Welcoming the return of cattle sales

Challenging weather kept sale barns closed, but as weather warmed buyers returned, though they were picky.

After two weeks of sales being cancelled the sights and sounds of commerce were as welcoming as the warmer temperatures. Diesel engines purring like a litter of tom cats in a dairy barn. Custom paint and punch hole trailers lined up for blocks. The click-clack of hoofs on an aluminum floor. The auctioneer bid calling. People were in such a good mood that I did not hear one person complain of the mud.

There were two things that were easy to predict this week. There were acres and acres of cattle to bid on and buyers were hungry. Green grass fever is the latest pandemic to sweep the country. There is an abundance of optimism in the stocker segment right now.

The Value of Gain had the trough effect the week in the Plains. I was highest on fly weight cattle, then it dwindles to almost nothing in the middle of the weight spectrum. It then climbs back up on the heavier weights to where it is right around the same as Cost of Gain. Sell the right weights and a profitable buy back is easy to execute.

In the south the VOG starts well above the COG and just goes down as the cattle get heavier. Southern markets were greatly under-valued to Plains markets.

With plenty of cattle to choose from buyers were selective, and that was evident in the discounts. Unweaned cattle were 20 back. Fleshy cattle were 6-20 back. There also were some notable discounts on cattle that were not black hided.

Feeder bulls were 30 back. This roll back makes bulls equal to or even less than the price of heifers. This is an opportunity to sell heifers and replace with males. This is the easiest, and greatest appreciation value to capture right now.

It was also noted that load lots sold a little stronger than smaller bunches. Replacement heifers caught a 4-10 premium.

A concern for the markets

Driving home from a cattle sale yesterday I heard on the radio that Warren Buffett’s “right hand man” says the stock market is overvalued. I am surprised it took mainstream media this long to report on that. The whole Robin Hood, GameStop thing kinda turned the stock market into something similar to betting on horse races and helped push it higher.

This morning I was curious how over-valued it was. A Google search lead me to a chart by Fred, FRASER, IMF, Willshire. That showed that for the first time ever the ratio of US stock prices to US GDP has reached 200%. Normally it stays under 100%. This is an extreme bubble for sure. Every time it has gotten near or above 100% it has crashed.

Here’s why I bring this up in a cattle market blog. In the past we have seen two different things when this happens. First the commodity markets tumble with it. Second hedge funds pull money out of stocks and buy commodities creating a bubble that bursts when they pull out and invest in something else.

I have no clue what will happen or when. Two things I am certain of is that something will happen. The other one is that no matter what direction the cattle market goes sell/buy marketers will go with the flow and make some money, while everyone else is trying to figure things out and point fingers.

Source/Credit: https://www.farmprogress.com/marketing/welcoming-return-cattle-sales