I’m getting ready to sell my last 56 heads of cattle, and while I’m not thrilled about it due to the great profits and the fact that it’s been entirely a passive investment, the pasture at the ranch is running low. Keeping the calves longer might mean they won’t get enough to eat and could lose weight.
We might head to the ranch this week to sell the cattle. The good news is that livestock prices have gone up. Last September, I sold at $0.80 per pound, and now buyers are offering $0.89 per pound, which is a 10.9% increase. To estimate the expected revenue from the sale, I’ve been reviewing last year’s numbers when I sold a total of 50 heads.
I kept three heads for nine months, after which BF bought them back for breeding purposes. These were strong, beautiful animals that he wanted for the best breeding stock. Not all bulls are paired with cows; only the selected ones for reproduction purposes. If bulls were mixed randomly with cows, they’d exhaust each other and lose weight, which isn’t profitable, plus it would be difficult to control the breeding process. My 50 calves were kept separately, so they had the best pasture and were less vulnerable to disease. Fortunately, none of the 150 animals I’ve managed over the past two years have died, though young calves are more susceptible to mortality in their first nine months when they are still on milk. After weaning, they can still get sick, but we only administered anti-parasite shots twice a year.
Most of the cattle were kept for 13 months, and a dozen came from an earlier deal bought 22 months ago but weren’t big enough for the last sale.
I originally bought the cattle without weighing them when they were nine months old, around the time they wean and typically weigh an average of 400 pounds. The price was $253 per head or $0.63 per pound, a bit higher than the $0.57 per pound market rate for grown animals meant for meat at the time. This is a standard price, and BF had offers from local farmers at that rate.
We split the profit halfway since I provided the capital, and BF supplied the ranch, cowboys, and medicine shots. After weighing the cattle, I get back my $253 investment per head plus half of the profit. Here are the figures from the 50 heads I sold last year:
– Total Bought: $12,666.67
– Total Sold: $24,654.00
– Total Profit: $11,987.33
– My Share: $5,993.67
– Average Holding Time: 14.92 months
– Average Profit: 47.32%
– Annualized Profit: 37.70%
Here are some per-head details from the last sale:
– Purchase Price: $253.33
– Sale Price: Ranged from $390.00 to $680.00
– Profit per Head: Ranged from $136.67 to $426.67
– My Share per Head: Ranged from $68.33 to $213.33
– Time Held: Ranged from 9 to 22 months
– Profit Over Period: Ranged from 26.97% to 84.21%
– Annualized Profit: Ranged from 35.96% to 45.93%
You can see that the oldest cattle, held for 22 months, sold for up to $680, whereas the younger ones sold for around $450. The first one fattened quickly, and BF bought it back after 9 months at a weight that many of its brothers didn’t reach until they were 13 months old.
Predicting how well an animal will fare can be challenging, but they generally gain about a pound a day until they’re around 3 years old, at which point their weight gain slows. On average, my lot gained 0.94 pounds per day.
I wish I could hold onto the livestock until they were 3 years old since the younger ones are barely 2, but I need to free up some cash for a 90-acre land development project. Plus, with the upcoming rainy and cold seasons, the cattle likely won’t gain much more weight.
IMPORTANT CONSIDERATIONS THAT WON’T MAKE ALL CATTLE INVESTMENTS THAT GOOD:
– BF owns the ranch, and his payroll didn’t increase because I kept the livestock there.
– I only bought males. While cows can reproduce, they lose a lot of weight when they do, and for the nine months they feed their calves. Older cows aren’t worth much even for meat.
– Over the past 30 months, livestock prices have increased by 57%, from $0.57 to $0.89 per pound, partly due to Mexico’s shortage and increased imports from Northern Guatemala. It’s rumored that drug lords use cattle trucks to smuggle drugs, but that’s hearsay.
– Besides making spreadsheets, my time investment has been minimal, just a few hours checking the scale during weighing and loading. BF handled everything else with his employees. This took less time than stock picking and was a truly passive investment. Most livestock deals aren’t this hands-off.
If everything goes well this time, I can expect a 38% return since I’ve held the animals for an average of 13 months, potentially turning my initial investment of $15,000 into $20,600. Fingers crossed!
Have you ever considered livestock investments?