Retained Ownership- Opportunity vs. Risk

Livestock Update, November 2003

Scott Greiner, Extension Animal Scientist, Beef, VA Tech

This process of retaining ownership on a portion of the calf crop fall has been practiced by many producers in recent years. This practice is warranted, as the benefits of retained ownership are numerous- including the opportunity to more fully capture the value of superior management and genetics. While the potential for enhanced economic returns is attractive, additional knowledge and information gleaned from participation in retained ownership are often more relevant than the economic consequences. This is particularly the case when a very small portion of the calf crop is retained. Exposure and understanding of the feeding and packing sectors; gathering of performance, health, and carcass data; and translation of the financial and production data are benefits that can be put to use in the cow-calf enterprise for long-term improvement. With the strong feeder calf prices being paid this fall, retained ownership has been viewed as less attractive by many producers. Certainly, the cash flow, tax implications, and risk factors involved with retaining ownership vs. selling feeder cattle this year are substantial. However, high feeder calf prices are not a complete negative signal concerning retained ownership, particularly if only a portion of the calf crop is retained. In years with high feeder prices, a smaller portion of the calf crop is required to generate the gross income needed to offset costs of production. In simple terms, the break-even gross returns for an operation is received on fewer calves when prices are high. When considering retained ownership in years of high feeder prices, the important consideration is how much risk one wants to take. Important factors to evaluate include costs of production vs. potential income and tax implications of income received this year by selling feeder cattle vs. next year as slaughter cattle. The use of futures and options are also tools that need to be strongly considered to manage risk. Ultimately, the decision to retain ownership on a few calves in years such as this with high feeder prices comes down to the perceived value of the knowledge and information gleaned by participating vs. the value of the dollars on the table now.

A shipment date of December 5 has been set for the Virginia Retained Ownership Program. The Virginia ROP is an educational program that provides producers an opportunity to retain ownership on a portion of their calf crop (as few as five head) to attain valuable information concerning the feedyard and carcass performance of their cattle. The VA ROP cooperates with the Tri-County Futurity in southwest Iowa. The TCSCF is a cooperative program that includes several feedyards in Southwest Iowa that custom feed and handle state-sponsored ROP cattle, and is coordinated through Iowa State University Cooperative Extension.

Producers planning on consigning cattle to the ROP program should plan on weaning their cattle at least 30 days before shipment, conducting a complete vaccination program, and start the cattle on feed. Guidelines for a preshipment health program are available through the local Extension office or from the VA ROP coordinator.

For more detailed information on the Virginia ROP contact Scott Greiner, Extension Beef Specialist, Virginia Tech, phone 540-231-9159 or email sgreiner@vt.edu.

CONSIGNMENT FORM
VIRGINIA RETAINED OWNERSHIP PROGRAM

December 5, 2003 Shipment

Shipment locations will be designated to match consignments.

Target weight: 650 lbs
Accepted weight: 500-900 lbs

Steers Only
My consignment: __________No. Head
__________Expected Avg. Weight
__________Weight Range

Preferred shipment location: _____________________________
_____________________________

Name: _________________________________________

Address: _________________________________________
_________________________________________
_________________________________________

County ___________________________________

Phone: __________________(day)___________________(night)

Email: __________________________________

Return with $5 per head consignment fee payable to the Virginia Cattle Feeder Assoc. by November 20 to:
Scott Greiner
366 Litton Reeves Hall
Virginia Tech
Blacksburg, VA 24061
Phone: 540/231-9163
Fax: 540/231-3713

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