Toss-up on retained ownership

Market signals typically offer a clue whether or not to retain ownership. Calf prices in 2014 and 2015 were 40% to 50% higher than this year, which made the decision to sell weaned calves 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.

Whether to market after weaning, running calves longer as stockers or taking calves onto the feedlot is a decision that is weighed differently by cow-calf producers. Market prices and forage growing conditions locally are two of the biggest factors that most producers will need to consider.

The beef industry has reached a relative balance with the cowherd back at average levels and feedlots stocked, says Derrell Peel, Oklahoma State University Extension economist.

“Obviously what you’re looking at a lot of times is do we have something kind of out of whack that either favors selling them as feeders or favors keeping them all the way through the feedlot,” Peel says.

Being in a middle-of-the-road market leaves producers with a lot of options because there are no clear market signals on selling or retaining, says Josh Maples, assistant professor of agriculture economics at Mississippi State University.

In areas of the country such as the Southeast, moisture conditions have been good, helping boost forage growth regionally. Producers in states such as Alabama, Florida, Georgia, Kentucky and Tennessee have no problems with drought heading into late summer/early fall so there should be ample feed to add cheap gains.

In other areas of the country such as the southern Plains and western U.S. drought is relatively widespread forcing early weaning on some ranches. When in drought situations cattle might not weigh what producers would want, says John Nalivka, president of Sterling Marketing. They also might have difficulty getting an acceptable price for their weaned calves because of a regional flood of calves on the market.

One situation that has the potential to change the profitability of retained ownership in the foreseeable future is the export market. Trade wars have resulted in a ripple effect of retaliatory tariffs.

Peel says beef exports have helped support the cattle market for the past 18 months, but tariffs could have potential to alter those gains.

Nalivka advises cattlemen to know their breakevens and implement risk management to help protect profits if markets go down.

Source: Drovers