Breeding cattle as an investment

My cattle in Guatemala

I own 56 bulls at the moment, down from 110. They are a happy lot, living in BF’s ranch in Guatemala, eating only grass and getting only an anti-parasite shot once per quarter. I don’t know anything about cattle, I just went with my guts on that one. There are more people on the planet, less space to breed cattle, a bigger middle class who can afford meat, so from the distance, it looks like an asset that deserves further consideration.

My deal

Before we went traveling, BF needed some cash. He wanted to sell some bulls and I asked if I could buy them and come to some sort of arrangement for him to keep them in his ranch. He had a lot of space per head so he said yes. The deal was that I would pay for each calf that was weaned a set price and then we would keep them on his ranch, and split profit at the time of selling.

Every calf cost me $250. At the time of buying, living calves were selling for $.53 a pound.

They were about 9 months and BF suggested we keep them for 2 years, saying they would weight about 1000 lbs by then, and sell for $530. We would split the profit so I would get (530-250)/2=$140 plus my initial $250. Already, you can see that the numbers are high. He had been breeding cattle for the past 30 years, and since he is a spreadsheet addict, had all the relevant historical data to corroborate. He was offering a return of 56% over two years.

Now imagine if you are on your own, you could get the 112% return. And don’t forget that we are talking about bulls here. If you have cows, every year, on top of the return, you would get another animal, doubling your investment! I didn’t run precise numbers for that because I don’t own cows.

Yes you would need to buy the land (check out that interesting article from freedom thirty five about buying some farmland) , and land is expensive nowadays. What BF paid for his land 30 years ago is ridiculous compared to today’s value. And having three employees overseeing the cattle in Guatemala doesn’t cost what having one employee in the US could cost. Still, I think it is a pretty interesting investment. You can resell the land later on and it is likely going to be worth more than what you paid for it.

Did I get the expected investment back so far?

I bought the calves in waves, 50, then 50, then 10, reaching my maximum of 110 heads, and also sold in waves. Last month I sold 44 heads so let’s have a look at that.

The average calf weighted 770lbs. I had bought that lot 15 months ago. We decided to sell before they reached 1000lbs because the weight curve is slowing down between 800 and 1000lbs (you learn something every day, don’t you!) and the price was at an all time high, at $0.76, a 43% increase since January 2011.

So I got back ((770*.76)-250)/2= $167.6 on my $250 investment, a return of 67% in 15 months.

I have kept 56 heads that I may transfer to the land I just bought, or some at least, buy them some cows and start a cattle project!

WARNING

My investment has been perfect because I have been lucky. No animal has been sick (it happens often, and they generally die), still-born can happen with cows, and people can steal your cattle. I have heard all kinds of horror stories in Guatemala about cattle being stolen. Your employee can steal a calf and pretend it was still-born. A plague can decimate half your heads. Because the return is high, I am taking the risk. But you have to factor for illness and miscellaneous events.

Stress-free cattle investments

There are a lot of livestock investments, if you make a little research, it goes from investment funds to actual farmers offering to take care of your cows and bulls for a fee. You don’t have to be a cowboy or girl to benefit from those returns, but the more people you’ll have between you and your cattle, the smaller your return.

Have you ever thought about less traditional investments like livestock?

 

This post was featured on the The First Million is the Hardest, Frugal Habits, Planting Our Pennies, Eyes on the Dollar, Frugal Rules, thank you!

A 30 something French girl embarking on a journey towards Financial Independence. I blog about money, travel, simple and deliberate living, freedom and choices. You can find me on Twitter, Google+, or Reach Financial Independence's Facebook Page

Latest posts by Pauline (Posts)

Thank you for reading! Please let me know your thoughts in the comments below. Never miss another post and subscribe via RSS feed or email. Or come and say hi on Facebook and Twitter.

Comments

  1. That is a pretty awesome return. I have never considered it because I don’t know anyone in the business that I could trust to do it with.
    Sean @ One Smart Dollar recently posted..Should You Pay off Your Mortgage Early?My Profile

    • I have Googled it and many farms are offering some kind of investing systems, every one is different, I would always try a nearby farm, so I can go check that everything is going well.

  2. Fascinating! Thank you so much for sharing. My brother spent a summer working milking bulls. Yup. For the company that does virtually all of the dairy cattle artificial insemination supply in Canada. (Little bro is in vet school). A family friend’s brother raised meat rabbits as a kid, too. Now he also invests in cattle like you.

  3. That is an excellent return and it sounds like things worked out perfectly for you (as you mentioned). I’ve also never considered it because I know nothing about the business and I don’t know anybody within it that would serve as a great partner such as what you’ve found.
    WorkSaveLive recently posted..1-Year Blogoversary Giveaway! Apple iPad Mini, $100 Amazon GC, $50 Paypal Cash!My Profile

  4. This is interesting. I never for a second have considered such type of investment. Returns sound great, but like you pointed out the risks seem fairly high. I’m curious if you had to sell them in the same country? What’s the cost involved in processing them and selling as organic / grass-fed whatever whatever healthy stuff to fancy restaurants? Is that even worth the work or possible even?
    Veronica @ Pelican on Money recently posted..3 Tips to Save Money on Prescription DrugsMy Profile

    • I don’t think there is a particular law here, I have sold to a guy who is apparently taking them to Mexico. I have heard stories about some guys using the bulls to transport drug through the border as well, poor animals. When you slaughter an animal, about half of the weight is edible. In Guatemala a pound of beef is about $2.75. I sell for $.75 alive, so it is about $1.50 for the meat without transport and slaughtering costs. Selling to a fancy restaurant would be hard due to the ranch being about 300 miles from the capital city, where most restaurants already have a good butcher. I would do it for myself though, and stock up on delicious meat as soon as I buy a deep freezer (and electricity is connected…)

  5. Tackling Our Debt says:

    Great ROI. Very interesting place to raise bulls. As you said the cost for employees to look after them is so much cheaper as well. You make a nice profit.
    Tackling Our Debt recently posted..Blog Post Swap: Sharing a PF Interview with Natalie from Debt and the GirlMy Profile

  6. Sounds interesting. I wouldn’t know the first thing about doing it but it sounds like a good investment. Does someone else do all the work with taking care of them?
    Budget & the Beach recently posted..Are You Brand Loyal?My Profile

    • There are three employees looking after them. They basically just change them from field to field when they have eaten all the grass, and give them an anti parasite shot twice a year. Then a guy comes with a truck, weights them and goes to the slaughter house. Hand free investment :)

  7. I’ve never thought about investing in livestock in that capacity, but it’s common practice in my area to go in with someone and buy a calf, then split the meat 50/50 when it’s time to slaughter. The cow never leaves the farmer’s farm, and a year later we get a freezer full of meat. I’ve never done it yet but I’ve definitely considered it.
    Jordann @ My Alternate Life recently posted..Why I’m Not Ready to Buy a HouseMy Profile

    • that sounds like a great deal too! I am thinking about doing that now, slaughter one and go around a few days before to see who wants to buy meat. I would get a better price by the pound.

  8. Interesting. I don’t think I could invest in cattle like that, though it’s pretty common around here for people to buy a few head of cattle and put them on undeveloped commercial property. A few phone calls to the zoning board to get it rezoned as farm land, and your taxes drop significantly while you hold the land waiting for the commercial development market to turn around. Pretty sure I would do that if I needed to – but not sure I’d be okay selling something that I know was headed off to a slaughterhouse.
    Mrs. Pop @ Planting Our Pennies recently posted..Lame Friends and Sunk CostsMy Profile

    • I have not had problems thinking about the slaughterhouse since I eat meat myself, and while it lasted, they lived a pretty happy life eating grass with little stress.
      I have seen some horrible farms where it smells bad miles before you get there, and the poor animals don’t have enough space to live normally, it has made me reduce a lot my consumption and try to find the best meat possible. Actually I would like to eat only my meat.

  9. Terrific returns there Pauline. C’est magnifique! Makes me really excited to get into the farmland business. I bet you save a lot on human resources. Labor cost like you mentioned is much higher in the US and Canada. I wonder how capital gains is taxed if you make a profit in Guatemala but live in a different country. In any case, thanks for sharing this info.
    Liquid recently posted..Mortgage Lending RulesMy Profile

    • Profits here are taxed at a fixed 6% of sales, or if you have a very small margin you can deduce your real expenses and be taxed at 31% on the profit. I am on the 6% bracket, which is easier to manage. If you live in another country, you can chose to pay taxes in your country, but it is usually higher.

  10. We live in a rural area with lots of farmers and ranchers, so I know that cattle are going for crazy prices right now. Both sets of my grandparents always raised cattle and did pretty well. I’ve never considered it because I would have to hire it all out. I know nothing about raising cattle, but sounds like a smart investment for you.
    Kim@Eyesonthedollar recently posted..What Happens Before and After Foreclosure?My Profile

    • If you know a farmer, it is definitely worth it, since they support all the day to day costs. The thing is to find one you trust in need of equity to be willing to sell you the cattle before they are sold out of the ranch.

  11. Wow I like learning about alternative investments and this is definitely one of them! I think it helps to know someone in the industry as you do though. I would never embark on a niche investment like this without the first hand help of someone like your BF. Good work though!
    Harry @ PF Pro recently posted..Case Study: Build Credit for Someone by Adding Them as an Authorized UserMy Profile

    • I don’t think I would have either. But a few years back a guy told me that alpacas were also a really good investment and I started projecting myself renting some land and putting lots of alpacas! I am only afraid of a vet emergency, like they can’t give birth or something.

  12. That’s so cool! Like the farmland investing from Liquid, I never thought to invest in actual livestock. That’s awesome that you were able to make some money on it. Good luck with the remainder!
    CF recently posted..Using Planwise to create a money planMy Profile

    • I like the idea of a tangible investment, real estate, land, livestock, something palpable, with all the crazy around stocks and shares, you may end up with a worthless piece of paper. At least if livestock prices crash, I can start a burger joint!

  13. Hmm, good point. I mentioned because one of the restaurants I’d visit got his beef from Japan. It might have been through a larger distributor but it tasted gooooood.
    Veronica @ Pelican on Money recently posted..3 Tips to Save Money on Prescription DrugsMy Profile

    • It was probably Kobe beef. I have never had it but would like to try. I guess it comes from a big distributor, handling hygiene and import laws just for a few pounds of meat is probably not worth it.

  14. I would have never thought of doing this, ever!

    You live such a different life to me, I am always captivated by your posts and feel as if I am living vicariously through you.
    Glen @ Monster Piggy Bank recently posted..October 2012 Goal ReviewMy Profile

  15. I really have never thought of investing in something like livestock! Very cool that you have owned 110 livestock at one point. Actually, you may be the only person I know that owns livestock.

    I am becoming more interested in traditional investments like this, so thanks for sharing!
    DC @ Young Adult Money recently posted..Get the clutter out: 5 things to organize todayMy Profile

    • I think with the growth of global population and limited resources, investing (even in funds) in anything produced by the Earth, corn, sugar, coffee, or livestock can be a great investment. Doing it physically requires being more hands on or knowing the right people. Even starting a garden can be considered an edge against vegetable inflation!

  16. Nope! But that is really interesting! A lot of people in my area invest in cattle, or alpacas, etc.
    Holly@ClubThrifty recently posted..My Escape from the “Toxic Employee from HELL”My Profile

    • I almost went into alpacas too! apparently they are one of the most profitable livestock investment, because they have more babies over the course of their lifetime

  17. Very interesting! Thanks for sharing. Imagine you could also buy land with someone else in the farming industry or rent a plot from someone else. I don’t think I have it in me to partake in something like this just because of the work and upkeep involved. How much do you spend feeding and taking care of them?
    Catherine recently posted..Paying More For Loyalty?My Profile

    • My deal is that everything is being taken care of, in exchange for half of the profits. So I visit the ranch once in a while to check on the cattle, but not much more. I thought about bringing them to my land, but would have to rebuild the fences and start paying employees, which as the moment is too much work, since I am also fixing my new house. Maybe in the future!

  18. That is interesting. I’ve never heard of investing in livestock unless you were a farmer. I’m glad that your investment has worked out for you. I’m really impressed by your initiative. First the move to Guatemala now you’re a cattle baron.
    Keep it up.
    justin@thefrugalpath recently posted..How to Start Saving When You Can’t Afford toMy Profile

  19. Best lace wigs says:

    I think you have made a valid point by pointing out that your investment was successful because no animal fell ill luckily. However, others who wish to take inspiration from you should keep this factor in mind as well.
    Best lace wigs recently posted..RussiaMy Profile

  20. Lazarus says:

    Interesting. I am about to start the same. Will get back to you soon.

    Cheers

  21. Great post Pauline, I just 40 head of heifers and they are being overseen and kept on my friends grandfathers property. They will be pregnant by August, and I hope to sell them all by next April/May so hopefully the investment will be a good one. Thanks for posting, would love to hear more about your operation.
    Jim recently posted..Windturbines: Great For Wind Energy, Not So Great For The Rare Bird PopulationMy Profile

    • Thank you Jim, how is your arrangement over there, do you pay a monthly fee or split profits with the ranch owner? Bear in mind that when cows wean the calves they are really skinny so you need at least 6 more weeks after the 9 months breastfeeding so they gain weight again.

  22. I have a stepson in Guatemala that I want to buy cattle for him never thought of it as an investment had no idea cattle was so cheap in Guatemala but as I think about it my husband already has land there and it would be easy ..what worries me is crime in the area and someone stealing the cattle but still taking a look into it … thank you for giving me investment ideas …

    • Hi Ileana, if you own the land already it can be a great investment, you need to hire people you trust to take care of the cattle, we never had problems but the cowboys are very good.

  23. Darwen Perez says:

    Hi there I myself have cattle in Guatemala Im actually in El peten area near Rio San Pedro in a small town called El Naranjo. I noticed in one of your post you had mentioned that the steers you had avg weight was 700lbs. when you sold them. One of the things that I have learned is if you want high yielding weight not only is the care involved but also the genetics. We do rotational grazing where im at along with feeding them salts and of course we have man made ponds which collect rainfall thru out the year along with a water well during the dry season. Currently we have 120 heifers and 102 steers and of course our Herd sires (2 of them) get replaced every 2-3 years. If you have any questions shoot me an email darwen81@hotmail.com Im always willing to share info with a fellow rancher. I wish you contined success !!

    • Thank you Darwen! That ranch is close to Dolores so not too far either. The animals were sold around 30 months so they are not fully grown, but apparently if you keep them longer the weight curve slows down quite a bit. The same attention is paid to genetics to keep the race strong and varied, most is siemental and brama mucho. They have a very low death rate. Anyway, thanks for the good wishes, all the best to you too!

  24. I have done the same thing in Brazil and the returns proved the same. I do have family in this business, they own the land, and are waiting for me to buy the beef cattle. I thought about running a business on this very principle, but never went ahead with it. A shame really. The plan does not work in the USA. Here, it is much too controlled and the feedlot cost eats up a lot of the profits. Not having the cattle going thru a feed lot is the best way.
    My cousin would be able to accomodate over 300 heads on his pasture, so it is underutilized.
    It is simple really: You buy the calf at around 180 to 200 kilos. Pay the transport to the location. Weigh it at the location when it arrives.That total weight is your investment. Nature takes its course. Cattle gains weight, you gain profit. Any weight gain after that is split with the farmer. He maintains the cattle in good health. Even with a 1 to 2% shrink you will make good money. contact me at nelore11@hotmail.com if you want to hear more about it. Dont’ invest a dime without going to Brazil to look at the grasslands, ranch the whole set up. It will cost you about $1200.00 to do that. very worthwhile.

Trackbacks

  1. […] also ventured into trading, invested in cattle and other alternative investments as a way to diversify. I believe that with a high rate of […]

  2. […] also have funkier investments like cattle or coconuts. Live cattle is actually pretty good an investment, since a cow will give you another cow every 18 months or so, and I don’t know many […]

Speak Your Mind

*

CommentLuv badge

WP-SpamFree by Pole Position Marketing