A typical marketing plan for many cow-calf producers revolves around hoping to hit a run of good prices when they sell calves, yearlings and cull cows after preg-checking. If the stars don’t align to bring all of the variables together in their favour on sale day — weather conditions for roundup, trucking arrangements, market forces — their profit for the year can go down the drain.
Ryan Copithorne knows that worry all too well. He managed his family’s ranch, CL Ranches, near Jumping Pound, Alta., set up the beef division as director of cattle operations for an 8,500-head investor-owned ranch and today runs 1,200 head on his own ranching operation on private and First Nation lands just west of CL Ranches.
He also knows marketing doesn’t have to be so risky and that cow-calf operators run on limited manpower with little time at the end of the day to devote to developing marketing strategies, or executing those marketing plans in a timely manner.
Looking around, he realized that there are no businesses in Western Canada that specialize in supporting cow-calf producers in their marketing decisions. Backed by his practical ranching experience, a degree in finance with a master’s degree in business administration, and his most recent experience with a cattle feeding/grain marketing/consulting company and his affinity for hedging and marketing, he set up the Cows in Control Marketing Group last fall.
His focus is to provide a service that helps cow-calf producers protect the money, labour, time and expertise they’ve invested in their business.
“When I first started ranching I worked on ways to improve grass and genetics to add value, but all it took was a 10- to 20-cent market move downward to wipe out all that work and profit. I was doing some grain farming as well and saw lots of marketing options not available on the cow side and became interested in how I could make those work for cattle,” Copithorne says.
“I also came to realize how important marketing is in our industry and felt that building a marketing tool box for ranchers could take the worry out of marketing so they could concentrate on what they like to do, raise cattle.”
He opens the tool box by explaining the marketing options available and works with each client to develop a year-long strategic marketing plan, then helps them navigate through the year with timely market analysis and advice, plus business connections as needed or requested.
At the end of the day, the producers are still in control of when and how they sell their cattle.
“There are lots of ways to have more control over the price you get and protect high prices,” Copithorne says. “The No. 1 issue isn’t whether prices will go up or down, but by how much they will go up and down, which could be violently, not in modest 10- to 20-cent moves, but we could see 40- to 50-cent moves.”
Marketing a year-round priority
Selling your whole year’s production in one or even two shots is risky business, not to mention stressful and really, quite unusual as business goes, even in agriculture. Many grain growers, for instance, market their production year round and rely on hedging strategies to lock in target prices on commodities when they become available.
For cattle, a hedging plan could include strategies such as participating in the cattle price insurance program, forward contracting, and taking positions on the futures market when cash prices are high during the course of the year before selling your calves.
“The first step is to identify the expected actual annual cost of production for your calf crop, then determine a reasonable return on investment (ROI). By using the insurance program, futures or forward contract bids, we are able to determine estimated profitability going forward for either the upcoming calf crop or the weaned calf crop. It there’s a profit that meets your criteria for an acceptable ROI, we develop a hedging program to lock in those returns for some percentage of the calf crop. As the market gyrates up and down through the course of the year, we lock in seasonal highs until, when the time comes to sell the cattle, you are pre-priced in at seasonal highs at an acceptable return.”
Oftentimes there are seasonal highs late in spring that can be hedged with insurance, and the feeder futures market seasonally tops in August or September. He suggests forward pricing no more than 80 per cent of your total expected production to allow for unforeseen circumstances such as higher-than-usual calf loss or lower-than-usual weight gain.
“These are examples of marketing times that can be used to price fall calves so that by the time next year’s fall run comes, a large percentage of your cattle is priced at the highs. If you choose to keep the calves, we can set up feeding strategies that hedge and price with the same tools.”
His role is to take the guesswork out by offering education on how to use the hedging tools, market analysis and setting up push-button hedging programs so all you have to do is pull the sell trigger to lock in a price.
There are buyers out there interested in forward contracting cattle to ensure a steady supply of the kind and weights of calves they need or prefer at certain times of the year. Copithorne makes sure you won’t get locked into a contract you may not be able to deliver on.
If your operation is too small to put together liner loads of similar cattle to catch buyer interest, he will help you network with other ranchers with similar cattle to fill a liner, share trucking cost and gain more bargaining power in the marketplace.
Putting together liner loads of cull cows to get rail bids from packers has the same advantages and a bonus. Rail bids (on hot carcass weight rather than live weight) eliminate what he calls the silent killer: shrink.
Shrink on live weight could be up to 10 per cent for a long haul with an overnight stand and at today’s market prices per pound that loss adds up quickly. The same goes for calves with a minimum four per cent shrink every time you move them.
Whether you are looking to direct market or forward contract calves, Copithorne offers a “best price marketing program.”
He’ll put together an offer sheet describing the cattle and other noteworthy production details, the price you are asking including slide, shrink and sale conditions. He will shop the listing around or scan the marketplace to provide you with the best options available at the time so you can take it from there.
“Some producers want to continue to do business through trusted channels they already have in place and we don’t want to interfere with that,” he explains.
Again following the lead of the grain industry, there may be times when storage is to your advantage. For beef producers, feedlots are the storage facilities and he is prepared to help arrange for retained ownership and pen sharing at fully managed feedlots.
For those with the resources to background calves on the ranch, forward selling is one way of financing retained ownership without jeopardizing the cash flow needs of the cow herd.
Currently, commercial breeding heifers are another matter because we are in a short supply cycle, those with control of the calf supply win, he adds.
“So, marketing isn’t just about the right price. We need to manage shrink and freight costs and sell at optimum times when discounts, commissions and basis are the least,” he says.
Copithorne realizes that this will be a learning process for many cow-calf producers and there will be many questions, so he has set his fee at a flat rate for a full year of service.
His plan is to start out on home ground in the western provinces with the primary focus on helping cow-calf producers protect and add value to their production by overcoming marketing obstacles. A large part of this will be encouraging producers to network, first with other ranchers to achieve scale and negotiating power in the marketplace, and then with feedlots, packers and order buyers.
In the longer view he aims to address a gaping hole in financial and formal strategies for producers who are starting or expanding a beef enterprise.
“Ultimately, my vision is to provide services that will help grow the cattle herd and beef industry as a whole.”
For more information, call 403-669-3451. Copithorne also offers a monthly newsletter through the Cows in Control website.