If you’re looking for a new and exciting way to invest your money, look no further than livestock. Livestock investing can be a great way to secure your financial future and build long-term wealth for you and your family.
In this blog post, we’ll explore how to invest in livestock and why you should consider it an option for your portfolio. So, if you’re ready to learn more about this unique and potentially lucrative investment opportunity, read on.
What is livestock investing?
Livestock investing refers to purchasing and owning livestock animals to generate income. The most common livestock animals bought and sold for investment purposes include cattle, pigs, sheep, and goats.
Investing in cattle and other livestock can greatly diversify your investment portfolio and hedge against inflation. Additionally, livestock can provide a steady income stream by selling milk, meat, wool, and other products.
How to invest in livestock – getting started
You can get started in livestock investing in a few different ways. One option is to purchase shares of a livestock mutual fund (a.k.a. Commodity funds) or exchange-traded fund (ETF).
These investment vehicles expose you to a basket of different livestock animals without purchasing and managing them yourself.
Another option is to invest in a livestock partnership. These are typically limited partnerships that allow you to own a direct interest in a specific group of animals. The advantage of this approach is that it allows you to potentially reap higher profits if the animals are sold at a later date for more than what they were purchased for.
Lastly, you can also choose to invest in a livestock futures contract. This is an agreement to buy or sell a certain amount of livestock at a specified price on a future date. Farmers often use futures contracts to hedge against price fluctuations for their animals.
If you are new to livestock investment, it’s always a good idea to seek expert advice before diving in. There are a number of risks involved, and you want to ensure you are as informed as possible before making any decisions.
That said, investing in livestock can significantly diversify your portfolio and potentially earn some good returns.
8 reasons why livestock is an excellent investment
Now that you know the different ways you can invest in livestock let’s take a look at some of the reasons why it’s a good investment.
- Steady Income – Livestock investment produces a steady flow of income that can be relied on yearly. Livestock contributes 40% of the global value of agricultural output, making it one of the most critical sectors in the world. This lends it a great deal of stability and makes it an ideal investment for those looking for a dependable source of income. In fact, The percentage of Australian livestock farms with negative net income in 2021–22 is estimated to be just 12%.
- Inflation hedge – The livestock prices are mainly unaffected by inflationary pressures, making it a good investment for those looking to protect their purchasing power. This is because livestock prices are set by international supply and demand rather than domestic economic conditions. As the cost of living rises, so does the price of meat, dairy, and other agricultural products. This means that investing in livestock can help to protect your wealth from inflation.
- Diversification – Diversification is vital when it comes to investing because it helps to spread your risk and reduce the volatility of your portfolio. The livestock prices are not highly correlated with other asset classes, such as stocks and bonds. In fact, during the Coronavirus Pandemic and the connected economic downturn, the prices of livestock actually rose while the stock market crashed.
- Recession-resistant – The demand for livestock is relatively recession-resistant, as people still need to eat even when economic conditions are challenging. This means that investing in livestock can help to smooth out your investment returns over time. Having a recession-resistant asset in your portfolio is always a good idea as it provides stability.
- Livestock is a physical asset – Unlike stocks and shares, which are purely financial assets, livestock is a physical asset. There are several benefits to investing in a physical asset, including that it can be sold quickly if needed and act as collateral for loans.
- High returns – Over the long term, investing in livestock can be highly profitable. In fact, the average rate of return (excluding capital appreciation) for livestock farms is estimated to have been 2.0% per farm in 2021–22, well above the 10-year average of 0.7%.
- Tax benefits – Investing in livestock can also offer some tax advantages. In particular, if you invest in breeding stock, you may be eligible for certain tax breaks, such as accelerated depreciation. Accelerated depreciation refers to writing off the cost of an asset (in this case, livestock) more quickly than would otherwise be allowed. This can result in a significant reduction in your tax bill by allowing you to claim more significant deductions in the early years of your investment, which can result in significant tax savings.
- Risk management – Another benefit of investing in livestock is that it can help to mitigate risk. For example, adding some livestock can help reduce your overall risk if you have a portfolio heavily invested in stocks. This is because livestock is not as volatile as stocks and tends to hold its value better in market turmoil.
A stable and consistent investment
Investing in livestock is a good option if you are looking for a relatively stable and consistent investment. This is because the demand for livestock is generally relatively steady, and prices tend to fluctuate slowly over time, making it an ideal investment for those looking to build up their wealth gradually over time.
Additionally, Livestock investment represents a haven for your money during difficult economic times, allowing you to diversify into an asset class that is not as prone to the stock market’s volatility.
So, if you are looking for a reliable and consistent investment, livestock may be the right option.
