Farmers can make up to 100% profit by investing in cattle in poor condition and selling them after their condition improves.
Daily Investor recently spoke to a farmer who operates in a remote area and specialises in cattle most investors would never consider.
He invests in lean cattle in poor physical condition due to malnourishment. He then improves their condition and sells them at a big profit.
The farmer explained that he buys the cattle at auctions at highly reduced prices because of the low demand for animals in such a poor state.
Prior to the auction, he inspects the cattle for obvious injuries, diseases, and other problems that could significantly lower their chances of survival. He prefers to buy young cattle.
The price for the animals varies significantly based on location and demand. Buying cattle at around R24/kg is considered to be a very good price for lean cows.
It equates to about R7,000 to R7,800 per cow, depending on their weight.
After the auction, the cattle are transported to the farm, where they are provided with ample food and water to get them into good condition.
To avoid a shock to their system, they are initially kept on a natural diet to regain their strength and put on mass. For this, they are released on green pastured fields to feed by themselves.
They are closely monitored in the first few days to ensure their condition does not worsen.
As their condition improves, they are gradually moved to a more nutrient-rich diet to accelerate their weight gain and improve their strength.
The fattening process can last anywhere from 6 to 18 months, depending on the cattle’s age, condition, and rate of recovery.
“Every cow or bull is different. Some gain the target weight within six months whereas others can take up to 12 or even 18 months,” the farmer told Daily Investor.
The following images are the same cattle from above less than one month after the purchase.
After the cattle reach peak condition, the farmer sells them at auction. The price at auction for fat cows varies from R32/kg to R34/kg.
The higher price per kilogram and the additional weight per animal mean the typical selling price is between R14,000 and R18,000 per cow.
Based on all costs, including transport, auction commission, and feeding, the expected return on the cattle is between 52% and 100%.
It is a lucrative strategy to make good returns from cattle, but it assumes a few important factors.
The first is that the investor has access to suitable land and skilled labour. Another assumption is that the cattle do not die.
The farmer told Daily Investor they had lost about 2% of their cattle using this strategy. However, it may increase if things go wrong.