Fall marketing time is not that far away for many Carolina cattle producers. Feeder calf prices are substantially above last year and the price of corn has fallen. USDA now projects the 1997-98 corn crop to be above nine billion bushels. Things have definitely improving compared to the last few seasons? Is retained ownership a viable alternative under these market conditions?

Retained ownership is generally considered a viable market alternative when corn prices are high and calf prices are low. Producers feed their calves until spring, generally on small grain forages or other low cost feeds, and hope that market prices will improve. But, this year calf prices are high enough to allow cattlemen to sell fall calves and a return small profit. Would retained ownership under these conditions improve what I expect my returns might be from a fall sale? What factors does the cattle producer need to consider to evaluate this decision? Are these factors any different than those used when cattle prices are low?

Many factors might lead a producer to consider retained ownership. Producers may elect to hold calves over because they have an inexpensive supply of feed and a good source of inexpensive pasture on hand, an under used supply of farm labor or they need to roll the tax liability of a calf sale into the next year. Regardless of your reason, the underlying question "still is," will the returns from retained ownership be larger than the returns from selling the calves in the fall?

Retained ownership not only affects your overall level of dollar returns but, it can also significantly affect your cash flow. If your calves are not sold in the fall but are now sold next spring, your ability to meet loan payments or other family commitments may be significantly altered. Your lender may need to be a partner in your retained ownership decision.

Additional inputs might also be required to successfully hold calves over. Feed or capital expenditures for fencing or increased labor requirements may be more than producers can handle. Someone needs to feed and babysit these calves during the winter. This decision might keep you and the "Mrs." from wintering in Florida.

Does retained ownership always work out the way you expect? Because it is difficult to second guess livestock markets and Mother Natures's influence on production, the retained ownership decision does have some risk. Market prices might decline and weather conditions can affect weight gains. Consequently, retained ownership is not always a sure bet.

Even if you think retained ownership will yield positive returns this year consider these other factors. If they create problems sell your calves and be done with it. You and everyone around you will be happier. If you can handle these other factors, then grab a pencil and start figuring.

The mid-July local cash market in the Carolina's is quoting (400-500 lbs.) feeder calves at $90 per cwt. Clemson's cow-calf budget projects out-of- pocket production costs in the Piedmont to be between $300 and $325 per head. Hence, producers can expect to average $90 per head above out-of-pocket expenses on this calf in mid-July. October feeder cattle futures are trading at $81.50 per cwt. suggesting that a price for Carolina calves would be close to $87 per cwt. this fall. So the market is telling us that a return close to $90 per head above out-of-pocket costs is likely into the fall of 1997. The question is; "Can retained ownership through the spring of 1998 improve this return?"

Remember that the evaluation process for retained ownership starts with the producer comparing the potential returns between a fall and spring sale. The analysis also requires the determination of the cost of gain on the calves for the retention period. Let's try to analyze the potential of retained ownership for the 1997-98 season. Keep in mind that your situation is probably different than mine so you should do your own calculations and not rely on mine for any decision that you might make.

We have said that the market price is close to $87's per cwt. This says that a 500-pound calf should be worth $435 in the fall. Based on my cost estimates ($300 to $325 per head) the return to the cattleman's labor and fixed resources could be over $100 per head. It is likely that this price will be achievable this fall since corn prices appear to be weakening as harvest time approaches.

Given this mid summer outlook for the fall calf market let's also project a spring 1998 price. The March 1998 feeder cattle futures contracts are saying that prices for 750 pound feeder cattle in the Carolinas will be near $73 per cwt. in March of 1998 (March feeder cattle futures at $83.00 less a Carolina historical average basis of $10 per head for 750 pound calves in March). Hence, if we keep a 500-pound steer calf over the winter (150 day feeding period) at a rate of gain of 2.25 pounds per day (total weight = 838 pounds) we can anticipate selling this calf for $612 per head in March of 1998, Table 1. If the cost of gain is $40 per cwt., the overwintering bill would be $135 per head (150 days X 2.25 lbs. per day X $.40 per lbs.). Net returns less stockering costs are near $477 per head. This is about $25 per head return more than if we had sold the calf in the fall of 1997 ($612-$451-$135).

Retained ownership in this example works. The returns from retained ownership are larger than the returns from selling the calf in the fall local cash market. So retained ownership is not just for times when cattle prices are low. But, these returns are also vary dependent upon the cost of gain. When the cost of gain goes above $40 per cwt. than this decision becomes quite marginal. It is very important that you understand what the cost of gain can do to the retained ownership decision. Underestimation of the cost of gain is the biggest problem producers face in this process.

This concept of the cow-calf operator retaining his calves or buying calves and stockering them through the winter is becoming more widespread in the Carolinas. These operators are capitalizing on the South's good growing conditions and inexpensive gains to capture profits that were once shipped out-of-state when calves were simply weaned and sold in the fall. Is retained ownership for you?

TABLE 1: BREAK-EVEN FEEDER CALF PRICES AT SELECTED COSTS OF GAIN
(1) COST OF GAIN (CWT)	(2) WEIGHT GAIN (CWT)	(3) COST OF GAIN (CWT)	(4) CALF COST	(5) BE PRICE (CWT)	(6) CALF VALUE (CWT)	(7) RETURNS PER HEAD (CWT)
$25.00	3.38	$ 84.50	$451.10	$63.95	$611.74	$76.15
$30.00	3.38	$101.40	$451.10	$65.97	$611.74	$59.25
$35.00	3.38	$118.30	$451.10	$67.99	$611.74	$42.35
$40.00	3.38	$135.20	$451.10	$70.01	$611.74	$25.45
$45.00	3.38	$152.10	$451.10	$72.02	$611.74	$ 8.55
$50.00	3.38	$169.00	$451.10	$74.04	$611.74	($ 8.35)

1. Cost of gain in hundredweights
2. Total gain for 150 days in hundredweights (150 x 2.25 = 338 pounds)
3. Column 1 times column 2
4. Value of calf at fall sale plus interest from fall to spring (150 days at 9 percent ($435 x 1.037)
5. Price per hundredweight necessary to break-even. Any price above this is a positive return to the producer (col 3 + 4)/838 pounds
6. Value of the calf at spring sale time
7. Returns per head at various costs of gain

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updated 7/16/97