Risk Analysis for Beef Cow-Calf Retained Ownership Decision Making

Utilization of Historical Performance Data

Abstract

Cow-calf producers recognize the value of postweaning performance information and have collected a large volume of data through alliances and university feed-out programs. These statistics are largely used to address and guide production decisions including genetic, health and management issues. Value Based Marketing (VBM) of fed cattle is increasingly popular, and individual animal value is determined based on specific carcass merits. This system of marketing increases income variability compared to traditional liveweight marketing of fed cattle. This research is designed to illustrate how feedlot and carcass performance information can be incorporated into the cow-calf producer's risk analysis decisions regarding retained ownership from weaning to harvest. Economic risk of retaining ownership is based on uncertainty of market conditions, cattle performance and expected income based on carcass merits. This study addresses utilization of historical performance data to compare the market value of feeder cattle with their expected value as finished cattle in a VBM system. From a feeder cattle producer's perspective, this is a very important issue. If, from past experience with the same or similar genetics and management, a producer knows with some degree of certainty that his cattle will perform well in the feedlot and/or in terms of carcass merits, then the market price may significantly undervalue those cattle. The producer would be better off to retain ownership of the calves or to market feeder cattle through some alternative means (e.g., direct sales to a cattle feeder with knowledge the cattle's performance potential) in order to receive a price that more accurately reflects their true value.