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French savers seek to milk cows for cash

By Noemie Olive
/ Source: Reuters

By Noemie Olive

With interest rates at record lows and banks still tarnished by the financial crisis, some French savers are returning to grass roots and pumping money into cows.

While France's most popular savings account, the Livret A, offers returns of little more than 1 percent, cow owners can expect yields of 4-5 percent a year for an initial investment of around 1,200 euros ($1,700) per animal, promoters say.

Unlike the stock market, this particular cash cow is presented as low-risk, with gains based on the sale of the herd's calves.

Pierre Marguerit, director of Gestel, a company in southeastern France that manages some 30,000 animals on behalf of 1,000 investors, said sales have doubled in the past year.

"You buy one or more cows, which are rented out to professional farmers. Your herd then increases as the years go by. A herd of 20 cows will bring you one extra cow every year, that's roughly 4-5 percent," said Marguerit.

Although the birth rate within the herd is higher, a portion of the offspring will make up for deaths, while others are sold off to cover the costs of rearing the animals.

However, in a particularly fertile year, the net increase can run as high as 7 percent.

Investors can choose to sell the new cows and take the cash, or allow their herd to build up over the years by keeping the offspring, then draw a regular income at retirement.

The cows are rented out for milk production, helping dairy farmers to cut their initial outlays and freeing up cash for buildings or high-tech machinery.

"There's a real ethical side to it in that you're helping (farmers) to run their business, and the agricultural sector is absolutely vital," said Marguerit.

The value of a cow does fluctuate, depending on the price of meat, milk and animal feed. However, Marguerit said global food scarcity was sustaining the market and that the cost of a cow was little changed this year despite falling milk prices.

Cow lease contracts are nothing new, and can be traced back as far as the 12th century, when monasteries leasing cattle to farmers were taxed to raise a ransom for the English king, Richard the Lionheart.

But in a country proud of its agricultural heritage, the idea has found new resonance following the recent financial turmoil, as some savers have turned away from volatile shares and toward more traditional values.

"It's better than putting your money in the stock market or in the bank, which just makes the traders rich," said Jean-Claude Janes, a retired executive who earns between 5,000 and 6,000 euros a year from his herd of over 60 cows.

"This is something concrete, your herd actually increases each year and it reconnects the consumer with production."