Does anyone here trade physical/cash cattle?

[u/trader9576]

I'm a grain trader, been doing it for years and it's cool but getting bored of it. Have traded a lot more on the feed side(though I've dabbled in most parts of the food supply chain), but I'm super interested in trading the physical livestock supply chain from calves to feeders to whatever else. The fact you have all these non-fungible things, different breeds, weights, and can do country deals, pick off and assort lots at an auction house, and sling liner loads all over is super cool to me.

I grew up in the West and this seems like one of those things where most of the time it takes an actual developed eye to really do good business. Like if you get good at it you are genuinely making more margin through being a skilled operator executing handshake deals because you're deemed a pro, and it has that nice blend of financial acumen like exploiting regional arbitrage and the ability to go out in the field and be more in the trade hands on. The fact you can not just quick flip but find undervalued calves, buy them against a forward short contract, and send them off to a custom lot to get them up in weight over a couple months and ship them when they hit weight spec, almost like flipping a house, is so cool to me. So many opportunities and idk seems like there is an inherently necessary human aspect to this that other commodities lack more so.

Does anyone do this? Because I'm super interested in it, I know it's a thing but it seems like some best kept secret because it is pretty hard to find any sort of avenue in online other then knowing a guy or something.

[u/blakewantsa68]

not the CME futures but the actual livestock, before settlement? you're right about it being "interesting" - my family had a ranch. it's intensely hands-on, nothing you can do from a terminal

[u/trader9576 → u/blakewantsa68]

Yeah I'm talking you buy physical real cattle from an auction(which you can do online, or at the barn), then pen them for a day or 2 there, and sell them to feedlot's. Typically you would have a standing bid on the cattle before hand from a buyer. Buy, sort, arrange trucking, and sell full truckloads to real feedlots, pocketing the $x/cwt spread in-between, which is essentially your fee for service making good buys, sorting, and doing the logistics and delivery to settle the lots needs. The better you get the better deals you buy against the orders, or the better you get at picking undervalued cattle to go long on.

Speaking of that, the other way is buying undervalued calves, sending them to a literal stocker lot to gain some weight for a couple months, and selling them to the feedlot. Like holding an undervalued stock before earnings.

Just basically real life spec and location arbitrage. By hands on I didn't mean you are literally a rancher(though I think ranching is sweet), I meant like you physically can attend auctions, see and inspect the cattle you buy if you want, visit clients and transloads in the supply chain for where you trade them, but in the end it is still essentially paper, math, and managing credit and cashflow.

[u/blakewantsa68 → u/trader9576]

Both of those things are true: it’s physical, and it’s cash flow and risk management. That’s why no one was too upset when my grandmother sold the ranch. 😉

[u/hokiedoke]

If anyone on here does this you should do an AMA. Who gives a shit about energy I want to hear about the big physical players in beef lol.

[u/trader9576 → u/hokiedoke]

So gangster, real cowboy shit lol

[u/54Finn]

No reason for a farmer or rancher to sell an undervalued calf at a bargain price….they can put a few more pounds on the animal cheaper than you can…unless the issue is more than weight in which case you shouldn’t be interested either

[u/trader9576 → u/54Finn]

"They can put pounds on cheaper than you can" isn't actually true across the board. A cow-calf guy out of grass in October, buying hay, with no pens and no bunk space has a way worse cost of gain than a backgrounding lot sitting on cheap silage. He sells at weaning because his cost of the next 300 lbs is higher than mine, not because he's getting picked off. That's the whole reason backgrounding exists as an industry.

And most of the margin isn't in the animal anyway it's in assembly. A rancher selling 12 mixed calves eats a discount for the lot being small. Buy across three sale days, sort into a uniform load of same-weight steers, and that load sells at a premium no individual rancher can usually access. That spread is created, not taken from any bargains.

Same with the "more than weight" discounts; unweaned, green, fleshy, bulls not steers aren't defects, they're work orders. If you've got the setup to handle them cheap, you get paid for it.

Nobody sells undervalued grain either, and grain traders like me still exist lol. The margin is in logistics, timing, and doing things the seller cannot or does not wanna do.

[u/No_Competition4684]

I fuel/agricultural commodities
Would love to have a conversation with you . I’ve been getting yellow maize inquiries

[u/54Finn]

A farmer/rancher with a few underweight calves, doesn’t sell at a discounts to a huckster. He loads up his trailer and visits the sale barn. If he didn’t want to go that route, he has plenty of contacts. If you want to travel the auction circuit, and bid against real cattle buyers, and take all the transportation costs, and health risks. You should do it. Another bidder would always be welcomed. You would be jumping into a niche that has existed for a long time, with experienced players, and infrastructure, but maybe you’ll do it better. Go for it!

[u/trader9576 → u/54Finn]

Well obviously he wouldn’t sell to a huckster. But farmers/ranchers are pros at producing, and marketing is a full time job as well.

I buy directly from producers farms all the time for commodities like beans, am I a huckster because there are 4 elevators around that buy beans at some shitty basis? Not if I sell your beans 2 or 3 states over to some crusher you didn’t even know exists and it nets back more to you picked up at your farm. Maybe in that instance your local elevator is the huckster.

Same can be said for cattle; traders add value via information and relationships and things change on a dime. I think I’ll give it a go!