Sifting the reality of retained ownership is like sorting bulls for the next breeding season: Considering the possibilities is free, but ignoring the prospects could cost the future.

'I really think we're all going to have to be more creative,' says Joe Neill, president of Neill Cattle Co. at Welch, OK, a 14,000-head capacity feedlot. 'Whatever segment you're in,you're probably going to have to be involved in at least two segments to make it work in the future. You can't sell a 500-lb. steer calf and make it work, or just put on 200 lbs. in a stocker operation and make it work.'

Neill isn't a guy banging the drum for more business. In fact, he says, 'We always thought over the years the guy who got into retained ownership and stayed with it (every year) was better off. That's changed a little bit. There are times it's too risky.' Just ask the folks who bet on a $75 market last year that never materialized.

But Other Times It Works But, there are other times when holding calves beyond weaning -- in backgrounding and stocker enterprises, or clear through the feedlot -- can make all the profit difference in the world.

As an example, James Henderson, Cattle-Fax market analyst explains their data shows winter stockers have turned an average profit of $30.06/head 15 of the last 19 years. More specifically, 13 of the last 17 years, a producer could have realized a $30 advantage by preconditioning his 475-lb. steer calves, then running them on wheat for 120 days (Table 1), compared to selling them straight off the cow.

Head those same calves weighing 740 lbs. to the feedlot for 140 days, sell them in August, and there would have been an average advantage of $54 in 14 of the last 17 years, he says.

Of course, the key is knowing when to hold them and when to fold them. And, that has everything to do with understanding breakeven costs at the cow/calf level.

'You have to know what your cow/calf costs are. If we look at selling 500- to 550-lb. calves for 82-85 cents, and that's at your breakeven level, then it might make some sense to consider retained ownership,' says Henderson.

In other words, if all that can be had is trading dollars and giving away your time for the year, profit demands looking for other opportunities before selling them.

Conversely, Henderson explains, 'If you're a low-cost producer and you can break even at $57/cwt. on those calves and can net $150 per head by selling them, you have to ask if you can really net any more by retaining ownership.'

That's especially true in the current market where excess feeding capacity has some folks bidding the feeding profit out of calves for the chance to keep pens full.

Proceed With Caution 'There is no question we're at a stage in the cycle where I'd encourage a lot of producers to consider retained ownership,' says Henderson.

With liquidation coming to a close this year, Cattle-Fax expects to see the lowest cattle numbers for the cycle in 2000-2001, with stronger feeder prices and cow/calf profitability in response to the reduction in feeder calf numbers.

'In times of large feeder calf supplies, the advantage of retained ownership is to minimize your losses. If you're in the market upturn, you want to retain ownership because you're taking advantage of the turn in the cycle,' Henderson explains.

If breakeven costs and earning potential add up to a decision for retained ownership, both Neill and Henderson advise producers to proceed with caution, especially if it's their first time taking cattle to the feedyard. They say there are plenty of considerations along the way, everything from addressing the health of the calves, to understanding how yardage and feed markup are calculated, to establishing trust with the folks who will manage the risk and market the cattle.

'If this was my first time, I wouldn't assume all of the risk on the cattle. I'd partner with the feedyard. Understand that yards will help with financing and risk management,' says Henderson.

Based on a survey of Cattle-Fax members, Henderson says retained ownership increased steadily from 1988 to 1995 (38-55% for stockers and 18-27% through the feedlot) as producers got more comfortable with the notion. At the same time, more producers have been preparing for value-based marketing by finding out how their cattle perform past the ranch gate.

Between $5/bu. corn in 1996 and more favorable calf prices in 1997, however, those figures dropped back back to 47% for stockers and 27% through the feedlot.

Bottom line, Neill says, 'From a retained ownership perspective, a guy had better check his whole card. Overall, if producers would figure out what their calves actually net with shrink and commissions included, it would change the breakeven (feedlot) on some of these cattle.'