Retained Ownership

[grassfarmer]

I'm trying to understand this concept of retained ownership of feeder calves through to fat. I understand the process but have some questions about the economics. Basically I want to know why it is such a good deal for the cow/calf man to pay someone to feed out his calves. If it is so profitable why do the feedlots lose substantial sums of money on a regular basis doing the same thing. Is it :
1) because they are working purely on borrowed money?
2) the fat market fluctuates in price too much?
3) the cattle they are buying are of to inconsistant performance?
Anyone with any comments?

[cswilson]

We have retained ownership on our own calves for several years and probably make money 90 percent of the time. The feedlot business probably can state it's profit and loss better than a cow/calf man because they actually keep records. Most of our cow/calf operations are propped up by off farm jobs or other enterprises. If we forced ourselves to keep more detailed records I think we'd find a cow calf operation maybe isn't as rosy as we all think.

[rsomer]

grassfarmer: For the last fifty years we always have retained ownership of our calves, never sell in the fall. We feed our own calves and feel we have almost never lost money feeding our own calves. We keep detailed records of all feed and weights, other costs. We believe we have an advantage because we precondition our calves and receive all the benefit from doing so. We don’t have anywhere near the drug costs that the guys buying calves have, some years never treat a sick calf. We have some efficiencies because we save the cost of buying and shipping the calves. Our calves have been selected over many years to do well in the feedlot. We don’t keep them to slaughter weight anymore but did at one time.

I don’t think the feedlots are loosing money feeding calves, I have talked to a local feeder who has been in the business longer than most and he claims he has never lost cash, just sometimes he doesn’t get paid for his fixed overhead costs. Again he is feeding in his own lot.

If we had to pay someone to custom feed our calves it would be pretty tight, the calves would have to gain well to cover the costs involved. I don’t see how the feedlot can loose custom feeding, everything is charged out to you, the owner of the calf. The interest in retaining ownership at this time is based on the assumption that the market will be stronger some time down the road than it will be in the next month or so. Maybe that is true, maybe not. Found a web-site that I thought discussed the issue well: http://www.ianr.unl.edu/pubs/beef/g766.htm

[rusty1]

grassfarmer - I just picked up a piece from CattleFax from the US. They calculate that 15 out of 20 years the producer that retains ownership makes more money. And that didn't account for getting feedback on your calves performance and the ability to make production deciaions on the producers cow herd. I would highly recommend that you find a feeder that will alow you to weight your cattle no later than their final implant weight to get some record of performance in the feedlot. It would be even better if you used RFID tags and a feedlot that is managing their cattle as individuals.
Feedlots will tell you that they would be happy to make $25.00 net day in and day out on every animal they feed. Research also shows that in any given group of calves there is often a $500 spread from the most profitable animal to the least profitable. Therefore if you find a feeder that will help you track your performance you can make great strides in your genetics. (Not saying you don't already have). However we have often found the ADG in a pen of calves to range as high as 7lbs. per day while some are under 1.0 Lbs.

[cowman]

Retained ownership: Can mean a lot of different scenarios. Put them in a custom lot? I doubt you'll get rich. Feed them out yourself? Probably make a buck.
Also depends on what size and type of cattle you have. Under 500 lbs.? Well most feedlots don't want to mess around with these little long keeps although that is just what the backgrounder likes and that's where he makes his bread and butter. But if you have a big 700 cross bred calf that is what the feedlots want.
I've always kept my heifers as I got tired of getting 10 to 15 cents a pound less than the steers. It's amazing how that price spread shrinks come spring! When I sat down and figured out costs I always made some money. Maybe not enough but you get into a system and it works and to change it sort of screws up the old income tax thing. I also keep any little tail ender type steers and they always seem to make me some money.
Now the easy way is to unload everything in the fall and not have the extra work and hassle. I guess it all comes down to what your priorities are! I sure do wish I'd unloaded those little steers and heifers before May 20th this year!

[grassfarmer]

Interesting comments: rsomer, your comments are maybe closest to the position I am in. I am in my third year of producing preconditioned calves. Weaning March/April calves on 1st October and keping them 7 weeks before selling. Haven't treated any calf post weaning and they gain 2 1/2lbs a day on a fairly simple ration. The vaccines available for preconditioning in Canada are excellent. I have been happy with the calves performance and wonder if I have anything to gain by moving them into a custom feedlot in December to get them fattened professionally. I don't have facilities/skill to fatten although I could background them for a while longer.. I was planning to keep them to mid December this year anyway to wait for the glut of calves to be through the auction system. If you retain your calves beyond weaning but not to slaughter where is the advantage?
in the post weaning performance?
in selling out of the fall market?
capitalising on good genetics?

[rsomer]

grassfarmer: you asked "If you retain your calves beyond weaning but not to slaughter where is the advantage?

The advantage I see are:
- backgrounding allows us to move our calving date a month later to April when temps are better and days are longer, not worried about weaning weight in October/November. Later calving means bulls go out June 10 when grass is usually growing well for best results getting cows in calf.
- backgrounded calved bring a bigger cheque than weaned calves, probably most important advantage.
- don’t have enough available labour to continue to feed calves to slaughter through busy spring calving, seeding and summer haying season.
- Will look at markets in mid February early March this year and decide if we need to keep the calves longer. We can if we see markets improving later in the year. I think we will know better by then just what the situation is.

Our numbers suggest it is necessary to keep calves at least 8 weeks after weaning to recover cost of preconditioning and post weaning. It looks like you are aiming for a year end tax market so maybe it works for you. Basically the longer you can keep them the more profitable the calves are assuming markets are at least steady and the calves are gaining as they should.

[rusty1]

I remember in the late 70's an Old Time who had fostered quite a livestock empire, telling me "The longer ya hang to the cows tail the better she is ta ya." :-)

[grassfarmer]

rsomer, thanks for your insights - I'm heading pretty much your direction with regard to calving later in the year on grass etc as it seems to make so much sense. I am now debating whether to feed some of my calves through until maybe February and sell them as bigger feeders,which I could easily do, or put them into one of the "value marketing" custom feedlots programs. I still am not clear which would pay me best for what I perceive to be high health/high genetic potential calves.

[kato]

We keep our own until January/February. We calve in January to March, so the calves are pretty big when we sell them. We've found that feed efficiency comes in to play after that. (the bigger the calf, the more he eats in a day, for the same a.d.g.) We leave the finishing to the big boys.

We've found that our own calves are easy to get from weaning to then. We buy backgrounding calves in the fall too, and there is no comparison between the two groups regarding health, gain, and just about everything else. Even with auction mart calves in the yard, our own give us very little trouble. We vaccinate in spring, and booster at weaning. The calves stay with their buddies, and once the first three days of bawling are over, that's about that. They settle right in and get to work.

Another bonus, is that you have more time to really do a good job of pulling replacement heifers out of the herd.