By Lee Pitts
I’m ashamed to admit that I was once an arbitrageur. Sounds likes a French doorman at Arby’s, doesn’t it?
An arbitrage trader is someone who takes advantage of the difference between two markets in bonds, stocks, and commodities. I was an arbitrage trader before today’s traders even knew the term, only I wasn’t a Wall Street bull; I just traded in them.
One of the few things I do well is guessing the weight of cattle. I attribute this to being on livestock judging teams and to the fact that when I started in the cattle business, auction markets didn’t have ring scales, so you didn’t know the weight of an animal before you bought it. One of my idols, Pat Goggins, changed everything when he installed the first ring scale at PAYS in Billings. (Pat also had the first video sale.)
Before ring scales, cow buyers had to be really good at estimating weights. As a field editor, I worked ring at auctions, and sometimes I had an extra day to kill between purebred sales in foreign locales, like Socorro, Salina, and Sealy. As an auction junkie, I usually spent this time sitting in auction markets, trying to guess the weight of cattle. It was my golf game.
I started in the cattle swappin’ trade at a time when there were way more bulls than buyers, and that was reflected in the prices paid. Often, the purebred auctioneer selling the cattle didn’t know the weight of an animal within 200 pounds. Of course, if the sale was at an auction market, or if it was a sale barn auctioneer, all bets were off. Because I paid close attention to slaughter prices, when a bull entered the ring, and the bid was cheaper than what I could get at the nearest auction market, I’d buy it. The most bulls I ever bought at one sale was 41 head.
I traded cows, too, and my most profitable day was at a Full French Charolais dispersal where I made one mistake after another. But they were good mistakes! I thought the huge cows weighed about 1,600 pounds, but they weighed closer to a ton. I ordered one truck when I needed two!
I usually bought the cattle under US Cattle Company to fly under everyone’s radar, and in most instances, I’d go up to the breeder afterward and offer them back their cattle if they didn’t want me to have them, but 95% of the time they thanked me for taking them off their hands. In one case, I discovered why the breeder was so enthused about me buying his bulls. The best lesson I got in this game was I couldn’t use the weights that were printed in the sale catalog. In this case, I figured my prices based on those weights, but when I weighed them off the truck after a five-mile haul to the nearest auction barn, they’d somehow shrunk 29 percent. Ouch! I almost lost money on that one.
During the ’70s and ’80s, many purebred breeders were different than they are now. A large percentage were neophytes who liked the purebred cattle game only for the big tax breaks it generated. My arbitrage scheme wouldn’t work now because purebred breeders are much too smart and because prices are so high. Even with a good slaughter market, it’s tough to pencil a profit on a $7,000 slaughter bull!
I usually sent my purchases to an auction market close by, where I probably knew the owner. I sent six bulls to my buddy Arkie to sell in the slaughter run at Socorro, but he ended up selling them as range bulls at a much higher price. That happened a lot and was fine with me.
As a result of all this trading, I collected a huge stack of registration papers from a plethora of breed associations for bulls that never got a chance to contribute to the gene pool. One time I got a letter from a breed association congratulating me for buying a “Pathfinder Cow” that was deader than a jaywalking armadillo by the time I got the letter. And you can imagine my level of discomfort when a conscientious purebred breeder called me a year after I’d bought eight bulls at his auction and wanted to see how his bulls were holding up.