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Abstract
One alternative to a cow-calf-yearling
operation is a stocker operation. Relative
profitability of cow-calf-yearling versus
stockers is well documented. Little is
known, however, about the economics of
the transition process itself. We analyze
benefits, costs, and risks of switching
from cow-calf-yearling to stockers over
a one-year versus seven-year transition
period. Results show a gradual transition
is superior to an abrupt transition. A
gradual transition to stockers generates
more net present value than cowcalf-yearlings,
given a sufficiently high
discount rate or short planning horizon.
Farm managers and consultants should
include transition-period benefits
and costs when analyzing alternative
enterprises.