Cattle Today

Cattle Today

cattle today (10630 bytes)

by: Wes Ishmael

“Hooter, the window's open. They're offering $62. You want to take it?” asked Bob Johnson from Apache Feeders.

Hooter was blasting down the highway between the cap rocks and gullies north of Canadian, scowling at the dead bugs on his windshield, doing the math on how much the bid would cost him on his pen of steers.

“What's the plants look like, Bob? You reckon there'll be more give next week?”

“There should be,” growled Johnson. “Will there be? You tell me the answer for sure and that'll be the first thing I've been able to take to the bank in better than two years.”

Hooter thought and scowled some more. “How many heavies you figure we've got next week compared to what we'd have today?”

“I'm guessing—crackle-hiss-crackle—then you figure—crackle—crackle—so If I was a betting man—crackle-hiss-click…”

“Bob? Bob?” said Hooter, glaring at the mobile phone mounted to the dash of his pickup. Despite the “no service” message on the phone's digital screen, Hooter punched the speed dial number for Apache Feeders. Nothing. He tried again. Nothing. The weekly fed cattle marketing window that had narrowed to a peephole so small a bulimic flea couldn't fit through meant that by the time he was back in cell range he couldn't take the bid if he wanted to.

Hooter locked up his brakes and screeched to a gravel-spraying, fish-tailing stop along the shoulder. He snatched the cell phone from its cradle and threw it as high and far as he could into the pasture beside the road. Then he lifted his 30-30 from the rack, slipped between the wires of the fence, found the loathsome electronic gadget looking no worse for the wear and proceeded to blast away, like some prairie ninja, shredding the remains of remains. After each pull of the trigger he screamed, “Can you hear me now? Can you hear me now you Japanese tin can, can you hear me now you &*%#@%!”

Then, seeping into his hazy rage, Hooter heard the hollow sounds of a loud speaker from behind him, “Sir, put your gun down. Get on your knees and place your hands behind your head.”

Hooter eyed the pock-marked ground laced with plastic shards of what was his phone, and hoped that was the source, but experience told him better. He did what the voice said.

Trolling for Perspective

“…so legally speaking, you got me dead to rights on trespassing,” explained Hooter to the youngish clean-cut Texas trooper sitting in the front seat of the police cruiser. “But you call up the owner of that ranch and I bet he won't press charges.”

“I'll bet he won't, too,” said Trooper Cade Watson, working hard to stifle a smile. “But, Mr. McCormick, you understand we can't have folks discharging firearms so close to a main highway. People were slowing down and stopping. It's a traffic hazard.”

“I see your point,” said Hooter. “But it sure felt good.”

“Now, if you would, please tell me the whole story.”

“From the very beginning?”

“From the start.”

Hooter scooped a wedge of Copenhagen from his can and said with a grin, “I hope you brought a jug of coffee with you.” Then he began:

“See, we used to sell fed cattle live, all of them. This pen was worth so much and that pen was worth so much. There was a range of price to work with and negotiate around. Buyers would come in and actually buy cattle several days a week. Then somewhere along the way all those pens got to be worth basically the same money according to the buyers.

“So, then we said, hey, that's not fair. Some cattle are better than others, and if you pay the same money for everything the good cattle are really subsidizing the poorer cattle which are actually earning a higher price than they deserve.

“So, then we got formulas and grid marketing. That's basically where they say all cattle are worth the same base amount, but depending on how much better or worse the cattle are than the base average, you'll either get rewarded or discounted.”

Trooper Watson's brow was knitted in concentration. “That seems to make sense.”

“Doesn't it, though?” said Hooter. “Just a couple of small glitches, though. That base price is set off the cattle still trading on the average, and the premiums and discounts are based on the average carcass performance of the packing plant. So, on the one hand, the base price, the average is lower than it would be if all the cattle were still included in the average—the supposedly higher cattle are being base-priced off of the supposedly lower valued cattle. And, on the other hand, the better the cattle do, the higher the plant average for carcass performance, so the tougher it is to beat the average. And that's not even considering whether or not the premiums and discounts are equitable to begin with.”

“I don't think I understand,” said Watson.

“You and a lot of the rest of us,” grinned Hooter. “Wait, though, it gets better and better.

“Now, at the same time we've been working our way through these grids and formulas, buyers know further in advance about more of the cattle they have coming to them. They call that captive supply. So, conceivably, if they know the supply they are going to have any given week, they don't have to be nearly as aggressive bidding on the cattle that are available to buy that week. Plus, it has evolved to the point today where you literally have one chance for a few minutes each week to sell your cattle.”

“That's what you were trying to do when your recently deceased phone cut out?”

Hooter started to flush a bit, so Watson quickly added, “And, it's all of these grid and formula cattle that are this captive supply?”

“It depends on how you look at it,” said Hooter. “That's sure part of it. But you could also argue when you're dealing with a perishable product, in this case cattle that everyone knows are going to the golden arches in the sky by the time they're 16 months old, give or take a couple of months, that in itself is captive supply. Once they're in the system, buyers have a good handle on the supply they have to deal with.”

Watson shifted in his seat. “So, grids and formulas are a bad thing?”

“Not necessarily.”

“But selling all of them live would be better then?”

“Not necessarily.”

“I think you're starting to lose me there,” said Watson, “but go on.”

“Now, at the same time all of this is going on, you know what's been happening with beef tonnage?”

“I can't say as I do.”

“Well, let me tell you. We're producing as many and more pounds of beef with a whole lot fewer cows today than we did in the mid 70's, the last time in history we were setting record production.”

“How's that possible?”

“Pick a subject. Better genetics, better management, and a lot of cheap corn.”

“What's corn got to do with it?”

“Everything. See if corn is cheap enough, like it has been, the more pounds I put on a fed animal, the cheaper they become.”

He saw Watson's eyes go blank. “It's like all those pounds are options on a company's stock. If I can buy them cheaper than I can sell them for I make more money. In this case, if I can put a pound of gain on cheaper than I can sell it for, the incentive is to put on more pounds.”

“But, if there are more and more pounds, doesn't the price of all of those pounds go lower, so that you make less money per pound than if there were fewer pounds?”

“Exactly. Unless of course demand grows at the same rate as production or better, which it hasn't done.”

There was a long pause. Watson was staring out the passenger window, mental wheels straining to grasp the complex simplicity of Hooter's nutshell perspective on cattle market evolution. Watson ventured, “Basically what you're telling me is that the more pounds you put on, the more money you make, but the more pounds you put on the more money you lose.”

“Yep. It's kind of like using a bigger plug to close up the hole in a boat. You've got to do something, but it doesn't mean it will change the ultimate outcome.”

Watson slowly shook his head from side to side as if trying to knock off cobwebs. “So, basically if you didn't feed as many cattle, and didn't feed any cattle for fewer days, and didn't put as much weight on the cattle you weren't feeding for fewer days, you'd make more money,” asked Watson.

“Near as I can tell,” said Hooter.

“But that doesn't make any sense, exactly,” said Watson.

“Exactly. Now you understand perfectly.”

Watson nodded to the outside. “Mr. McCormick, you're free to go…Oh, if you need some more shells, I've got some.”


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