Livestock investment, without the farm

Having recently returned from an impromptu trip to the Free State, this piece is a reflection of my first-ever experience of Grain SA’s annual Nampo Harvest Day event in Bothaville. What an eye-opening experience, filled with lessons and value.

Immediately upon arrival at the event, two things were clear. First, a new-found appreciation for the agricultural sector of South Africa. And second, livestock must be an investment opportunity for all.

Read: SA farming hobbled by power cuts, poor roads

One would think that having relatives who own cattle would open one’s mind to greater possibilities sooner. Even so, there are still elements of surprise and awe that come from witnessing a majestic R300K Brahman or Ankole grazing right before you.

Their sheer size and magnificent coats clearly indicate the time and effort spent on them. It’s easy to see why our nation’s first citizen can sell them for R2 million a pop.

Before I digress, the promises of broadening investment thought that were made in my previous column shall continue to remain my North Star. So, let’s take a look at the investment opportunities within livestock.

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The most obvious and logical thought is that getting a farm and some cattle is the first step. But what if you know nothing about farming or have a corporate nine-to-five that doesn’t allow you to spend your mornings sorting feed lots? Surely there must be a way.

Surely an average Trevor should be able to invest in cattle without first needing to know what a technical investment chart looks like. As luck would have it, someone else has already asked these questions and discovered some of the answers.

Livestock futures

While the JSE does offer complex livestock futures for those who wish to specialise in livestock hedging, most of us may prefer a more simplified approach like the one employed by the Public Investment Corporation when it decided to take a direct stake in Karan Beef.

And with the help of financial services licenses and community funding ideas, one can do wonders turning a farming business opportunity into an investment product, just as our friends at Livestock Wealth.

The company has been one of very few that have found a unique way to allow individuals to invest in cattle without needing to trade their desk job for something more rugged.

Read: The PIC buys majority stake in Africa’s biggest cattle firm

But if you truly want to see creativity where it relates to investable opportunities in livestock, look at how Unum Capital built a financial product that generates a measured return without you ever needing to see a single cow. In essence, you would be able to invest in cattle on a farm that is entirely independently managed, without the risk that comes with spending sleepless nights wondering if you’re doing it right.

You could freely leave to the professionals that frequent Nampo, the worries of perfectly timed slaughtering, and still leverage all their years of skill and expertise to enjoy the benefits associated with a return on a portfolio.

Insuring losses

Best of all, whichever product you may decide on, you can insure your investment against losses as easily as you can buy a loaf of bread.

And although there would be conditions to investing through regulated institutions, there’s a certain level of comfort knowing that you could stick to your day job and still reap what you sow.

Some of the conditions may be related to minimum capital investment amounts and may also include minimum lock-in periods for investments. These would be no different to any other worthwhile investment. The only ‘new’ variable would be that the underlying asset class is audibly responsive to words like bull and bear.

In concluding this look into livestock, a sensible recommendation would be to explore a few possibilities before committing to just one. There are many ways to get into this alternative asset class.

Perhaps there is or will be an even easier way to invest in livestock soon, maybe we should look at tokenising it like other real-world assets.