A long-time market analysis and columnist for Cattleman’s Corner, with a focus on the feedlot industry, is now offering one-on-one consulting services to cow/calf producers across Western Canada.
Jerry Klassen, who has worked as a grain and livestock market analyst for different companies for a dozen years, and has been a regular monthly columnist for Grainews for many years, is stepping out with full time consulting service for cow/calf producers and cattle feeders.
“I am always surprised how little many cow/calf producers know about the current status of the cattle cycle,” says Klassen who is based in Winnipeg, but is still involved with the family feedlot business at Coaldale, just east of Lethbridge, Alberta.
THERE ARE OPTIONS
“People who derive most of their income from beef production have little knowledge of the beef market. Cow/calf producers feel they are at the mercy of the market with no options. With my consulting service I want to provoke thought and suggest marketing plans.”
For example, should producers hedge on the feeder cattle futures six months before selling the physical animal, says Klassen, or should they put the feeder cattle in a professional backgrounding lot for 100 days and then sell to a finishing feedlot?
“All these options should be penciled out for the cow/calf producer because everyone in the industry is trying to make a margin,” he says. “Sometimes, the margins are more favourable in one area over another. For example, sometimes, the backgrounding operator has better profits than the finishing operator. However, there are also different risk capacities in each segment. Finishing operators carry larger financial risks and the market will inevitably reward this risk-taking at certain points in the cattle cycle. The risk is a double edge sword, so there’s a need for market analysis, sensitivity analysis and risk management.”
Klassen is offering his service at $200 per month. For that price producers get an e-mailed, faxed or mailed copy of his twicemonthly Canadian Feedlot and Cattle Industry Analysis — that’s a concise and very readable 12 to 15 page report on the current market. As well, the service includes one-on-one telephone and e-mail access to Klassen for help in developing a marketing plan, and/or discussing marketing strategies.
“Some times people just need to talk and bounce their ideas off someone else,” says Klassen. “I have clients who call to say what do you think about this or that idea, or what do you think will be the situation six months from now. As a consultant I can help producers develop a plan and with the ongoing consultation we can discuss changes in the market, or changes in their needs, to keep it up to date.”
NO CONTRACT NEEDED
The $200 fee is charged on a monthly basis, with no short-or long-term contract. A producer could sign up for one or two months at a time, for example, and then opt out for a few months during haying season, then sign up again in the fall, as needed.
“I would hope producers would find a long-term benefit from the service, but I want to keep it flexible,” says Klassen. “Using the service for a full year is only $2,400 and if through my marketing experience I can help a producer find even a cent or two more per pound or a few dollars per head on a transaction, it doesn’t take long to cover the cost of service. But if using the service a month or two at a time works for people that is fine with me.”
Klassen provides market analyst services to other sectors of the beef industry including feedlots, keeping an eye on several key areas. In fact, it is those services, that makes such as complete information package available to the cow/ calf sector.
In preparing the Canadian Feedlot and Cattle Industry Analysis, Klassen looks at the trend and impact of the Canadian dollar, analyzes the live cattle market, the feeder cattle market and the feed grains market. Those sectors are included in the overall twicemonthly report. Also during his years of commodity trading and market analysis he has developed contacts all over the world.
“In bringing this report to cow/ calf producers hopefully they will gain a better understanding of how these components affect the overall market and what it means to them as producers,” says Klassen. “These are the four key areas producers need to look at in developing a marketing plan.”
AT THE FEEDLOT
Klassen says his services are valuable to feedlot operators who have only so much time in the day to do a multitude of tasks.
“Feedlot operators are busy managing their feedlots and day to day operations,” he says. “They pay someone to be a fulltime pen checker, full time feeding operator, and some feedlots want someone analyzing markets full time. The feedlot operator cannot be all things all the time. Through my services they essentially have an analyst at their disposal watching markets and helping to provide a risk management program for the upcoming months.
“Most feedlot operators have to be honest with themselves and know where their strengths and weaknesses are. Feedlot operators have to ask themselves where do they spend most of their time — managing day-to-day operations or market analysis? Most feedlot operators have strengths in production, not market analysis and trading.”
Klassen says a key aspect of his service is to collect a lot of detailed and varied information and boil it down into a manageable summary.
“Feedlot operators don’t have time to watch feedgrains, cattle on feed numbers, currency markets, the other influences of the energy and equity markets on the cattle market,” he says. “What I study all week, I can relay to a feedlot operator in 15 minutes. Most feedlot operators don’t have contacts around the world to have up to date information on crop and market conditions. They may have access to the USDA reports but this is old news when it is released. If they are trading off USDA reports, then they are behind the efficient operators. As feedlot operators strive to be more efficient in production, they also need to strive to be more efficient in market analysis to plan four to six to 12 to 24 months forward.”
The feeder cattle market is a pure competitive market with many buyers and sellers, he says. The finishing market is many sellers with few buyers. Economic theory tells us the financial returns in a pure competitive market over the long term are zero. The market drives the costs of production to the least-cost producer.
“Therefore, most cattle producers focus on efficiencies in production but fail to realize the value in market analysis and risk management,” he says. “The problem is that 70 to 80 per cent of producers cannot be the least-cost because of the economies of scale. Therefore, if cow/calf producers, backgrounding operators, or smaller finishing feedlots, don’t put resources into a market analysis, they will also be behind in this area as well.”
For more information on the consulting service contact Klassen at: 204-287-8268 or e-mail: [email protected]
Lee Hart is editor of Cattleman’s Corner based in Calgary. Contact him at 403-592-1964 or by email at [email protected]