Contract Heifer Rearing 

Marie Kearney, Beef Advisor, Teagasc, Midleton

Contract heifer rearing has increased in popularity over the past number of years due to a number of different factors,

1. Removal of milk quota’s in 2015, has allowed dairy farmers the opportunity to expand and milk more cows, generating more milk output from the milking platform.
2. Continuous improvements in herd fertility and six week calving rates, have contributed to high workloads in springtime and the demand for specialised labour.
3. The availability of land to purchase or lease for the rearing of replacement heifers is very often difficult to source and in many cases the costs can be prohibitive.
4. With the volatility and price uncertainty of the beef markets, many dry stock farmers are looking for alternative income sources.

What is Contract Heifer Rearing?

Contract heifer rearing is a written agreement whereby the dairy farmer supplies a heifer to be reared at an agreed fee per head per day. In return the contract rearer undertakes to care for and return an in calf heifer in good condition. The replacement heifers may be moved from and returned to the owner’s farm at different ages depending on the individual agreements made.

What are the benefits for Dairy Farmers?

1. Increased milk production and profitability.

Where replacement heifers were previously reared on the milking platform, this land can now be freed up allowing the dairy farmer to increase dairy cow numbers, increasing milk sales from the milking platform, thereby increasing farm profitability if completed in an efficient manner.

2. Additional land, labour and facilities

As the contract rearer is completing all works associated with the management and rearing of the replacement heifers, they are providing additional land and labour to the dairy farmer. Animal housing, slurry storage and silage holding facilities are also provided, thereby reducing the need for capital investment. With cow banding for nitrates calculations now coming into play, dairy farmers may be able to maintain some or all of their current cow numbers if the replacement heifers are moved off farm.

3. Ease of management

With the replacement heifers now contract reared on another farm, there is predominantly only one group of animals (dairy cows) to be managed on the dairy farm. This allows for increased efficiency and improved management as there are now fewer groups of animals to management.

What are the advantages for Contract Rearer’s?

• Cash Flow and Income

 Having an agreed fee per head per day gives the contract rearer a guaranteed monthly income and they are not dependent on uncertain beef prices and volatile markets. Monies are paid directed into the contract rearers’ account on an agreed regular basis and they can make plans and commitments based on having a stable monthly cash flow.

• No investment in stock

There is now no requirement to avail of stocking loans to purchase animals and the risk of paying high prices to purchase livestock is removed. In many cases contract rearing agreements may be run in conjunction with the rearer keeping a certain level of stock of their own. This enterprise may complement the existing farm enterprise.

•  Potential to be more profitable

In an efficiently run contract heifer rearing enterprise, where there is a high level of grassland management and production of high quality silage, a high level of performance can be achieved. Coupled with the removal of the risk of purchasing expensive animals and the beef price uncertainty there is capacity to make the farm more profitable.

What’s involved in a Contract Heifer Rearing agreement?

It is very important to partner with the right people. There should be a written legal agreement between the dairy farmer and the contract heifer rearer. This agreement will outlined the agreed responsibilities and plans. Bear in mind that the best made plans can sometimes changes and the success of the agreement is very often based on how these issues can be worked through and resolved between both parties. Like any relationship, it requires trust, flexibility and an ability to compromise.

The agreement needs to be a WIN : WIN for both parties involved.

What are the costs involved?

When discussing the costs involved in Contract Heifer Rearing it is important to realise that one size does not fit all. There are many reasons for this.

• Different start and end dates, therefore varying length agreements.
• Heifer owner supplying different inputs.
• Varying size and weight heifers (Cross bred v Holsteins)
• Regions of the country have longer winters and therefore more expensive stage of rearing.
• Rearer’s have different values on their reward for land, labour, facilities and management.

It is therefore essential that each party establishes their own costs and completes a budget to arrive at a fee per head that covers variable and fixed costs and leaves a satisfactory a margin to cover the cost of own land, labour, facilities and management.

The fees per head per day must therefore cover,

• Variable and fixed costs,
• Land and facilities charge,
• Labour and management fee 

With changing costs of fertiliser, feed and energy, Teagasc have developed a GUIDELINE cost calculator which can be completed with your advisor.

This calculator gives a GUIDELINE figure, to start the discussion between the heifer owner and rearer and the agreed fee may well be above or below this guideline.

Summary

• For Contract Heifer Rearing to be a success it must be a WIN: WIN situation for all parties involved.
• It is a business arrangement and trust, honesty, flexibility and good communication must exist between both parties for a successful agreement.
• A written agreement is essential so that all parties are in no doubt as to their responsibilities.

For further information on Contract Heifer Rearing please contact Teagasc Midleton Advisory Office, Knockgriffin, Midleton, Co Cork on 021 4631898.