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Is it advisable to invest in crowd farming?

As with any other investment, it is important to fully understand the risks involved.

I would like to know what you think of an investment in crowd farming. Please see livestockwealth.com.

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Thanks so much for sending the question through. I’ve had a look at the website that you provided with interest. From what I can understand, this concept appears to be very similar to crowdfunding but in the context of farming. As such, this initiative should be viewed as an alternative asset class.

From the farmer’s perspective, this concept is essentially an alternative form of raising finance.

Read: Livestock Wealth’s ‘crowdfarming’ gets backing from RMI, Woolworths

One of the key features of any crowdfunding initiative is to provide a platform through which potential funders (investors) can be connected with investment and/or financing opportunities.

Under normal circumstances, a farmer who requires financing would approach a financing institution, such as a bank, for a loan. If approved, the loan would have repayment terms and interest rates attached do it. If the bank does not find the farmer to be a secure credit risk, it may refuse to grant the loan, or possibly reduce the credit facility or increase the interest rate in order to compensate for the risk.

When considering whether to invest in this crowd farming opportunity, our advice is to approach it as you would any other investment by ensuring that you fully understand the risks involved before making any commitment.

If the farmer was to approach a financial institution for financing, the onus to perform full due diligence would fall on the financial institution. However, as a potential investor or financer of this scheme, the onus of performing due diligence falls on you. As such, you will need to ensure that you fully research this investment opportunity so as to identify the potential risks you may face.

While this investment may provide an opportunity to generate returns, it is important to understand the downside.

Questions to consider

As a potential investor, you will need to establish the credibility of the organisation, how and where it is registered, and who runs the business. How long has the organisation been in existence? What is their track record? How does it work? What are the terms and conditions? Does the farmer have an established business? What is their experience and formal training in farming? What guarantees are in place that the cattle or calf you have invested in exist? What if the calf is stillborn? What if the cattle are stolen? Do you or the farmer have insurance for such events?

My suggestion is that you spend time doing your due diligence and understand your risks before committing any money to this investment.

What Livestock Wealth’s website says:

How and where it’s registered

Livestock Wealth is a registered credit provider with the National Credit Regulator (NCRCP8126), and is also regulated as a registered agricultural producer agent with the Agriculture Producer Agents’ Council (Reg No. 155).

Livestock Wealth is not regulated by the Financial Sector Conduct Authority (FSCA) because it does not meet the regulatory definitions of a financial services company or a financial services product as it offers real tangible assets.

Its tangible assets (free-range oxen, pregnant cows and Macadamia trees) actually fall under the Agriculture Producer Agents’ Council (Reg No. 155) which it is regulated by.

How long it has been in existence

Livestock Wealth was started in 2015 when agri-tech entrepreneur and CEO Ntuthuko Shezi realised there was an untapped commercial opportunity around livestock farming in SA that could leverage off the African community’s close links to cattle.  

How it works

You buy the young asset (livestock or plant-based) from the farmer, through Livestock Wealth.

  • The asset grows in the farmer’s care.
  • The farmer buys back the asset once it has fully grown at harvest. You, the investor, make a profit from the sale.
  • For more information, click here.

Are returns or profit guaranteed?

Yes, the profits we advertise are guaranteed as the assets are insured by the farmer.

What happens if my asset dies or is damaged?

In the event that something happens to your asset, it will be replaced at no extra charge.

Click here for Livestock Wealth’s terms and conditions.

Do you have any questions you would like answered by registered financial planners?

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COMMENTS   5

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Ultra ultra high risk, it is hard enough to get your own cows/ewes to produce regularly in our harsh climate, and to survive. But another person who expects a return every year way above inflation, just because they see farmers as money trees.

Believe me I have been there, the animal that breaks a leg or falls in a hole or drowns is either your own best cow/bull/ram/ewe or it will be the other persons.

Profits are guaranteed? Alarm bells ringing. Stay away.

I agree do your due diligence, choose a partner with a track record, register your own branding mark for your livestock and be involved.
QE and money printed has created the biggest dislocation in equity prices vs underlying value in the history of mankind. We will see another 1929 and it is close. Real tangible assets like commodities, land, property will hedge you against the fall-out to come.

Farming is a science, no longer a hobby for tough guys in Khakis. I can tell you how many cents it cost me to rear a calve to a weener. With technology like weigh-bridges, electronic tags, drones we convert price of grazing into input cost per cent vs mass gained and predict outcomes and optimal times to sell.

It is alternative asset classes or give Stephen Cohen (from Billions series – yes there is such a guy) a $1.0 mill innitial investment and see how he actively manges your wealth.

Oh and buy quality like Beefmaster, Bonsmara, Brangus, Brahman not just any field cow.

A very novel idea, but the numbers these guys are talking about does not make sense. The type of cattle they buy is also not quality breeding stock, in my opinion looking at the prices. Very nice when prices keeps on going up, when the prices are going down this business will struggle. Quality cows are going for R18-R20k at the moment, I want to see how they guarantee a 14% return on that when you have to add your costs (Maize at R3k+/ton) and management fees.

In the end who am I to judge, they have all the big companies supporting them with impact investment funding…

If this is such a great idea and a good investment, why is the Land Bank bankrupt?

End of comments.

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