The Decision to Retain

August 22, 2018 01:14 PM
This year, hanging on to your calves is a toss up

Market signals are usually helpful when deciding whether to retain ownership of calves after weaning. Calf prices in 2014 and 2015 were 40% to 50% higher compared with this year, which made the decision to sell a no-brainer. But market conditions for 2018/19 are not an easy call, and analysts say the decision to retain ownership is a 50-50 proposition.

Cow-calf producers have a number of factors to consider when weighing the decision of retained ownership. Here are three tips to keep in mind:

Relationships matter. The key to a successful partnership with a feedlot is building a relationship, says Josh Maples, assistant professor of agriculture economics at Mississippi State University. A cow-calf producer needs to do their homework prior to entering discussions with a feedlot and talk to other people who have done business with the feeder. “That relationship is one of the most important things—make sure you feel comfortable with where you’re sending your cattle,” Maples says.

Don’t get complacent. Marketing decisions shouldn’t be made just because that’s how it has always been done. “It’s worthwhile to assess decisions because the circumstances are changing in these markets,” explains John Nalivka, president of Sterling Marketing. A producer who traditionally retains ownership might want to re-evaluate the situation if the cattle market is taking a dive. The same applies for someone who markets calves after weaning and the market is rallying.

Capture value for your cattle. For producers who don’t have cattle that can be marketed through branded beef or natural programs there isn’t much potential for profitability with retained ownership, says Derrell Peel, Oklahoma State University Extension economist. “But if you can identify and tap into a value-added program, then certainly feeding out quality cattle can work.”

The cattle market tends to shoot for average, and cattle producers can be rewarded aiming for the top, Peel adds. “Sometimes the only way to capture the value of your cattle is to realize that potential yourself by feeding them out,” he says.

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