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Return On Investment

There are plenty of ways to lose money in the stocker business, but the returns can be more lucrative than some realize, too.

There are plenty of ways to lose money in the stocker business, but the returns can be more lucrative than some realize, too.

At the Mid-South Stocker Conference, Mike Murphy, an analyst for Cattle-Fax, pointed out just a few dollars return, relative to the equity requirement per head and the length of ownership can produce astounding return on investment (Table 1).

Rather than think in terms of dollars per head, Murphy explains, "Return on equity is how we should be measuring our business."

Annualized Percentage Return on Equity (Assumes $150/head collateral) Dollars/Head Profit Days on Grass $10 $20 $30 $40 $50 100 24% 49% 73% 97% 122% 120 20% 41% 61% 81% 101% 140 17% 35% 52% 70% 87% 160 15% 30% 46% 61% 76% 180 14% 27% 41% 54% 68% 200 12% 24% 37% 49% 61%

Source: Cattle-Fax