Rethink your plan(s)
Having more than one plan in place, and maintaining flexibility can pay off in a wet or dry season.
By: Doug Ferguson
Just about everyone I talked to this week had an abundance of moisture last weekend. While dealing with mud right now is a pain, we all know this will get the grass off to a good start. The thing that bothers me is overhearing some people say that they won’t have to worry about drought this year. If mother nature decides to play a bad joke on us and it stops raining after April first it will be a long stretch to September. Just because the river is running bank full right now doesn’t mean we should let our drought plan drown. And if you didn’t have one in the first place I would suggest making one up.
But what if it stays wet this year? We all hear about how we should have a drought plan, and I will argue that it’s more difficult to manage through the super wet years. That may sound completely off the rails. Thing is, the really wet years are so unpredictable. Fences and roads get washed out. Cattle get trapped on the other side of the creek when it floods. Rotations need to be done quicker to prevent cattle from tearing up pasture. This makes us feel like we’re leaving a bunch of feed behind because we are. It messes up the timing we had planned. Muddy roads may cause us to postpone a shipping date, and if that happens, do we have enough grass left? The list of issues goes on where as in a drought it’s just one dry day after the other, and emergency grazing options become available (usually a little too late).
Whether extremely wet or dry, both situations have challenges. We need to have a plan for either, and we need to remain flexible. Whatever the situation is we must protect the base of the inventory triangle, which is our money and feed.
Rethinking your plan
Whatever the situation we need to be paying attention to the markets and have a plan for differing scenarios. This is where I am going to differ from most. We always hear that a stocker operation is a good sideline to have along with cow/calf, because in dry years we can ship the stockers and extend grazing for the cows. I think we must examine the appreciation value of stockers against the depreciation of the cows. If the scale is lopsided maybe we sell the pairs instead and buy back some more stockers.
The stockers naturally will be smaller and eat less than the cows. This will extend the grazing budget (amount of grazing days). When we do this, we bought some time, by extending the amount of grazing days. This time is extremely valuable because two things can happen. During that time, it may rain again, helping our grass situation for sure. It also gives us more time to watch the markets, looking for other opportunities to trade.
Maybe we know some fool who loves his cows too much and is willing to pay a stupid high grazing fee to keep them. In this case should we sell off our stock and custom graze his? It may be worth a look.
As you can tell I am a believer in having several plans up our sleeve. And I am a believer that the market really is trying to help us. We must have the market literacy to be able to understand what it is trying to give us at the moment, and we must be flexible enough to capitalize on that.
Whatever we decide to do in any situation, when we decide to market cattle we must be sure we are capturing the full value of our feed, and time, by utilizing the market as best we can.
This week due to the weather some sales were cancelled, and others had a smaller run than normal. The small runs and mud kept some buyers at home, which in turn left the guys that did show up with some good buying opportunities. Smaller groups of cattle were not highly prized this week and had a lower undertone. Load lots however sold well and were higher this week.
The Value of Gain still has that trough effect to it. It is high on flyweights and shrinks to nothing on cattle weighing around 600 then it starts to go back up as the cattle get heavier. A lot of flyweights have a VOG over $1.50, and on some sale reports it was over 2 bucks. Heifers tend to hold their VOG together better than steers. This is due to the big roll back on the lighter weights, creating a bigger slide on the steers.
This week feeder bulls were 10-25 back, and replacement heifers caught a 4-10 dollar premium. Southern markets are undervalued to plains markets.