Sending cattle to the feedyard and retaining ownership can be a profitable venture for cattle producers, but is it the right move?
“It’s kind of glamorous to think about retaining ownership at the feedyard, but you have to know yourself, your cattle and the economics,” Dr. Evan Whitley, Center for Advanced Agricultural Systems and Technology manager of the Samuel Roberts Noble Foundation in Ardmore, Okla., said.
Whitley said producers should make contact with the managers of prospective feedyards to find out what the feedyard can offer.
“Find out what kind of ration they feed, what their health protocols are so that you can gauge if you have the management and the cattle that fit into that feedyard’s program,” he said. “Most cow/calf producers do not retain ownership of their cattle and they are new to these questions, so it’s really important to establish that rapport, that relationship with that feedlot manager. For some producers, that fear of not having possession of the cattle can be overcome by establishing that relationship and confidence with those feedyards.”
While it is important to find out what the feedyard can do to get producers the highest possible dollar for their cattle, producers should find out what he or she can do to get calves ready.
“There are going to be some management practices that do preclude you from retaining ownership,” Whitley said. “If you don’t have that high-quality herd health program on both the cows and the calves, if you don’t have a defined breeding season that allows you to instill that uniformity in that calf crop or if you don’t have the ability to castrate or dehorn, there’s bigger fish to fry rather than trying to figure out if you should retain ownership.”
Commercial feedyards typically deal with producers who are retaining 100 or more head of cattle, so for those with only a few head, the best option might be to sell.
“Most feedyards in the Texas Panhandle and up through the central part of the United States feed cattle in 100- to 200-head pens,” Whitley said. “That, however, doesn’t preclude someone from sending 50 head, but it goes back to your economics. Your participation cost will he higher with 50 head, as opposed to 150 head.”
When do producers know if they have made any profit from retaining ownership? Usually not until the cattle are sold
“Most of the feedyards will charge you at the end,” Whitley explained. “They will do a closeout and most of the time they are going to charge you a monthly feed cost, a monthly yardage cost and so on. Then at the end, once your cattle are sold, be it on the cash or on a grid, there will be a settlement. That will be the time that costs associated with the cattle and revenue generated will have to be analyzed and settled.”
When sending cattle to a commercial feedyard, turning a profit, Whitley said, can be difficult. However, for producers who feel they have a superior product, there are options.
“The majority of the time, the market will not let a producer, based on economics alone, retain ownership because feedyards are more efficient and own the cattle, feeding them themselves, opposed to custom feeding them for someone else. But, if you have the genetics that will allow you to take advantage of some of these value-added programs and are able to sell past the finishing aspect, selling on the rail, maybe going into these mixed markets, it might work well for you to seek a custom feedyard.”
Retaining ownership may also be able to give per animal carcass data, which producers can then use to work on their genetics
“Most of the data coming back is going to be the pen average data, which goes back to the number of cattle in the pen, but if you retain ownership through the packing house, most of the time that carcass data will come back on an individual basis, so it really allows that progressive producer to take that next step in order to determine management decisions in order to push their cow herd to a new level.”
He added that some land-grant university extensions offer retained ownership programs that provide co-mingling opportunities, giving producers the chance to see how their genetics are working.
Some feedyards also offer partnership opportunities for producers
While retained ownership might not be the most profitable option for producers, Whitley said it could be a valuable tool.
“I don’t want to scare anyone away from retaining ownership, but it goes back to knowing yourself, knowing the economics of cost of production and potential revenue generation, and knowing your calf,” Whitley said. “I don’t want anyone to miss the opportunity of retaining ownership of a set of cattle where you put the management and the decisions in place that allow you the opportunity to do so. That’s when you are going to take your program to the next step.”
