We are considering buying a pen of cattle to feed at feedlot. Anyone ever done this? Looking at having feedlot buy 100 head using their buyer and feed them out. They are showing us projections of cost of gain and return based on various feed and cattle prices. Does not look like there is fortune to be made but the returns are better than what the bank is paying.
Investing at feedlot
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Returns are better until you have a sick pull or 2 or any of them dies. Make sure about how the money for feed and yardage part works. Some feedlots charge you monthly, some wait until they're sold then the feed and yardage is deducted from your check.
Stocker Steve
Well-known member
I think a way to beat the average is to know the cattle you are feeding out. I could do this by sorting stockers to pick the growthy ones with no health history issues... But, since feed lots claim to lose money most of the time. I am not sure if above average is all that great.
The big thing is to make sure the return justifies the risk. If you make a little more than a CD is paying but take on a lot of risk then obviously you are not making a wise choice.
The big thing is to make sure the return justifies the risk. If you make a little more than a CD is paying but take on a lot of risk then obviously you are not making a wise choice.
1982vett
Well-known member
Yep, with the bank you know you are guaranteed a return (within FDIC guidlines) of your money plus a little interest. With the feed yard, as you stated you were shown projections....no guarantee you won't owe the feed yard money after they feed out and sell your animals reguardess of "projections"....
Feedyards would be full of and own their own animials if those "projections" were guaranteed. ;-)
Feedyards would be full of and own their own animials if those "projections" were guaranteed. ;-)
I understand there is risk. I am ok with that. Certainly don't want to set out to lose money but I understand there is risk involved in any investment. I think with the bank you are guaranteed to lose. 1982vett you have it right that you will get your money back and some interest but the interest they are paying is less than the current rate of inflation so while you will get the same amount of dollars plus a little you will not be able to buy as much goods as you did when you put the money in there.
The money I would be investing in the feedlot is money that is currently in the stock market.
The money I would be investing in the feedlot is money that is currently in the stock market.
Angus Cowman
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Just by figure your costs and investment and see what they are trading for and buy paper to protect yourselfforrest":3dqfjxo1 said:
Stocker Steve
Well-known member
A common story is big money is coming out of the stock market to drive up the price of farmland. Not a problem for me.
Seems like fed cattle are not quite as hot. Just remember that usually you make your money when you buy.
Seems like fed cattle are not quite as hot. Just remember that usually you make your money when you buy.
TexasBred
Well-known member
Never get into something you know absolutley nothing about or without an expert on your payroll and even then be able to afford to lose every penny you invest. Otherwise you'd be better off to buy a pair of dice and look for a sucker. That's what a lot of these folks are doing that are looking for "investors".forrest":d4yuyzts said:
novatech
Well-known member
I've lost money on stockers with relatively free grass. All it takes is a market change. I would hate to think what a guy could loose in a feed lot with the same down swing.TexasBred":1zyid5qc said:
If you have your money in the stock market you could just switch it over to commodities.
novatech
Well-known member
Have you given any thought about the quality their buyer would acquire for you and the quality the buyer would get for the man that is his bread and butter?forrest":1adt5qn2 said:
Stocker Steve
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novatech":1w6epr9d said:
Had a buyer who would buy small groups and then sort the pen after the sale...
TexasBred
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I am but I wanna hear your explaination. :mrgreen:MF135":343p02s7 said:
1982vett
Well-known member
I'm quite aware of the effects of inflation....I'm quite aware that at one time all one needed to earn a living was 160 acres of land and a mule. Try that today and see how fast you starve. Fisher or whoever?....who the hell needs them to figure that out.TexasBred":1xuyw93k said:
Just a thought....money in a bank... all you have working against you is inflation.....
novatech":3bwwwdfm said:
Same here. The market downturn from 05-06 and I had 86 holsteins. I thought I could wait a while but the downturn was WAY more severe than I thought reasonable.
I'll do it again though :banana:
Stocker Steve
Well-known member
In theory - - you don't need LRP ect as long as you turn your inventory often enough...
In practice - - we have an annual cattle cycle here, and certain types of cattle are not always available, so as long as you can stand the weather there is a way to make the seasons work for you.
In practice - - we have an annual cattle cycle here, and certain types of cattle are not always available, so as long as you can stand the weather there is a way to make the seasons work for you.
1982vett":45dz7uob said:
WRONG AGAIN! You are still heavily exposed to Interest Rate risk. As interest rates rise, the value of fixed-income securities fall and vice versa. The rationale is that as interest rates increase, the opportunity cost of holding a fixed-income security decreases since you are able to realize greater yields by switching to other investments that reflect the higher interest rate. For example, a 5% bond is worth more if interest rates decrease since you receive a fixed rate of return relative to the market, which is offering a lower rate of return as a result of the decrease in rates.
TexasBred":45dz7uob said:
The Fisher (or whoever :lol2: :lol2: ) equation estimates the relationship between nominal and real interest rates under inflation. Say your bank pays you 5% per year on the funds in your savings account. If the inflation rate is currently 3% per year, then the real return on your savings today would be 2%. Even though the nominal rate of return on your savings is 5%, the real rate of return is only 2%, which means that the real value of your savings only increased by 2%. As the duration lengthens, inflationary risk increases as the average inflation rate over the term is subject to more uncertainty. :mrgreen:
TexasBred
Well-known member
This has been done for years in buying and selling bonds as well as in buying and selling packages of mortgage backed securities but the computations are a bit more complicated.
alohacattle
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@ novatech
Do they not allow average joes on the mainland, to use puts and calls?
Do they not allow average joes on the mainland, to use puts and calls?
novatech
Well-known member
Not at the feedlot. They are usually sold at target weight or number of days on feed. You could I guess but you may feed yourself into the poor house.alohacattle":jw7k5luh said:
