Contract Heifer Rearing in detail

Contract heifer rearing has increased in popularity over the past number of years. Teagasc ran two Contract Heifer Rearing farm walks in June on the farm of Laurence McEvoy, Co. Kilkenny and on Kieran & Caroline Henry's farm in Co. Sligo to address the growing interest. Get the details here

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?

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.

Additional land, labour and facilities

As the contract rearer is completing all the work 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. 

Ease of management

With the replacement heifers now contract reared on another farm, there is predominantly only one group of animals, the 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 manage.

All the above should also lead to an improved work life balance where the dairy farmer can enjoy time off to pursue other activities of interest.

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 directly into the contract rearers’ account on an agreed regular basis. 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?

There should be a written legal agreement between the dairy farmer and the contract heifer rearer.  The agreement should be signed and dated by both parties and witnessed by an independent person. 

The basic details that are included in an agreement are.

First Schedule

• Date the heifers will be moved to and from each farm.
• Fee agreed and payment procedure outlined.
• Details of the land to be used by the contract rearer.
• Breeding procedure and who is responsible for each action.
• Bonus/Penalty clause if applicable.
• Facilitator identified in the event of a dispute.

Second Schedule

• List and tag numbers of all heifers to be moved from farm to farm.
• Vaccination protocol and who is responsible for supplying and administrating.
• Weighing schedule and targets.

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.
• Different 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 amount for their 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 (opportunity cost) fee

Teagasc have developed a Guideline 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.

The agreement needs to be a win : win for both parties and there must be recognition taken of a rearer that does a good job in terms of:

• management of the heifer
• good weight/condition for age
• high percentage returned in calf
• calving down early in the calving season

while also an owner that pays on time and is fair and helpful in the process are all worth their weight in gold.

What do I minimise the risk of an outbreak of TB?

This is a very common question in contract heifer rearing scenarios. It can be dealt with in a few different steps

Reduce the risk

Ideally contract rearers would only take in heifers from one source farm.
Assess the TB history of the farm to ascertain if there is a higher risk of a repeat breakdown.

Follow the recommended protocols

• Ensure good fencing exists between neighbours to avoid nose to nose contact.
• An excellent bio security protocol in both herds is critically important.
• Feed animals in raised troughs, not along the ground.
• Fence off badger sets and badger proof farm buildings.

Further information on TB management in contract heifer rearing herds can be viewed on the DAFM website

Summary

For Contract Heifer Rearing to be a success it must be a win: win situation for all parties involved. A level of trust, honesty and flexibility must exist between both parties. Events may change and things will go wrong, so good communication and a give and take attitude are required. It is important to have a written agreement so that all parties are in no doubt as to their responsibilities.

For further information on Contract Heifer Rearing please contact your local Teagasc advisor.

More information including guidelines and factsheets are available here