If you traditionally market your calves at weaning, income will be delayed six to eight months until slaughter cattle are marketed. Discuss your equity position with your banker to determine if you have the equity necessary to finish cattle, you should also evaluate how much you can stand to lose in a bad market. Several opportunities exist for reducing risk, but none will guarantee a profit. Many commercial feedyards will offer or have an arrangement with a brokerage firm to provide hedging opportunities for customers who desire them. Cattle producers who are uneasy about placing their entire calf crop on feed or have limited financial resources should consider participating in local steer feed-outs or fill pens together with neighboring farms and ranches.
Producers can consign as few as five head to some feed-out programs.
This reduces risk and still allows the producer learn how the cattle will perform in the feedlot. Cow-calf producers should be aware of the tax implications of retaining ownership. This situation is more difficult, however, when a producer has retained ownership previously and now wishes to sell weaned calves, backgrounded calves or yearlings since two calf crops will be sold in one year. The new tax laws regarding income averaging may help producers through this situation. Producers should contact their tax professional to determine tax implications of retained ownership.