Sell-Buy Marketing Strategy Ensures Profit
Different method of marketing gives options.
Art McElroy grazes forage-raised cattle in Saskatchewan, just north of Havre, Mont., using Angus bulls in his herd of 150-200 cows. He manages his own yearlings and custom grazes about 1,200 head of yearlings annually for a neighbor.
In recent years he’s been practicing sell-buy marketing, which is a little different than traditional marketing. “Most people in the livestock business think in terms of buying, increasing (weight or number of animals or value), and then selling to make a profit. In sell-buy marketing you determine what is overvalued and undervalued in the marketplace, and only deal in animals that you can increase in value. I never buy animals above 800 pounds because I’m not in the feedlot business. I might buy anything between 250 pounds and 700 pounds, or cows, pairs or heifers,” explains McElroy.
“With every sale, you can figure out what is overvalued and undervalued by determining the value of every increase in weight gain. It took me a while to learn how to figure out what was overvalued and undervalued, but I just use 50-pound weight breaks or 100-pound weight breaks and divide the increase in dollars by the weight gain, to see what the market is paying for each of those increases in weight,” he explains.
Lighter calves bring the most value per pound. When the next increases in weight are only worth $1 or $1.50, be it 50 pounds (lb.) or 100, he notes that he learned to tell whether to hold the animals or add weight to them. If he isn’t paid to add more weight, he sells those animals and replaces them with something that is already undervalued, for which he is paid to put weight on.
“It’s easy to know exactly what all of your costs were on that turn of cattle, and through simple arithmetic, determine what you can afford to pay back for different weight prices and still cover all your costs on those animals. So you are buying a profit as you are replacing your animals,” McElroy says.
He adds that net worth will fluctuate, but his real concern is cash flow — being sure there’s enough left between the sell and buy price .
“I am also learning to buy pounds of gain for less money than what it costs me to put it on. There are always some animals that you can buy with the money from your last sale. You can actually take home 50 to 100 pounds or even 150 pounds for very little money, and sometimes with a few dollars of cash in your pocket, from your last sale,” he says.
Additionally, McElroy explains, “When you go to replace animals, if you can’t replace them at a profit, you should leave your money in your pocket. You not only keep your money, but you also keep the feed the animals would have eaten, whether it’s grass or stored feed. You have to determine what has the most value to you — the animals, your money or the feed. What is the point of feeding animals if you are not being paid to put pounds of gain on them that would add value to the feed?”
“This is a unique system that Bud Williams figured out, when he was at VT Feeders in Alberta for 10 years. Bud has passed away, but his daughter and son-in-law, Richard and Tina McConnell, are still teaching this method. This is a very good system and you don’t have to do it in large numbers, and it’s not wise to do it with borrowed money. You just build your numbers gradually,” he concludes.
Editor’s Note:Heather Smith Thomas is a cattlewoman and a freelance writer from Salmon, Idaho.