Exposure of livestock grazing to forage productivity variation and to market fluctuations affects the risk of investment and returns from cow-calf operations, but little work has been done to empirically compare these returns to the returns that would be demanded by financial markets from assets with similar risk and return characteristics. This study uses historical forage production data from three rangeland locations in California, and cattle and hay prices, to simulate financial statements for three hypothetical cow-calf producers in the period 1988–2007. Return on investment from year to year incorporates the variability and risk associated with dependence on natural forage production. Performance is then compared to the actual performance of a diversified portfolio of assets using the Capital Asset Pricing Model, from which the theoretical cost of capital for these hypothetical grazing enterprises is derived. Much like other agricultural enterprises, cow-calf production in California has low market risk and a low theoretical cost of capital. This theoretical cost of capital is still greater than the historical return from livestock production (excluding land appreciation) in the western United States, adding further backing to the point often made in the literature that ranchers who engage in cow-calf production are receiving benefits beyond the commercial returns from livestock production alone.