Evaluating Retained Ownership and Stocker Alternatives

At the Range Beef Cow Symposium earlier this December, I was asked to speak on the economics of different production systems.

At the Range Beef Cow Symposium earlier this December, I was asked to speak on the economics of different production systems. I took that to mean an evaluation of a cow-calf only operation compared to a cow-calf yearling operation. There are numerous different types of yearling or backgrounding operations. Ranchers may hold weaned calves for about 100 days and put anywhere from 100 to 250 lbs. on the calf and then sell it in February. At the other end of the retained ownership spectrum, ranchers may "rough" the calves through the winter and then graze them on grass all summer and even into early fall. These calves may be over 18 months of age and weigh more than 1,000 lbs. when sold. Between these two types of programs are a myriad of other alternatives: short season and graze out wheat pasture programs, corn stalks grazing, dry lot with hay, range grazing with supplements. The calves may be sold at the end of any of these programs or they may be retained for another 90 to 180 days on grass.

There is a challenge to evaluating the economics of each of these systems. I looked at several alternatives including just looking at the historical returns from each of these, predicting the futures returns from each of them and simulating the past and future returns when several factors are allowed to vary, such as market price or average daily gain. Each of these methods of analysis tells a different story and provides insight, but each also suffers from one major weakness: I assume a certain type of program. By that, I mean I have to pick an average daily gain, the number of days on feed, a starting weight of the calf and several other factors. When my analysis is done it makes for a nice presentation, everyone tells me it is interesting, but almost all producers leave not knowing exactly how their operation compares because they have a different calf starting weight, or they target a higher rate of gain, or they remain in the program for a shorter or longer period of time and thus sell in a slightly different market with a different yearling weight.

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