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It's all about the positive margin



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A wild week in the markets shows love for bred cows, pairs and replacement females.

artwork of cowboy riding market

Watch each Friday for Doug Ferguson's Market Intel blog on Beef Producer.​

This week I had the honor and privilege of hosting some ranchers from Australia. They are an awesome group of people to be around. Their knowledge of plants and soils is superior to anyone I’ve met. I learned a lot from them while they were here and I hope they learned a little from me.

I took them to a cattle auction and they got to see firsthand how our sales differ from theirs. I want to give a shout out to Maryville Livestock in Marysville, Kansas, for their hospitality.

I took the Aussies to a neighboring operation and they got a good comparison of differing types of production methods and the costs associated with that.

In the evening I had Jeremy Row from Nebraska come speak about his operation. To me the highlight of Jeremy’s talk was when he spoke about the cattle he buys to feed. He buys what most would call junk. Even though he takes a discount when he sells them, he buys them at an even bigger discount, creating a positive margin in his cattle feeding enterprise.

The auctions I attended this week were wild! The highest values of gain are between 450 and 700 pounds. In Nebraska and Kansas there is demand for eight-weights that I’m not seeing anywhere else. At several of the auctions I attended, three-weight heifers outsold their steer brothers. I can’t say that fly-weights were undervalued this week. If you are a least-cost cow-calf producer you could strip your three weight heifers off the cow and sell them at a profit. With the prices being paid for feeders I find it difficult to find any trades that are profitable this week compared to fats, but there are many feeder-to-feeder trades that are awesome.

Let me show you how awesome it is. This is a real trade that happened in Nebraska. The producer sold a load of mixed heifers of varying weights. The cattle were Herefords, shorthorns, red angus and some colored up crossbreds, with an average weight near 650 pounds. He was able to buy back black-hided cattle weighing around 475 pounds and generate a $50-per-head profit. He owned the cattle for four months and ran them out on grass. That $50 may not be much profit, but there is some value in upgrading the quality of cattle he replaced with.

Last week I had a typo. I wrote “there is love for bred cows.” It should have read “no love.” I was a week ahead of the market. This week I saw bred cows selling much higher. Last week the cow bell curve of appreciation/depreciation would have been fairly flat, this week it definitely has a curve in it.

Pairs sold well. And when the auction ran out of pair buyers they still sold well due to the prices paid for fly-weights, plus the weigh-up value of the cow.

This week unweaned cattle were $6-11 back, feeder bulls were $8-12 back and replacement quality females fetched a $6 premium.