Pulling the trigger

All of this obviously is a simplified presentation of concepts that require plenty of brain sweat, if not complexity, in their application.

In some cases, like the Bud Williams approach, exposure to market movement is minimized by selling and buying within the same week. For others, who buy replacements later, likely future value must be analyzed.

Delaney tends to utilize futures market prices with his local basis. He points out there are three other common proxies for assessing future value: an index of monthly historical average cash prices, the current cash market and the venerable school of wild guesses.

With those predictions in place, Delaney utilizes a decision-making spreadsheet that evaluates comprehensive costs and calculates profit scenarios for a given set of calves. Last spring he ran the numbers for King Ranch calves using five different marketing scenarios. The projected ROI ranged from -10.5% to +27.4%. He's quick to add that he's not a market guru; he tries to be right 51% of the time.

Barnhardt emphasizes, “You have to know the cost structure in every business. Few cattle producers calculate their cost of gain when they buy, and when they do it's often woefully incomplete.”

Delaney and Barnhardt also stress that applying these concepts requires discipline.

But, Barnhardt adds with the excitement of a kid at Christmas, “You can make fantastic money in this business consistently. The profit opportunities are out there everywhere all of the time.”

For the full KRIRM study, go to http://krirm.tamuk.edu.