What Price Should I Use?

by Dallas Mount

For the past 3 weeks we have been holding our Executive Link meetings from New England to Texas. We have about 110 businesses that are currently members of Executive Link (EL). These businesses meet as boards of directors three times a year to give and receive strategic advice on their business and be held accountable for action plans developed at the previous meeting. There is no process I’m aware of that is more effective at helping business owners implement the change they want to see in their businesses.  

The fall EL meetings are often focused on economic planning for the coming year. With decreased prices across most classes of livestock the planning has been more intense. EL members have been diving in deep with their numbers during these meetings to emerge with a plan that meets their targets. Having a plan is an empowering feeling. 

Your neighbors’ ranch isn’t actively managing for profit. They are just digging in and hoping for a better outcome next year. I’ve seen the stress this path creates and the financial realities are starting to catch up to those who don’t respond accordingly.

When putting together the economic plan for 2020 many wonder what numbers to use for prices looking forward. It is easy to tell ourselves a story about our understanding of market forces and lead ourselves to an outcome we desire. Being a speaker at many conferences I often get to share the program with my friends from CattleFax, LMIC or another market forecasting organization. These presentations usually end with the projected prices for the upcoming year. There are sighs of relief if prices are projected upward or furrowed brows if projected downward. I often wonder, what advantage the best market forecaster has over random chance. For example if the market forecaster said prices were going to go up, and then on the other side of the room someone stood up with a magic 8 ball that said “outlook looks bad” and you did this for 100 years, who would be right more often? My guess is that it would be a pretty even race. After all – if the market forecaster really has an advantage, couldn’t they make a nice living by playing the market, buying puts and calls and never have to work another day?

My friend Wally Olson teaches livestock marketing based on the principles Bud Williams founded. He reminds us that the only price that is real is what animals are worth today. When working your projections for the coming year, I suggest you use what you know you could sell them for today. Certainly things will change as the year unfolds, but then your plan should be changing as well. As Dwight Eisenhower said, “In preparing for battle I have always found that plans are useless, but planning is indispensable”. When the year starts and the ‘battle’ unfolds, replan and adjust. Falling prices create just as many opportunities as they do problems, if you are ready to respond.  

Listen to Heidi Stoltz explain how they use projections to adjust their plan for the coming year:

Here is Heidi’s full story including her experience at the Ranching for Profit school:

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