By Andi Anderson
How can a person afford to pay thousands of dollars for an animal and still expect to make a profit? This is a major concern among stocker producers buying calves in today’s market without strong guarantees of future value.
Even though there is still a slim profit, the real issue is the growing risk tied to higher investment amounts. Years ago, a producer could buy a calf for $1,000 and aim for a $100 profit, resulting in a 10 percent return. Now, buying the same type of animal for $2,000 but still making only a $100 profit drops the return to 5 percent.
This shift makes the business model far less attractive. Investing double the amount for the same profit does not make sound financial sense, especially when other investments might offer better returns with less risk.
Some producers argue that they have few alternatives, but stepping back to reconsider investment choices could be wise. Instead of accepting a lower return, producers might explore other opportunities that provide stronger growth potential.
In today’s cattle market, careful financial planning is crucial. Producers must evaluate the risks and rewards to ensure their operations remain sustainable. As calf prices rise, maintaining profitability without adjusting expectations or strategies becomes increasingly difficult.
Decisions about buying stocker calves today need to be based not just on tradition but on a clear-eyed analysis of investment returns. A 5 percent return might not be enough to justify the risks in a volatile market.
Photo Credit: gettyimages-ahavelaar
Categories: Ohio, Business, Livestock