Rope Skippers

It almost never seems to fail.  I talk to a ton of people who want to start their own business.  And as you could guess most of them are people wanting to get into raising cattle.  So many of them fall into a category that I call “Rope Skippers”

Rope Skippers talk like they are smart.  They know all the latest market info.  They know the trends.  And by gosh they can predict where the market is headed.

So why do I call them Rope Skippers?  Well, imagine a couple girls on a playground with a jump rope.  They twirl that rope round and round.  You can time it perfectly.  You can hear the snap, snap, snap, noise every time it slaps against the ground.  So now the Rope Skipper just needs to jump in, and,  start skipping rope.  Only they don’t.  Because the next time around will be a better time to jump in.  So they patiently stand there trying to time it the next time the rope comes around to jump in.   Only they don’t get in that time either.

I did not do that.  I just went into a sale barn one day and bought a few claves.  I went to another auction the next day and bought a few more.  When I sold those cattle I bought, I turned around the very next day and started buying the next group.  This worked out great for me because I was never victim to where the market was going.  I sold and bought back in the same market, allowing me to take advantage of the price spreads between weight groups at that very moment in time.   I know people that will sell cattle and wait a few weeks or months to buy back.  Only to have the market go up, killing their margin, wasting time, and not to mention it is kinda hard to make money without inventory. No one can time the market.  If they could that person would be very very rich.

So what usually happens to the rope skippers is the two girls twirling the rope get fed up waiting and leave.  We have a word for what happens to rope skippers…NOTHING

Yesterday a young fella I have been trying to mentor called me and told me he quit his J O B and started his own deal.  After years of skipping rope the bum finally did it.  He told me that in his first month his take home pay was four times as much as what he was making at his old job.  I really wasn’t surprised, but when you take that huge leap it is a big deal.  I’m proud of him for trying.  Time will tell if he really makes it or not.  Thing is, so what if he fails this time.  That only means next time he gets to start over a bit smarter.  NOTHING, is no longer happening to him.  He is making SOMETHING, happen.  So I decided to tell him last night what pressure really is.  I will share that with you another time.

Until then quit being a Rope Skipper, unless it is in the gym. 

Mad Cow = Distractions= Beginning Cattlemen

BSE made the news again.  I have a different view point of it than most people.  Past experience tends to shape how we view things.  Everyone else seems to be a bit shaken by it, while I kind of embrace it and laugh about it.  My Facebook status right now is “We have 140 breeds of cattle and the black and white ones seem to be the center of most of our problems.  Before Angry Birds came along Holsteins gave us Mad Cow.”

How did I come to this paradigm?  It was back when I was really still struggling to get my cattle feeding enterprise off the ground.  I had been buying calves and co-mingling them.  All I could buy at that time was the singles, the sorts, and well junk.  I would back ground them and resell them.  At the time if I could get about 30 to 40 head put together in a week that was pretty good.

My pen was empty when we had the second inconclusive mad cow.  Everybody panicked.  I went to the bank to get a loan to buy cattle.  They looked at me like I lost my mind.  “Don’t you know what’s going on?” they asked.  Every bank in town turned me down.  At some of them I didn’t even get the chance to sit down before being laughed out of the place.

Here is what I did.  I had some money that was in a CD.  It was put there after my aunt was killed in a car accident.  My grandmother divided up her retirement money between us grand kids.  It was to be used for college.  But as I stated earlier in another blog, I dropped out.  I had scholarship money that covered it when I was there.  I also had another CD that my great grandmother put together for me to use for college.  I cashed them both in.  Paid the penalty and went to the sale barn.  Remember those penalties are only there to make you feel trapped.

I had budgeted everything out.  I knew how much money I needed for propane to heat my home.  How much I needed for gas and food for each month, and so on.  I saved that amount back.  I turned down the heat in my house.  It was cold enough in here that I slept in a hoodie under a few blankets.  I quit driving around so much, and so on.  I already had enough feed to background several groups of 40 head for the rest of the year.

So I tripled my efforts.  I bought about 100 head.  I could background them for a few months.  Put a couple hundred pounds on them, and then I sent them to a custom yard.  There I valued them, so I had a check and money to live on for a while.  I financed the feed, so that was deducted from my check when I sold them as fats.

Here’s what happened.  I made a shitload of money.

When I was buying those calves people tried to talk me out of it.  I even had a guy here last week that recalled I did that.  He told me people were really worried about me buying those cattle.  They really got cross with me when I ignored their warnings.

Here is what I knew.  None of the borders had been reopened since the first cow with BSE was discovered.  So we did not lose any trade deals.  Yet when that cow came up inconclusive the market dropped about $40 a hundred here.  Get it?  We really lost nothing yet the market was sustaining that level before that cow was discovered, so I figured it was only a matter of time before the market came back.  To my surprise it came back in only a few weeks.  Of course that was due to the cow coming up negative on the long test.

Here is my take away.  Sometimes the best time to be successful is when everyone else is distracted.  Maybe today’s mad cow will provide some buying opportunities.  Maybe not.  The thing is, this is the type of thing you need to keep your eyes open for, and have the balls to cash in.  I did this when I was in my early twenties, and it greatly accelerated the growth of my operation.

Supply and Demand 3 of 3

Now let’s think logically for a minute.  I live in reality so I see no need to worry about what the price MIGHT have been.  I can’t read cards, palms or stars so I just deal with what I have at the time

The only reason I can think of to have the demand conversation is to give ourselves an out for losing money, like in the example earlier.  We all know we like to have someone to blame for our short comings.  Old ranchers tell us that cattleman are willing and ready to accept a loss as long as they have an out to blame it on

You see there is another law that trumps the law of supply and demand.  It is the law of substitution.  If feeders were to get that high I would go buy range maggots  (sheep).  If the price of beef gets to high the consumer will take their ball and go play in the pork or poultry yard.

Now this is where “smart” people tell me, see if the consumer goes elsewhere the price for your product drops.  Maybe so.  Just remember earlier that I stated the market is currently trying to create its opposite.  So we ALREADY KNOW  this is coming.  Now I don’t sell BEEF.  I sell cattle and buy cattle. (notice the order I put that in.  Sell/Buy.  This is a clue. )Moving BEEF is a packer and retailer problem.  If you have any marketing skill you would still know how to make money when this happens.  Going back to the example of 08, that was my best year ever.  I doubled the size of my operation and that set me up for great years in 09 and 2010.  Knowledge and marketing skill, is how I did it.  None of this demand bull  was ever a thought in my head.

Here is a bit of trivia for you.  This whole concept of making charts and graphs, depicting the scam of supply/demand making cattlemen profitable was created by a commodity broker in Denver.  It really did wonders for his business.  At the time he was the only one doing it.  The boys over at cattlefax felt left out and took it to a whole new level.  How many of you have ever sat through one of their seminars and left totally confused?  That confused feeling wasn’t because you aren’t smart enough to get it.  No, it was because you were trying to make sense of something totally irrelevant.

To think that an increase in demand will result in higher profitability is absurd.  To say that the law of supply and demand leads to increased profits, is a politically correct way to say “We now know how many incompetent fools can make a profit based on dumb luck”    All it takes to look like a marketing genius is a rising market.  Knowledge and marketing skill are what separates the profitable operators from the rest