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Retained Ownership Pays

When calf and feeder cattle prices are high, not just any retained ownership program will fly. But by producing calves from proven genetics and using a strict preconditioning program from pasture to packer, a central Texas ranch family is enjoying some lofty premiums. Greg and Don Crawford, whose family has ranched near Strawn, TX, since the 1940s, revamped their production program three years ago

When calf and feeder cattle prices are high, not just any retained ownership program will fly. But by producing calves from proven genetics and using a strict preconditioning program from pasture to packer, a central Texas ranch family is enjoying some lofty premiums.

Greg and Don Crawford, whose family has ranched near Strawn, TX, since the 1940s, revamped their production program three years ago after being convinced they could make retained ownership work for their Angus and Angus-cross herd. The advice they took from James Fuqua paid off with their first, fed-out calf crop.

The Crawfords use a unique method of herd management known as U Lazy 2. They're licensed operators of the program developed by Fuqua of Quanah, TX. This patented program dictates every step of production from the moment the calf hits the ground until its carcass data is analyzed.

“The first calves we sent to the feedlot produced $120 to $140/head profit, nearly $70 more than we would have made by selling the calves off the cows at local sales,” Greg says. He adds some calves went to the feedyard in late spring.

Calves are produced from U Lazy 2 program-approved cows and bulls. They graze on native grasses in an intense rotational system, which the Crawfords plan to expand in the next year or two. The cattle receive a supplement to promote growth.

At 700-800 lbs., the calves are shipped to the program's specific feedyard — Flint Rock Feeders in the northeast Texas Panhandle near Gruver. There, they're monitored closely with ultrasound checks to gauge performance.

At their finished weight, 1,150-1,300 lbs., they're harvested and carcass data is provided to the Crawfords. The data is part of a continuous string of performance information they receive from Fuqua, who manages the system.

“It's been tempting to sell our calves (with prices well over $100/cwt. earlier in 2005),” Greg says. “But with the high quality grades we see from our calves carried over to the feedlot, it's hard not to make a solid premium on our production.”

The retained benefits

James Mintert, Kansas State University livestock marketing economist, says many producers retaining ownership have committed themselves to it because of the time and money spent on improving herd quality.

“It turns into a long-term decision, especially if you're involved in a program with higher quality genetics and trying to reap the benefits in terms of carcass quality,” Mintert says. “Those aren't decisions you flip from one year to the next.”

The Crawfords made the commitment after going with a mainly Angus herd. They wanted better methods of getting paid for their genetics. Fuqua outlined to them how his plan worked, and how he'd never lost money on calves in his retained ownership program.

“I still haven't,” Fuqua notes.

The Crawfords run just more than 300 cows, 210 of which are Angus and U Lazy 2-approved, meaning they have the genetics to produce calves that grade consistently high, at the Choice/3 level. Many cows have come from other licensed herds and contract growers in the herd management program.

The Crawfords have been in the program long enough to introduce some of their own heifers into the system.

“It was our first time saving our own heifers,” Greg says, adding that some cattle have been marketed with good results through the Certified Angus Beef® program. “We're eager to see if their calves perform as good as others we've had in the program,” he adds.

The U Lazy 2 program

Fuqua started the program in the mid-1990s, tailoring his retained ownership program from information gained from the Texas A&M University Ranch to Rail feed-out trials. It begins with proper animal health and nutrition for cows and their calves. It ends with a mountain of performance data provided to participating ranchers on every animal they run through the system.

Computer-generated spreadsheets outline feed conversion, average daily gain and other information. Beef Quality Assurance guidelines are followed.

In the system, calves begin a strict vaccination program at around 60 days of age. It includes a modified-live vaccine and killed vaccine for protection against IBP, BVD, PI3 and other viruses, in addition to a 7- or 8-way blackleg.

A four-digit visual ear tag, along with electronic IDs, enables monitoring of the calf both visually and electronically.

Processing crews receive extra training to ensure proper injections to prevent site blemishes and damage to muscle. In many cases, only one person in a processing crew is allowed to vaccinate.

To minimize calf stress, mamas are kept in an adjoining pen while calves are vaccinated, after which they're reunited. That's part of the program's objective of making sure calves and cows remain paired until weaning.

“We track every animal in the system, which is used by more than 20 operators in eight states,” Fuqua says. He notes the extensive recordkeeping helps participating ranches learn which cows perform well on feed and on the rail.

Fuqua bought into Flint Rock Feeders several years ago to enhance his personal retained ownership program. Flint Rock also follows a specific feeding and animal health program intended to promote better gains and feed conversion. Only preconditioned cattle are accepted at the yard if the yard has any ownership interest in the cattle.

After 80 days on feed, cattle are ultrasounded for quality and yield. They're then tagged with a different ear tag to further identify them, and sorted by weight and quality.

“Under our program, we usually see a lower cost of gain,” Fuqua says, noting that while typical costs of gain were 50¢-55¢/lb. this summer, his were 45¢ for steers and 50¢ for heifers.

When harvested, they're usually sold in the meat through one grid or another. The data is recorded by Fuqua through the harvesting process. That data is made available to the Crawfords and other licensed operators.

Fuqua also monitors environmental conditions and tries to help producers “plan for the next time Mother Nature wants to throw you off the planet.”

“We really like the program because so much risk has been taken out of herd management and overall performance,” Greg says. “The program isn't fool-proof, but James has taken the steps to think everything out.

“The data on our cattle performance gets better every year. We're confident of the quality in our cattle every time we take them to the feedlot,” he adds.

Fuqua says U Lazy 2 cattle aren't required to be fed at Flint Rock. But to remain in the program, cattle must go to a feedyard that operates in a similar manner — with ultrasound, ear tagging, etc.

He stresses retained ownership may not always be the correct marketing method, and producers must decide if it's for them.

“If you see a very volatile market with prices going down sharply, some may choose to go ahead and sell their calves,” he says. “They have to evaluate that.

“I may not have made as much money during certain peak times when calf prices were higher,” he adds. “But over time it's been consistently better to go ahead and retain ownership and improve my herd through that method.”

Larry Stalcup is a freelance writer based in Amarillo, TX.

To retain or not to retain

The judgement on whether to retain ownership or not depends, of course, on the price of calves, feeder cattle and fed cattle. It also depends on the premium you can expect from your genetics.

Because of their Angus herd's excellent average grades at the Choice/3 level, Greg and Don Crawford of Strawn, TX, normally receive a $5/cwt. or better premium for their finished cattle.

As breakevens continue to tighten this fall (2005), those premiums can be the difference in whether fed cattle produce a profit or a loss.

For example, a 700-lb. steer can be sold for $100/cwt., or $700. If that steer is carried over to the feedyard at a cost of gain of 55¢/lb., adding 500 lbs. to produce a 1,200-lb. finished weight will cost about $275 (55¢ × 500). That puts the total cost of the animal at slaughter about $975.

If the live cattle price is $80/cwt., the 1,200-lb. steer will sell for $960 ($80 × 12) — a $15 loss.

However, with a $5 premium for strong performance at the packer, that $80 price becomes $85. That extra $5/cwt. makes the finished animal worth $1,020 ($85 × 1,200). The $15/head loss becomes a $45/head profit ($1,020 - $975).

Kansas State University economist James Mintert says retaining ownership of calves in the fall can be beneficial because it takes advantage of seasonally low calf prices and feed costs, and it markets calves as slaughter cattle when slaughter cattle prices are seasonally strong.

“To capture the seasonal strength in slaughter cattle, producers generally need to place cattle on feed in September/October, and try to avoid November placements,” he says. “Calves placed on feed later in the fall often are marketed late enough in the spring that they miss the seasonal strength in slaughter cattle prices.”

Programs such as the U Lazy 2 system of controlled preconditioning and feeding programs provide a strong avenue for retained ownership. Still, Mintert says the future of such programs may be determined by whether or not more systems evolve to enable producers to obtain stronger premiums for their high-quality calves.

“It has been difficult to reap the benefits of those improved genetics without retained ownership,” he says. “As markets evolve the next several years, we'll see more models in which producers can capture more of these benefits without retained ownership.”

Mintert says graded feeder cattle sales, which place more emphasis on how carcasses will grade, are helping some enjoy higher premiums. “But more opportunities are needed,” he says.