Maybe we should invest in cows for the rental return

New Zealand has about 5.2 million cows. Just imagine if we all owned a couple of cows and were paid rent by the farmers who milked them. We would also 'earn' the calves each cow produced and be able to sell those.

Could this be a safer and higher returning investment than stocks or rental property or even the bank?

This isn't so far fetched. In France there are about 37,000 cows on 880 farms that are owned by investors and produce after tax returns of 4-5 per cent, according to this excellent article in the New York Times.

It is an intriguing prospect. New Zealand's farmers are heavily indebted and may need additional sources of capital in the years to come. Our banks now have 15 per cent of their assets tied up in loans to farms, up from 10 per cent in 2000. The Reserve Bank warned banks this week to be careful about lending too much more to dairy farmers.

Yet New Zealand investors face record low rates from bank term deposits and the stock market has been volatile and painful for many. Rental investment property has its attractions, but there's a risk prices could fall further and there's all the hassle of tenants and maintenance and rates.

What if farmers sold their cows piecemeal through some sort of market or intermediary and agreed to pay a basic 'rent' each year. The cow's calves could be sold to boost returns.

It works in France. Why not here?

We're experts at dairy farming and it seems to fit a basic need for more investment choices for investors and more funding sources for farmers.

Just a thought.

Bernard Hickey

 

Bernard Hickey is the managing editor of interest.co.nz

 

 

Photo: Rotorua Daily Post