Maximizing Profit Through Strategic Livestock Investments

Maximizing Profit Through Strategic Livestock Investments

It’s almost time to sell my last 56 heads of cattle! I’m not particularly thrilled about it, since the profits were great and it has been a passive investment, but the pasture at the ranch is getting scarce. Keeping the calves longer might lead to them losing weight due to insufficient food.

We may head to the ranch this week to sell the cattle. The good news is that livestock prices have risen. Last September I sold at $0.80 per pound, and this time buyers are offering $0.89, a 10.9% increase. To estimate the expected revenue, I’ve been analyzing last year’s numbers when I sold 50 heads in total.

I kept 3 heads for 9 months, after which BF bought them back to continue breeding them as bulls. They were strong, beautiful animals that he wanted for breeding to maintain the best bloodline. Not all bulls are mixed with cows; only the selected ones for breeding, to avoid weight loss and maintain control over the breed. My 50 calves were kept separate from others, ensuring they had access to the best pasture and reducing disease risk. None of the 150 animals I’ve held over the past 2+ years have died. Mortality is high for the first 9 months when they are still on milk, but they remain susceptible to sickness afterward. We administered an anti-parasite shot twice a year.

Most of the cattle were kept for 13 months, and a dozen came from an earlier deal that I bought 22 months ago, and weren’t big enough for the last sale.

I bought the animals without weighing them at 9 months old, when they were weaned and weighed an average of 400 pounds. The price was $253, or $0.63/lb, slightly higher than the $0.57/lb that grown animals were selling for meat at the time. This is a standard price, and BF had an offer from local farmers at that price.

We shared the profit halfway since I provided the capital and he supplied the ranch, cowboys for supervision, and medicine. Once weighed, I recovered my $253 and half of the profit. Here are the numbers from the 50 heads I sold last year:

My total purchase cost was $12,666.67, and I sold them for $24,654.00, making a profit of $11,987.33. My share of the profit was $5,993.67. The average time held was approximately 14.92 months, yielding an average annual profit of 37.70%.

Looking at specific examples:
– A head bought at $253.33 and sold at $450.00 after 9 months resulted in a profit of $196.67, with my share being $98.33. This equated to a 51.75% annualized profit.
– Similarly, another head bought at $253.33 and sold at $473.33 after 13 months resulted in a profit of $220.00, with my share being $110.00, which equaled an annualized profit of 40.08%.

The oldest ones, kept for 22 months, sold for up to $680, while the younger ones sold for around $450. One of the bulls grew significantly in just 9 months, reaching a weight that many of his brothers didn’t achieve even after 13 months.

It’s challenging to predict an animal’s growth, but they generally gain about a pound a day until they are 3 years old. After that, the growth rate slows down. The average daily weight gain for my lot was 0.94 pounds.

I wish I could keep the livestock until they are 3, but I need the funds for the 90-acre land development. Additionally, with the upcoming rainy season and cold weather, they likely won’t put on much more weight.

Important considerations for why this investment was so profitable:
– BF owns the ranch, and his payroll did not increase because I kept the livestock there.
– I bought only males. Although cows can reproduce, they lose significant weight during and after pregnancy and become less valuable for meat as they age.
– Over the past 30 months, the price of livestock increased by 57%, from $0.57 to $0.89 per pound, possibly due to increased demand from Mexico. There were rumors of drug lords using cattle trucks for smuggling, but this is uncertain.
– Apart from creating spreadsheets, the only time I spent on this investment was a few hours overseeing the weighing of the cattle. BF handled the rest with his employees, making this investment more passive than typical livestock deals.

If all goes well this time, I will get a 38% return since I held the animals for an average of 13 months, and I plan to turn my initial investment of $15,000 into $20,600. Fingers crossed!

Have you ever considered livestock investments?