Cattle Investments

[patrizio80]

Hi,

I am in agriculture but nothing close to cattle. I would like some info on custom cattle feeding...

Let's say I have some money just sitting for a few months. Are there feedlots where I could buy cattle, have them fed, and sell them fat for a profit? Do the feedlots do everything from the buying to shipping them off for slaughter? Whats the turn around time? Any ideas on ROI? Can you lock in a selling price so you have an idea on expected profit?

Any info would be great!

 

[branguscowgirl]

IDK anything about feed lots. But I will bump this up to see if anyone can answer your questions.

 

[Bigfoot]

I read your post earlier. My advice would be to not do what you are thinking about. Get some cattle, study the market, get educated, then look to invest.

 

[TexasBred]

Might be easier on paper but with real money

http://www.cmegroup.com/trading/agricul ... attle.html

 

[Tim/South]

Not much profit in buying feeder cattle and paying to have them finished, at least according to my friends who have cattle on feed.
If you raise the feeders, have lower inputs and not all the middle men, then there can be some worthwhile profit. As fickle as the finished cattle market is right now I believe it would be a huge gamble to buy a group of 750 lb. steers with the hopes of making money.
There is some stability in the cow/calf operation right now. Stockers and feed lots have a lot of mood swings right now.

 

[talltimber]

Not much profit in buying feeder cattle and paying to have them finished, at least according to my friends who have cattle on feed.
If you raise the feeders, have lower inputs and not all the middle men, then there can be some worthwhile profit. As fickle as the finished cattle market is right now I believe it would be a huge gamble to buy a group of 750 lb. steers with the hopes of making money.
There is some stability in the cow/calf operation right now. Stockers and feed lots have a lot of mood swings right now.

I hope nobody tells the backgrounder who buys my calves that!

 

[Tim/South]

Not much profit in buying feeder cattle and paying to have them finished, at least according to my friends who have cattle on feed.
If you raise the feeders, have lower inputs and not all the middle men, then there can be some worthwhile profit. As fickle as the finished cattle market is right now I believe it would be a huge gamble to buy a group of 750 lb. steers with the hopes of making money.
There is some stability in the cow/calf operation right now. Stockers and feed lots have a lot of mood swings right now.

I hope nobody tells the backgrounder who buys my calves that!

There is a big difference between a backgrounder, a stocker operator and a speculator.
If I was looking got invest some money there is no way I would buy a load of 750 lb steers to put on feed right now. Futures and break-evens do not look good at the current prices. Finished cattle prices are what is leading the calf and stocker prices lower.

 

[talltimber]

Also a big difference in trying to finish what someone finds you, and what you find yourself. Cattle you know.

It's been heard of to make more on premiums than the weight.

Note: I've not finished any, nor sent any. I have talked with some backgrounders and cow/calf people who have retained ownership of their own calves for the carcass data.

Personally, I wouldn't do what he's thinking. There are some good calves that come through the barn (that's assuming his buyer would find them there), but I would be leery of anything that I didn't know, if I was going to try to do something like that. The guys turning out good calves that I know don't have to go through the sale barn. They are sold off the farm or retained.

 

[Texas PaPaw]

Hi,

I am in agriculture but nothing close to cattle. I would like some info on custom cattle feeding...

Let's say I have some money just sitting for a few months. Are there feedlots where I could buy cattle, have them fed, and sell them fat for a profit? Do the feedlots do everything from the buying to shipping them off for slaughter? Whats the turn around time? Any ideas on ROI? Can you lock in a selling price so you have an idea on expected profit?

Any info would be great!

To answer your question, yes there are many feedyards that will do turnkey custom feeding for you. Many will even partner with you and have financing arrangements with banks. All you have to do is provide the required equity and they do everything else. The normal turnaround time is 5-6 months depending on size when bought. There are several ways to lock in a selling price but at the moment with current market conditions, locking in a profitable selling price upfront is probably not achievable. Haven't had any cattle custom fed in over 30 years because it can be volatile and risky. Not every pen you feed will be profitable and some will be wildly profitable. It can be quite a roller coaster ride. Due to considerably lower corn/feed costs, midwestern feedyards should to have a lower cost of gain compared to Texas and southwestern feedyards, which is a key part of profitability.

Here's a link to a site that calculates the potential profitability based upon the futures market prices of fats, feeders and corn. Have been watching this matrix for many years now and it seems when it shows from -$40 to -$60/hd in profitability things are relatively calm. This indicates to me that is the matrix level where there is maybe a slight profit or at least breakeven.

http://www.agcenter.com/newcattlereport.aspx

 

[js1234]

virtually every major feedlot in the west and midwest does some amount of custom feeding for investors. a typical equity position is $300-$350 per head with the balance of the cattle cost and 100% of the feed costs and margin calls financed at currently 4-4.5%. they also can handle the risk management in house. the key to this is risk management. often times in the market place there are risk management opportunities that allow a producer to in many instances protect break-evens or lock in profits at some point over the course of owning that set of cattle. Feeding cattle is extremely risky and not for the faint of heart. for this reason, the default response by most people many of whom really don't know the first thing about feeding cattle is that you'll never make money. the money is always, always, always made on the buy side. you are in the perfect spot, you don't have a brick and mortar feedyard or kill plant that you have to feed. run your break-evens, if the cattle can be bought at a break-even or slight profit after figuring the cost of getting a put option underneath them, why not protect your downside and try a set on to see how things really work? I'm certainly not what i would consider a cattle feeding expert but we do feed what i think most would consider quite a lot of cattle annually at several yards. there are a few things i can tell you with certainty:
1. some of the cattle i have on feed right now will lose money, you will own cattle at some point that lose money too.
2. there have been years (not near as many as the horror stories) that the net return for feeding cattle was a loss.
3. we, like you, do not happen to own a feedlot (other than a small grow yard for warming up grass cattle),we don't "have" to feed cattle. the only reason that we do is that year over year, by buying cattle right or not at all and managing the futures aggressively, we make money feeding cattle.

 

[cross_7]

The way the market had been ticking up and cheap corn it appears there been money made
But the way the markets trending now who knows what it going to do
As js1234 said if you can get them bought right and protect your downside this thing may turn around this spring