2. Retained Ownership of Livestock and Risk: Overview The risks associated with retained ownership of livestock Retained ownership risk management

3. Retained Ownership of Livestock and Risk Retained ownership may or may not provide income diversification – Ranch and custom background – Ranch and custom finish Can a producer capture and retain the value of weight gain? – The primary concern is determining if market conditions exist to provide value – Are the producer (and cattle) in a position to capture that value?

4. Retained Ownership of Livestock and Risk: Risks Suppose value is generated: – How much added risk is generated? – Is the expected value enough to offset that risk? – Are there ways to manage the added risk effectively?

5. Retained Ownership of Livestock and Risk: Added Risk Added Risks include: – Morbidity and Mortality – Cost of Gain – Price Variability – Timeliness in Marketing – Market Access

6. Retained Ownership of Livestock and Risk: Morbidity and Mortality Morbidity and Mortality research show that: – Commingled pens of cattle had a 6.7% increase in morbidity – Placements at higher weights had lower morbidity – Lower morbidity increased average daily gains – Montana feeder cattle gained 0.2 pounds per day more than those from five other states – Montana feeder cattle had end-values of $31.50 - $35.70 per head over those from other states

7. Retained Ownership of Livestock and Risk: Morbidity and Mortality (cont.)

10. Retained Ownership of Livestock and Risk: Cost of Gain Feed costs Weather Managerial expertise Cattle performance

11. Retained Ownership of Livestock and Risk: Timeliness in Marketing Do you, as a producer, have your cattle at a feed motel? Who controls the marketing decisions? Are cattle sorted for optimal performance?

12. Retained Ownership of Livestock and Risk: Market Access Do buyers visit the lot and consider show lists daily? Does more than one buyer frequent the lot? What type of cattle are they buying? Does the lot have a marketing agreement or strategic alliance?

13. Retained Ownership of Livestock and Risk: Costs Involved Financial Issues Interest cost of further carrying cattle Cash flow issues Enough cash equity to handle downside risks

14. Retained Ownership of Livestock and Risk: Joint Ownership Advantages of Joint Ownership – Better cattle management – Risk sharing Disadvantages – Sharing of profits – Sharing of control

15. Retained Ownership of Livestock and Risk: Summary Management risks associated with retained ownership of livestock