Experience combined with a solid marketing plan may increase your profits
Eyota producer Alex Jech (left) and All American Co-op Livestock Production Specialist Mark Werner (right) on farm in early December.
Eyota beef producer Alex Jech (left) converses with All American Co-op’s Livestock Production Specialist Mark Werner (right) in early December. The pair has worked together for the past few years making decisions for the Jech’s herd.
Bob Jech, Alex’s father, who started the operation in 1978, has been working with All American Co-op since the mid-80s. “After all those years, if we did switch [nutrition companies], we’d always be coming back. That ought to tell you something. You can only bang your head against the door so many times before you finally figure it out,” Bob Jech said with a laugh.
Alex started working alongside his father in 2015 after finishing his degree at NICC. The Jech family, who were dairy farmers until the late 1990s, made the switch to a cow-calf and finishing operation to adapt to trends in the market. Throughout the three decades of working with AAC, they have worked with multiple nutritionists. Since working with Werner for the past few years, however, the Jech family operation has made a few changes in the way they plan and market their cattle. In addition to nutrition planning, Werner and the Jech have devised a marketing strategy in an attempt to maximize their profitability and minimize their risks.
“The biggest change with Mark has been selling direct to the packer,” Alex said. The Jechs previously sold their cattle in the open market directly to the packer, however, Werner helped them contract their cattle and lock in a price with the goal of reducing their risk.
“They have done really well that way—with Alex watching the markets and selling them at the right time, and the end product is working out well, too. That has been really nice to see those kill sheets actually pan out, “ Werner said. “A lot of people are afraid to do the marketing or the forward contracting because a lot of people do not understand how it works. [The Jechs] were kind of like, ‘alright, we will just trust you to run with it.’ But, it definitely panned out.”
Werner cited early planning, well-balanced rations, adjustments to their expectations with the cattle, the Jech’s use of their own feed, and communication when questions arose for the success of their marketing plan over the past year. Werner earned his degree at UW-River Falls and went on to work as a market news reporter as well as a meat grader before joining the Purina and All American Co-op teams.
Tips for creating a strong marketing strategy
Marketing the commodities coupled with the sell price received for the end product are the essential factors contributing to profit within any farming operation.
Depending on your level of comfort, financial investment, risk management, and involvement, there are a variety of marketing programs available for adaptation on your farm. However, there is no cookie cutter approach to marketing and risk management. Constructing a marketing plan for your operation is a decision that needs to be designed individually for each producer. Think of the following marketing strategies as an offense designed to the strength of your team rather than a collection of individual, generic plays taken from the playbook. Marketing considerations need to be measured at different points in the game plan for each separate pen of cattle. In certain cases, some marketing plans require you to begin evaluating before your current pen is even empty.
In other situations, such as with open market cattle that you are seeking maximum value in the current market for, you can start by shopping around with different packers or sale barns. The idea is to see where you our cattle have the most value. In addition, researching the market trends and marketing into historically higher priced selling months of the year, when fed cattle are in limited supply, may require you to buy heavier cattle or different frame-sized cattle that may push you outside the norm of what you are used to doing. In most cases, when you are able, shopping around will pay off in terms of profitability as well as gaining knowledge of the industry.
Breed specific programs like Certified Hereford or Certified Angus beef programs have parameters that you must understand before just assuming a hide color is going to bring you huge premium. Holsteins are the breed that has created a lot of hardships for many cattle feeders. Marketing these black and whites has frustrated many in the past five years, however, packers harvesting these cattle have recently made changes to how they go about contracting and purchasing them. Contrary to conventional thought, when marketed correctly, Holsteins have been some of the most profitable groups of cattle from some feeders in the last few years. Unconventional means of marketing concern many people because they do not understand the parameters or stipulations tied to a marketing agreement with the packer. Lack of understanding often leads to distrust and hesitation within these programs. Being in a marketing agreement just makes some people uneasy, but on the flip side, it can also make you very happy if the market slips away from your profit point.
When marketing cattle of any age or size, there are many moving parts to consider. Cattle type, in weight, marketing end point, and market conditions (current and future coupled with seasonality and consumer demand) are the most obvious influences to start with. If you know the genetics and background of the cattle you are feeding, take advantage of that and use the information to market them in the channels that will directly benefit your bottom line. This is an example where shopping around can lead to more profit. Each of these contributing factors are puzzle pieces that need to be put together to create a marketing plan. However, understand that the same plan will likely need to be fluid—those puzzle pieces may not always fit together in the same exact way each season. Understanding the factors, as well as the relationship between all the factors, can help you understand how to manipulate them in order to be more profitable. Making these relationships work in your favor is much easier, especially when just beginning, if you are working with someone that understands how the market, management, and nutrition tie into this plan.
Markets can change by the minute—literally—so you need to be fluid and flexible in your ability to adjust as the markets swell and contract. Being flexible and staying informed with your options and market conditions are crucial if you want to be able to capture the highs and avoid the lows, but this often comes with more risk than doing nothing. $100 in profit might not be as good as the $150 that you could have had, but its way better than a $100 loss.
When considering all aspects that can affect the cattle markets, my previous career experience with the USDA as a Market News reporter and meat grader comes in handy. My experience helps put all the puzzle pieces together for your individual operation. My goal is to provide you with the insight to look at the production and marketing cycle of a group in a new way in order to help you determine your best financial outcome for those cattle.
As a note to end on, for first-hand application of this article, one of my customers called a packer for a negotiated bid on open market Holsteins on a recent Friday. They came back to him with a bid and after reading a few market reports and articles late that week, I informed him to hold out and call the packer back Monday morning. With his past cattle performance from a couple of basis contract Holstein loads that he recently delivered, and my market insight for him to wait it out, he received a bid $2.00/hundredweight higher for those cattle. This increase more than covered freight costs to get his cattle delivered.