Retaining ownership can seem like a high risk and high reward option for cattle producers.
It can be a good option to retain profits and data on your own calves. However, there is always the risk of calves not gaining efficiently, death loss and a market downturn.
Here are three tips to keep in mind when considering retained ownership:
1. Be Flexible Making Marketing Moves
Flexibility is a key when marketing calves and producers should be prepared to make decisions to sell if market conditions are right, says David Anderson, extension economist with Texas A&M. Pay attention to the futures market on the feeder side before determining if retained ownership will work. “If you see prices for calves that are more than you would be willing to pay you should sell.”
2. Don’t Sweat Taxes, Worry About Profit
Tax implications are a concern when implementing a retained ownership program because there is the possibility of gathering no check for calves in a year and two checks the next. “I think some people make bad decisions because they don’t want to pay taxes. I’d rather make the right decision and pay taxes because that means I’m profitable,” says John Nalivka, president of Sterling Marketing.
3. Find a Feedlot Partner
For some producers retaining ownership can be scary because of health and marketing risks foreseen by having someone else care for their cattle. Andrew Griffith, economist with University of Tennessee, suggests partnering in ownership with the feedlot feeding the calves. “Having somebody else with part-ownership in your cattle reduces price risk immediately. Probably the biggest risk it reduces is the personal, mental risk of knowing these people will do right by your cattle.”