dozen states. Think of it as kind of a “boots on the ground information report.”
Flooding- While final numbers have yet to be released in regard to estimates in regard to livestock losses we will likely see numbers that are far worse than anything seen since my grandfather was a boy. Also, in case you missed it, on a global scale, recent massive flooding in Australia took claim to upwards 500,000 head of cattle.
Record Cold- A wide swath of the northern plains saw temperatures right at or below zero degrees for 50+ days all right in the heart of calving season. The losses that stem from this environmental factor will go beyond simply losing calves at birth, to far worse than normal sickness in calves and cows, and we have yet to see the full affects taken on the body condition of cows insomuch as the ability to milk and breed back.
Drought- The drought that plagued Kansas and Missouri has caused a significant selloff of breeding stock. Conditions were then further complicated when last summers feed stockpiles started killing cows and aborting calves in significant numbers because it was high in nitrates.
Financing- Of course, it is completely normal to have a young fellow fresh out of school who has nothing more than a pickup and a dream of owning cows to struggle to put together enough money to buy his first herd. What is not as normal is to be working with longtime producers struggle with new lending standards being imposed on them that does not allow them to operate in the casual way, they are accustomed. The days of buying a piece of equipment or a set of cows then calling the banker on the way home are over for many producers.
Honestly I have a list of other factors such as the number of dairy farms shutting down and converting to beef production, the potential impact of the Federal Livestock Indemnity Program, even the reality that we are doling out record amounts in food stamps has honestly had an impact on demand for protein… think about it, if your going to eat on someone else’s dime are you going to buy rice and beans or steak? Oh yes, and did I mention that the world population has doubled in the last fifty years?
While there are plenty of reasons for demand to go up but with slim margins, lack of capital and rising interest the reality is that the bred cattle markets will likely see a continued volatility that has taken place through the last season.
When the time comes and you are looking to buy or sell cattle, and you want to look at all your options we would be happy to have a conversation with you. We specialize in marketing sets of bred cattle having privately sold ~3,000 head in 2019, we also work with feeder calves and yearlings. Our goal is to market your cattle across the country not simply across the county and make sure everyone knows they are getting a fair value.
Thank you kindly,
Glade Miller Smith
Rush Limbaugh has said that when there is a product he wants to buy, he selects the most expensive option every time. As for myself, I would be pretty close to the exact opposite! For example,
I drink two kinds of coffee, free and Folgers.
I would rather eat at home then a restaurant any meal of the week.
I have a budget of $5 for work pants, yep that’s right. Although my wife does accuse me of looking homeless and is not inclined to be seen in public with me… perhaps I’m getting a bit of what I paid for there!
Often times the phrase, “You get what you pay for” is thrown around insinuating that if you don’t pay more for something you will be filled with regret, but the subtlety that goes unnoticed is the assumption that there is a standardized fair value, and paying less than fair value indicates sub par quality and paying more is a guarantee of a premium product.
When it comes to buying and selling livestock the ability to fully understand quality and then attach a fair price to it becomes much more involved.
Consider for instance the unique value of being able to maintain your cattle on high elevation pastures without reason to be concerned with the problems associated with brisket and heart abnormalities.
In order to feel comfortable, you would likely need to spend years doing research in controlled settings carefully managing data and recording results in order to be able to confidently arrive at a final result that will perform in a safe and efficient manner.
Fortunately, there are good people doing this work for us at the Colorado State University, Beef research ranch.
Wright Livestock was pleased to be able to spend some time at the ranch and gain a better understanding of the value of the work they are doing and furthermore be able to help them in capturing some of that value by marketing and selling their set of their quality bred heifers.
Understanding a fair value of bred cattle across the country is a paramount concern for us at Wright Livestock and our mission is to make sure everyone knows exactly what they are getting so we can say with confidence that you are, “getting what you paid for.” Honestly, we don’t just say it, we guarantee the quality of every animal we sell!
As a bit of free publicity for the CSU, Beef Research Program. If you will be looking for some extremely gentle, angus bulls ready to perform at high elevation they will be having their yearly bull sale on Monday, April 8th at 12:30. These bulls are literally the results of 50 years worth of research, you won’t be disappointed!
Call Lindsey Noreen, Ranch Manager at CSU for more information. 307-710-2938
Thank you kindly,
Glade Miller Smith, Wright Livestock
There are many reasons to own livestock, but for most of us there has to be some degree of profitability. However having conversations that revolved around achieving breakeven prices was never my cup of tea either. Sure it can be enjoyable to raise cattle, but I’ve experienced working all year only to lose money enough times to appreciate that breaking even would have been better than going backwards but it doesn’t mean that I would keep going to intentionally make zero dollars either.
Believe it or not there are bright spots in agriculture, but with such slim margins, adhering to conventional farming practices will create a struggle to get ahead and simply doing things on a scale doesn’t ensure profitability anymore. While it is simple to say you have to find a niche in order to be profitable it can be quite a daunting task to find a scenario that separates their operation from the neighbors in such a way to provide a distinct economic advantage while not going clear out on an unsustainable limb that leads to raising something like ostriches. Although I did take my kids to the zoo and found out an ostrich egg is equal to 18 chicken eggs and I believe I would pay for a one egg omelet sometime in my life if given the chance!
Sometimes a little outside perspective goes a long way so allow me to share a few thoughts about what it takes to secure a profitable niche within the cattle industry right now.
Make Money When You Buy Them
Many years ago I remember sitting at an auction next to an older man named Rex, he taught school at a rural school in Nebraska for years. A teacher’s salary doesn’t afford one to build up much of a ranching empire but he still ended up owning an impressive amount of cattle and land by the time I knew him. He told me, “make money when you buy them”. This sentiment will still ring true today, when you understand that what this older gentleman was a steady grasp of what was good value. The realty right now is that you could be spending way to much on a cow that costs $900 and you could have a bargain and $1700.
The niche could simply be defined as superior market savvy. The key here is to simply have a better understanding than those around you to know when to let opportunities pass and when to act quickly.
Intentional Input Management
A significant advantage grain farmers have is being able make more detailed decisions about their inputs. Marketing products to grain farmers is a science showing exactly how many dollars per acre this improvement will cost and based on a multitude of trials there will be an expected gain in production that will offset the input and provide a rate of return.
To be clear I am not suggesting that spending money is a bad idea, I am suggesting that spending money that doesn’t provide an intentional path to profit is dangerous. Sharpen your pencil and dust of your 4th grade math skill and take an honest look at all your inputs and think of them as an investment and make the most detailed accounting possible and see if you will have a significant return on your investment.
This niche could be described as an intensive dedication to managing inputs. Obviously this will end up being a balance of an art and a science and no two situations are correct, but the goal is to only spend money if it will make you money. How much money? Well my father would advise to do things if it looks like it will make a lot, because in the end it might make a little!
Create a Marketable Product
I’ll give you my personal opinion that if you are having a brainstorming conversation about expanding into a new-to-you market segment, say grassfed beef, organic or registered stock and you hear these words expressed, “People will pay more for…” . Stop, what people? What people will pay more? Would you be willing to pay more for this product? Show me a list of names of people who will pay more. As a general rule of thumb, utilize the philosophy, “If you build it, they will NOT come… unless you give them a darn good reason!”
Be extremely honest with yourself and ask the questions,
-Can I provide a better product?
-Can I provide a cheaper product?
-Can I provide a needed product?
Take a moment to access your situation, put all the cards on the table and think about what you could offer people that would allow you to answer yes to any of the questions above. I think about a line from the movie “The Three Amigos”, I think that movie may have won an Oscar for best film involving Steve Martin and a Sombrero. The little village was about to be attacked by a band of outlaws and the villagers were asked, “What can you do?!” there was a long silent pause and a little old woman said, “We can sew!” Martin Short replied, “You can sew?!... If only we’d known that earlier!” The villagers then defeated the outlaws because they could sew.
This niche could be defined as being creatively profitable. Different people have unique skills and talents and you will need to leverage every last bit of them in order to separate yourself and step away from ranching as a breakeven proposition and create a sustainable lasting legacy for your ranch. Will this be easy? Of course not, but neither is pulling a calf in a blizzard. You can do it, and it will be worth it. I’m pulling for you!
Thank you kindly,
Glade Miller Smith
“What are bred cattle bringing?” this is a question coming from cattle farmers and ranchers all day long from across the country, and there is honestly a huge range of prices coming out of auction barns thus it can be a daunting task determining fair value for quality replacements.
Insufficient live auction demand is a driving force behind price discrepancies in today's market. It’s no secret that the first few sets of cattle through the ring at any given sale typically represent the highest prices for the sale, however it becomes painfully clear when there are only a handful of buyers in the seats that selling the remaining cattle will be a significant challenge.
There are two main causes feeding this problem and neither have to do with overall demand for bred cattle it simply has to do with scheduling conflicts. Overall there are two demographics that represent potential buyers for bred cattle, the full time farmer/rancher and the hobby farmer with a job in town.
With the size and scope of farming/ranching operations it is increasingly difficult to take the time to devote even one day to sit in an auction with only the mere possibility of purchasing cattle. Similarly the family with 80 head of cows and might need a set of heifers but it is not plausible to take a full day off of work to watch a sale.
Thus the stands at livestock auctions sit increasingly empty. This problem is not going away and those producers specifically trying to market bred animals need to be proactive to protect themselves against selling at fire-sale prices. These are my top three suggestions when working with customers who have bred cattle for sale.
Thank you kindly,
Glade Smith, 308-660-9168
Sales and Marketing Manager, Wright Livestock
Founder, Family Farm Beef Box
I’m a husband to one wife, father to five children in this world and three in the next, multi-generational cattle producer, owner of Family Farm Beef Box, and bred cattle marketing specialist with Wright Livestock. I love a good joke and I’m slowly learning to eat fruits and vegetables.