Grass-Fed Beef Equity: A Smart Investment Strategy

how to invest grass fed beef equity

Grass-fed beef has become an increasingly popular market, with consumers becoming more conscious of the health and sustainability impacts of their food choices. This shift in consumer behaviour has led to a growing demand for grass-fed beef, presenting an attractive investment opportunity. Investing in grass-fed beef equity involves supporting farmers and ranchers in their operations, whether it be through direct-to-consumer sales or supplying larger retailers. This investment can take the form of equity crowdfunding, private equity, or alternative lending platforms.

Characteristics Values
Initial Investment $8,500 for a young bull and five ready-to-breed heifers
Annual Gross Profit $11,000
Total Gross Profit $132,000 over 12 years
Land Requirement 16 acres of pasture
Leasing Option $480 per year for 16 acres
Market Demand High during COVID-19, increasing consumer demand
Investment Opportunities Equity crowdfunding, private equity firms, investment banks
Return on Investment Higher than the stock market, secured yields

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Grass-fed beef demand and market expansion

Grass-fed beef has seen a notable increase in demand and market expansion in recent years. Several factors have contributed to this growth, including health and environmental concerns, changing consumer preferences, and the impact of the COVID-19 pandemic.

During the pandemic, many consumers spent more time cooking at home and placed a greater emphasis on health and wellness, as well as the environment. Grass-fed beef aligned with these priorities, as it is considered to be healthier and more sustainable than conventional beef. This shift in consumer behaviour led to a rise in sales of grass-fed beef, with US grass-fed fresh beef sales reaching $776 million from July 2020 to July 2021, a 5% increase from the previous year.

The health benefits of grass-fed beef are well-documented. It contains less total fat, fewer calories, and higher levels of omega-3 fatty acids and conjugated linoleic acid (CLA) than regular beef products. It is also a good source of vitamins and minerals, including vitamins B3, B6, and B12, iron, zinc, and selenium. These nutritional benefits have not gone unnoticed by consumers, who are increasingly seeking out grass-fed beef as a healthier alternative.

In addition to health benefits, grass-fed beef is also perceived as a more sustainable option. While grass-fed cattle require more land and resources than conventional cattle, they also have positive environmental impacts, such as improving soil health and grass production, which can help sequester carbon dioxide. However, environmental concerns about the ecological impact of grass-fed beef production have been raised, particularly regarding greenhouse gas emissions and land and water usage.

The demand for grass-fed beef is expected to continue rising, with the market projected to reach a valuation of US$20.4 billion by 2033, securing a compound annual growth rate (CAGR) of 5% from 2023 to 2033. This growth is driven by increasing consumer awareness of the health benefits of grass-fed beef and their positive impact on maintaining blood and heart health. Additionally, the preference for grass-fed beef over organic and grain-fed beef due to its lower calorie content is expected to boost sales.

To meet this growing demand, companies in the grass-fed beef industry are expanding their operations and investing in research and development to create sustainable and approachable sources of grass-fed beef. For example, Verde Farms, a producer and processor of grass-fed, free-range beef, received a $15 million investment from Manna Tree Partners to expand its product lines across the US and internationally. Similarly, Harvest Returns, an agriculture investment platform, has raised nearly $10 million for grass-fed sheep and cattle producers globally.

Despite the challenges of marketing and consumer understanding of grass-fed labelling, the grass-fed beef industry is experiencing significant demand and market expansion. With increasing consumer awareness of the health and environmental benefits of grass-fed beef, companies in the industry are well-positioned to capitalise on this growing trend.

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Health and sustainability concerns

The grass-fed beef market is experiencing a surge in demand, with consumers increasingly concerned about the health and sustainability of their food choices. This shift in consumer behaviour has led to a growing interest in grass-fed beef as an alternative to conventional grain-fed beef. While grass-fed beef is often perceived as a more sustainable and healthy option, there are several health and sustainability concerns to consider.

Health Concerns

One of the primary health concerns surrounding grass-fed beef is the presence of bacteria, particularly in raw or undercooked meat. Grass-fed cattle are more likely to harbour bacteria such as *E. coli* due to their grass-based diet, which can lead to foodborne illnesses if the meat is not properly cooked. This is a significant concern, especially for consumers who prefer their meat rare or medium-rare.

Additionally, grass-fed beef has been found to have higher levels of saturated fat and lower levels of monounsaturated fat compared to grain-fed beef. While this may not be a concern for those following a ketogenic or low-carb diet, it could be a consideration for those watching their saturated fat intake.

Sustainability Concerns

The sustainability of grass-fed beef is a complex issue that involves multiple factors, including land use, water consumption, greenhouse gas emissions, and energy use.

#### Land Use

Grass-fed beef production often requires more land than conventional grain-fed systems. This is because grass-fed cattle take longer to reach slaughter weight, resulting in a larger supporting population and increased land occupation rates. The type of land used also plays a role, with grass-fed systems utilising rangeland that cannot be used for crop production, while grain-fed systems rely on cropland that can be used for multiple purposes.

#### Water Consumption

Water consumption in grass-fed systems can vary depending on factors such as irrigation practices. In general, grass-fed systems that utilise irrigated pasture during the finishing phase tend to have higher water footprints than those that rely solely on rangeland. However, it is important to note that water consumption in grass-fed systems can be mitigated by adopting strategies such as rotational grazing and drought-resistant forage species.

#### Greenhouse Gas Emissions

Grass-fed cattle tend to have higher methane emissions due to their longer lifespans and grass-based diet. Methane is a potent greenhouse gas, and the increased emissions contribute to the carbon footprint of grass-fed beef. However, it is worth noting that well-managed pastureland in grass-fed systems may have the potential to sequester carbon, offsetting some of the methane emissions.

#### Energy Use

Grass-fed systems generally require less energy than grain-fed systems, mainly due to the reduced need for transportation and farming inputs associated with feed production. However, this advantage may be offset by the increased energy demands of irrigating pastureland in some grass-fed systems.

In conclusion, while grass-fed beef may offer some health and sustainability benefits, it is important to consider the trade-offs involved. The grass-fed model promotes a more natural way of raising cattle and can lead to improved soil health and carbon sequestration. However, it often requires more land and water, and the increased methane emissions contribute to a larger carbon footprint. Ultimately, the decision to invest in grass-fed beef should be informed by a comprehensive understanding of the health and sustainability concerns associated with this production method.

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The cost of pastureland

The national average value of pastureland in the United States is $1,200 per acre. However, this figure can vary widely depending on location, with prices ranging from $3,000 to $5,500 per acre in certain regions. For example, in some areas, pastureland can be leased for around $30 per acre, per year, which can help reduce initial capital outlays.

To determine the amount of pastureland required, it is important to consider the number of livestock that will be grazing. As an example, for one bull and five cows, along with their calves, approximately 16 acres of pastureland would be needed.

The cost of purchasing or leasing pastureland is a significant factor in the overall profitability of grass-fed beef operations. While the land itself may not generate income, it is a necessary investment to support the grazing and rearing of livestock.

It is worth noting that the cost of pastureland can also depend on factors such as access to water and the need for fencing. These additional considerations can impact the overall expense of establishing a grass-fed beef enterprise.

In summary, the cost of pastureland plays a crucial role in the financial planning of grass-fed beef equity investments. While it may require a substantial upfront investment, the potential for long-term profitability and the safety of the financial model make it an attractive option for those interested in generating a stream of future income.

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Direct-to-consumer sales

One example of a company that has successfully utilised direct-to-consumer sales is Blackdirt Farms, a grass-fed cattle producer that has completed three successful funding rounds with the investment platform Harvest Returns. This platform connects investors to farmers and ranchers in need of funds, and Blackdirt Farms has been able to access a wider base of investors and raise capital effectively through this platform.

Another company that has benefited from direct-to-consumer sales is Cattleana Ranch, a small livestock farm in Wisconsin. The owners, Tom and Susan Wrchota, have worked hard to market their farm products and know the prices they can charge for their pastured meats. By eliminating the "crapshoot", they have become price makers rather than price takers. They have also invested time in analysing their financial results and understanding their production costs, which has allowed them to identify their most profitable enterprises and make informed decisions about their business.

Grass-fed beef company Verde Farms has also recognised the importance of meeting consumer demand through direct-to-consumer sales. With a recent $15 million investment from private equity firm Manna Tree Partners, Verde Farms plans to introduce ready-to-eat meal options and expand its product lines and distribution channels. By investing in innovation and focusing on sustainability and animal welfare, Verde Farms is positioning itself to become a leading brand in the grass-fed beef market.

For grass-fed beef entrepreneurs like Cole Mannix, the founder of Old Salt Co-op, reaching climate-conscious consumers is not the only goal. Mannix is focused on building a regional meat supply chain that bypasses the consolidated food system and keeps dollars and ecosystem benefits within local communities. By investing in relationships with local farmers, pick-up and delivery services, and restaurants, Old Salt Co-op is creating a more resilient and sustainable business model.

In summary, direct-to-consumer sales offer grass-fed beef producers the opportunity to charge premium prices, build direct relationships with customers, and create more stable income streams. By investing in marketing, understanding production costs, and focusing on sustainability, producers can successfully utilise direct-to-consumer sales to build profitable and resilient businesses.

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The role of investment firms

Investment firms play a crucial role in the grass-fed beef industry, facilitating the connection between investors and farmers or ranchers. These firms, such as Harvest Returns and Manna Tree Partners, provide a platform for investors to access investment opportunities in the grass-fed livestock market, which was once considered a niche market.

By leveraging equity crowdfunding, investment firms enable investors to collectively fund agricultural ventures without the need for traditional loans. In return, investors receive a portion of the harvests and rents generated by the farms and ranches they have invested in. This model allows investors to diversify their portfolios and benefit from the stable nature of the agriculture industry, which is less susceptible to stock market fluctuations.

For farmers and ranchers, investment firms provide a vital source of capital to expand their operations, purchase new land, or buy out siblings in multi-generational farms. This access to funding helps them grow their businesses and meet the increasing consumer demand for grass-fed beef.

Overall, investment firms play a pivotal role in connecting investors seeking stable opportunities with grass-fed beef producers in need of funding. By fostering these connections, investment firms contribute to the growth and success of the grass-fed beef industry, creating a mutually beneficial relationship between investors and agricultural businesses.

Frequently asked questions

Grass-fed beef has seen an increase in consumer demand and is considered a safe investment during economic downturns as it is not correlated to the stock market.

You can either invest in grass-fed beef companies, such as Verde Farms, or invest in livestock and farmland yourself.

One of the main risks is the time it takes to see a return on investment. It can take a couple of years before the livestock is ready for market, and during this time there will be costs associated with feeding and caring for the animals.

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