There surely isn’t much interest in retained ownership among Ozarks cattle producers – not with calves bringing as much as $300/cwt, and yearlings over $200. But even so, it’s long been a way of doing business for some growers.
“There are producers that have historically retained ownership through the feedlot,” said Dr. Derrell Peel, Oklahoma State University agricultural economist. “Some of it is just a personal preference in terms of the way they like to run their cattle business. Obviously, producers who think they have better than average cattle have some incentive to retain ownership; in many cases, retained ownership was the principal way that you could capture that additional value. If you sold into the commodity market you got commodity, kind of average prices, and you often didn’t get that price.”
But in the absence of retained ownership, a good relationship with a feedlot may be the ticket to better returns. It may take time to develop; a feeder may need to finish a pen or two of a producer’s cattle to get a handle on the quality. At that point, said Peel. The feedlot may be willing to take full ownership of those cattle and still pay the additional value back to the producer. It’s also important for the cattle raiser to shop around. “It’s kind of like choosing a doctor or lawyer,” Peel said. “It’s going to take some trial-and-error, and the first one you choose may not be someone that works. They may have a slightly different management philosophy, and you just may not be comfortable with them. So I think a producer has to be prepared to shop around a bit.” He suggested talking to other producers about their feedlot customers.
Eldon Cole, University of Missouri Extension southwest region livestock specialist, said not many growers in the region have any interest in retained ownership, even though it might be to their benefit. Cole told OFN, “We thought if they were producing good cattle, maybe they were leaving some money on the table when they sell the calf at 500-600 pounds, instead of owning it all the way through the feedlot and to the harvest phase.” But he said most ranchers don’t want to take the risk. “Bad things can happen when cattle are in the feedlot for that last 120-180 days,” he said. “Death loss and sickness; the market can drop, feed prices can escalate, and those things can scare people.”
Cole said the short supply of cattle will probably lead to some feedlots curtailing operations or shutting down entirely, and there are always a few people interested in feeding cattle on the side – mostly those who are in a position financially to take some extra risk. “I think the extra profit from owning cattle that extra 4-6 months is not all that great,” he said. “It may be somewhere in the neighborhood of $20-50 per head on average to take that risk, and quite honestly a lending institution that may have to finance the feeding of those cattle is a little nervous about taking the risk just to make that few extra dollars.” Also, producers may want to find out if the breeding program they have is on target to meet a niche market; Cole said, “Certified Angus Beef is one of those niches that a lot of people look at. Striving to get cattle to grade prime – that’s kind of a lofty goal, but it takes time to get those genetics into play.”
Peel added, “We have a limited supply in the industry and the cow/calf level, and coupled with that the stocker level where we’re utilizing forage, really are the sectors that are in the driver’s seat right now. I don’t know that there is a lot of incentive for many producers to be involved farther up the chain than that in terms of retaining ownership, or becoming involved in cattle feeding at this point in time.”
