Can someone tell me how Angus is not a pyramid scheme?

[kentucky]

I attended my first cattle sale yesterday at Champion Hill in Ohio. It was quite interesting.

So here is my question. The first heifer sells for 66,000 for half interest. Total valuation of over 120k. How would you ever recover your money on this animal? The only way I can see is that you breed in and sell offspring. Sure this works for a while but eventually you have to run out of buyers, someone is holding the bag. The best part is most of these are raised in milk cows with donor eggs. So theoretically one could make 100s of this same cow for 120k. The reason they don't? It would they couldn't find enough buyers.

Can I get a little insight into this? Thanks

 

[TheBullLady]

If she's a proven show winner with good bloodlines, you can make money if she can reproduce herself! Flush, flush, flush, you sell pregnancies and embryos, and you market the offspring everywhere.. especially the show ring. Now you have a market. The trick is, you sell the cow after say, a year or two of flushing her, and if you've done a good job marketing the offspring, she'll sell for close to what you invested.

There are some very well known Simmental cows that have produced over $100,000 worth of progeny in a couple of years. It's all marketing of course.

 

[Jogeephus]

I was looking at a $280,000 cow once with an old wise cattleman. I asked him what he saw was the major difference between that cow and another one you could buy for $5000. He told me the biggest difference he saw was $275,000. So I guess I have a few cows that are worth $50,000 - if somebody would pay me that for them. ;-) ***zipping up my kevlar vest as I type***** :lol:

 

[kentucky]

Well that is what I can't figure out, there are heifers with similar or even better epd numbers that sell for 60 grand less. The only way to recoup your money is to sell progeny for big bucks, well eventually there has to be an end to the number of buyers, there is just not intrinsic value. I just see so many similarities to other crashed animal markets.

 

[Running Arrow Bill]

The same "sickness" occurs in the Longhorn (or other breed) industry as well. Consider the following scenario (i'm keeping numbers simple for example):

• [1] Buy a cow for $100,000
  [2] She's 5 years old
  [3] Expected to produce calves until she is 15 yrs old.
  [4] 10 years of calving = 10 calves.
  [5] Each calf has to sell for average of $10,000 to pay for dam.
  [6] Add about $5,000 in upkeep of cow for 10 years.
  [7] Need to sell one more calf (#11) to pay for her upkeep and calves upkeep & care till they're sold.

Now, the caveat:

Where, when, how are the middle 67% of cattle producers going to find 11 buyers of $10,000 calves? Probably a fantasy. Also, over 10 year period, the perceived value of that cow and offspring will probably decline and/or be replaced by more "popular" lineage animals. You may end up with several $1000 to 2500. calves and MAYBE a $10K to 20K calf or yearling. There are neither 100% guarantees in breeding strategies nor in expected "sales" or "value" of any given offspring.

To me, the expected ROI for such a deal is not very valid and "most" producers would end up losing big.

Now, take tht cow that cost $100,000 and replace her with any cow of any given price. Then, do the math.

Shows and judges change. Lineage popularity or fads change. Embryo transfer sales (or semen sales in case of a bull) are also very unpredictable and all. I expect that considering all breeds and all animals that probably not more than 1/100 of 1% of such inflated animal purchases will ever be profitable.

Thus, the "high roller" sales IMO are often tied into ego purchases, one-upmanship purchases, and "you buy mine and I'll buy yours" wheeling and dealings.

JMO and research...

 

[Brandonm2]

IF you pay a $100,000 for a cow, you are not shooting for 10-11 natural calves. You are going to hook her up as a donor and HOPEFULLY get 10-12 calves a year out of her.

 

[Brandonm2]

I don't mean to be the defender of the high rollers here; but a lot of it depends on how you define "profit". If a 150 cow purebreed herd buys that cow they build their whole program around and 15-20 years later she is in 2/3s of his herd's pedigree and she really lifted the caliber of that herd (and thus increased its reputation and sales).....whatever the initial purchase price the purchase probably was (in the long run) a money maker. And all it takes is ONE high dollar descendant to pay off. I think most $20,000+++ cows wind up being tax writeoffs; BUT I think more buck that trend than we would guess on the surface.

 

[jvicars]

i cannot see how anyone can make money on that deal. to much risk. glad people have money to burn. gives me hope.

 

[dun]

It isn;t just Angus. It happens in all breeds, the one that gets me is the price people pay for young basically unproven bucking bulls.

 

[Jogeephus]

Another alternative is for you to pay me $150,000 for my bull and then I can buy one from Dun for $150,000 and he can buy yours for $150,000. Now we all have $150,000 bulls and we are walking tall in the eyes of some people who might decide to pay us $5000 for a calf out of a $150,000 bull. After all, they just saved themselves $145,000 - didn't they? ;-)

 

[Angus In Texas]

You also have to take into consideration the pedigree of the animal. Typically the high priced cattle have a very reputable pedigree not only on the top side but the bottom as well. G A R Precision 2536 was purchased by Wehrman in 2000 for $60,000 and has amassed over $5.5 million in sales since. Talk about a money maker. Davis Yr Blackbird 558H was purchased by Riverbend for I believe $50,000 in 2002 or 2003 from Anderson Circle Farm, two years later half interest sold for $260,000. When we flushed her a flush was worth roughly $250,000. She averaged 10 embryos, 60% conception, 50% heifers gives you 3 heifers worth approximately $75,000 each give or take depending on mating and individual quality.

You have to have a market for their progeny, make wise purchasing decisions, get a little lucky, and be willing to take on the risk of them dieing before they pay for themselves or they not turn out like you expected.

 

[jkwilson]

Another alternative is for you to pay me $150,000 for my bull and then I can buy one from Dun for $150,000 and he can buy yours for $150,000. Now we all have $150,000 bulls and we are walking tall in the eyes of some people who might decide to pay us $5000 for a calf out of a $150,000 bull. After all, they just saved themselves $145,000 - didn't they? ;-)

Ding ding ding ding!!!!! We have a winner!

Another point to note: Write down the name of the buyer in the sale catalog, then look a year later and see who owns the cow. It will often be the seller, with no mention of the buyer in the breed's records. I wonder what happened?

 

[grannysoo]

I've looked at this before and it looks like a shell game to me. Don't get me wrong, the cows are pretty enough to marry, but I will never own a hundred thousand dollar cow. My wife wouldn't want the competition.....

 

[jvicars]

good point about the "i buy yours, you buy mine" . one could never get their money got of a bull/cow for 150k. just crazy

 

[Rookie]

Another alternative is for you to pay me $150,000 for my bull and then I can buy one from Dun for $150,000 and he can buy yours for $150,000. Now we all have $150,000 bulls and we are walking tall in the eyes of some people who might decide to pay us $5000 for a calf out of a $150,000 bull. After all, they just saved themselves $145,000 - didn't they? ;-)

Jogeephus be right on with this from what I seen. ;-)

 

[Frankie]

good point about the "i buy yours, you buy mine" . one could never get their money got of a bull/cow for 150k. just crazy

There are hundreds of AI bulls that have sold over $150,000 worth of semen and certificates in the Angus breed, in other breeds, too.

The people who bought the Angus bull "Midland" sold enough pieces of the bull to get their money back in just a few weeks. After that, semen sales and AI certs ($50 and $50) were just gravy for them.

I think it would be a lot harder to make it back on a cow, though.

 

[kentucky]

Thanks for the replies. As an outsider, who has dealt in numerous financial markets, I just couldn't see how money was flowing in to cover initial investments. I do understand how with a good bull it wouldn't be hard to recover your investment, but I could also play the lottery and probably have similar odds.

 

[ALACOWMAN]

It isn;t just Angus. It happens in all breeds, the one that gets me is the price people pay for young basically unproven bucking bulls.

thats for sure . i seen a mongrel heifer out of one that went for over 90.000 that would have been lucky to bring 350.00 at the barn

 

[Brandonm2]

There are hundreds of AI bulls that have sold over $150,000 worth of semen and certificates in the Angus breed, in other breeds, too.

The people who bought the Angus bull "Midland" sold enough pieces of the bull to get their money back in just a few weeks. After that, semen sales and AI certs ($50 and $50) were just gravy for them.

For an extreme example, Bon View New Design 1407 just passed away. According to his Obit, he sired 20,000 reg. progeny and 25,000 commercial progeny. Combined that is 45,000 straws of semen, assume a 75% conception rate and assume that there are probably another 10,000 straws in tanks or as growing calves inside of cows and that translates into 66,000 straws sold. At $20 a straw that is $1,320,000 worth of semen sold plus $800,000 in certificates and he has grossed over $2 million for his owners not counting the value of his progeny.....and they still have existing semen stocks so they aren't done yet. I know that 1407 is an EXTREME example, but THAT is a lot of money and other breeders all dream of that same home run shot. Bulls eye Genetics ALONE has 369 Angus semen sires available.

 

[Angus In Texas]

Buying young bulls in hopes they become super stars of their respective breeds is like investing in the stock market. You can make very informed decisions as to where to put your money but in the end it is still a gamble.