Finding the courage to make a change

It takes courage to make a big change to your farming enterprise. Throughout this series, we have shared stories of families and farmers who approached change with an open mind, clearly viewing the potential pros and cons, and had the courage to take action if they felt the option was right for them.

Some business changes require less drastic changes than others. Contract-rearing of dairy heifers is an example of a business that can deliver consistent profits without the need for dramatic investment.

In many cases, the change of mindset is the biggest step. Rearing stock on contract requires the same, if not more, farming skill than any other enterprise. Contract-rearing is becoming more and more common.

It is an agreement under which a dairy farmer pays a contract-rearer a set fee per day, for an agreed period of time to rear his/her heifers. This fee pays the rearer for any costs incurred in rearing the heifers and gives them a return for their land, buildings and labour. In some cases, the rearer takes on heifer calves and returns these as in-calf hiefers. In others, the dairy farmer might keep the calves for the first year and send them to the rearer as weanlings. The fee paid varies depending on the agreement; some dairy farmers provide health products, such as dosing and vaccines, which reduces the daily fee.

Typically fees from €1 to €1.50/day are possible, depending on when animals come and go. Agreements where animals are housed over the winter will have the highest cost per day.

With milk quota removal next year, the demand for good contract-rearers is likely to increase. Most dairy farmers will want to use all the land around their milking parlour to milk cows. Getting someone to contract-rear their heifers can mean profitably producing more milk and reducing labour demand. Well-reared heifers are crucial to the profitability of every dairy farm.

Heifers must reach target weights of 60% of mature weight at bulling and 90% of mature weight at calving (see table 1). Otherwise milk production and fertility suffers. Using a specialist contract-rearer can be a way of improving how heifers are reared if the rearer has the right skills. The potential benefits for a dairy farmer are clear (see table 2).

What are the benefits for a farmer to consider contract-rearing?

A collaborative farming arrangement needs to be win-win if it’s to work. Let’s look at contract-rearing in more detail.

What is the potential profitability?

Teagasc figures based on profit monitor data for heifer-rearing costs suggest that an average-performing contract-rearer stocked at two bulling heifers and two weanling heifers per hectare and receiving €1.20/day could make approximately €420/ha net profit as a return for land and labour. A low-cost farmer in the same situation could make approximately €690/ha, while a high-cost farmer would make €150/ha. A weanling heifer is approximately 0.3LU and a bulling heifer is approximately 0.7LU. Running a higher stocking rate is only profitable if the farm is growing enough grass to sustain this.

How will it affect my workload?

The only extra work involved in contract-rearing over drystock farming is during the breeding period. Some dairy farmers may be happy to let a stock bull run with heifers, in which case there is very little extra work. Others may want to carry out a number of weeks of AI first and some may wish to synchronise the heifers to breed as many of them as possible to AI in the first week. This will be set out in the contract at the start. The only other tasks required are daily herding and dosing (which the dairy farmer may or may not help with). A well set up contract-rearing enterprise could be run part time, depending on the scale.

Is there much investment needed to begin?

Most likely not. In some cases, contract-rearers could hope to earn more profit while freeing up capital, as farmers sell stock or do not buy-in their own stock. Good grazing infrastructure makes managing grass easier.

The better you manage grass, the more weight heifers gain and the less cost to the rearer. Many farmers house weanling heifers on slats in their first year. In-calf heifers may need to be housed in cubicles in their second winter. If these aren’t available, the heifers may simply be returned to the dairy farm at housing.

What skills do I need?

Grassland management and stockman skills are essential. Heifers need to be gaining close to 1kg/day liveweight at grass to minimise meal feeding needed in winter. Heat detection skills are essential if using AI on heifers.

How can I set up this arrangement?

Advertise your availability in the Farmers Journal. Contact Austin Finn in the Land Mobility Service. Approach a dairy farmer/potential contract-rearer you think you could work with and discuss the idea. Contracts are available from Teagasc, which can be used to officially set up the arrangement. Some tax planning may be required if selling stock to begin contract-rearing.

Can I rear stock from more than one farm?

Yes, some contract-rearers have stock from more than one dairy farm, or have their own stock along with dairy heifers. In some cases, these are kept separate on different blocks of land. It’s preferable that stock from the different farms are being vaccinated for the same diseases. TB testing should be carried out in the summer to ensure time for retesting should an animal be confirmed positive. Should a dairy farmer or rearer be locked up with TB, the Department will allow transfer of animals from one farm to another, but both herds will be locked up. This won’t compromise compensation to be paid for a reactor.

Case Study

Contract-rearing on Shinagh dairy farm, Bandon

The Irish Grassland Association recently held a contract-rearing focus event on the Shinagh Dairy Farm in Bandon. This is a Carbery monitor farm, converted from beef in 2011, that is now milking 226 cows. All the heifers on the farm are contract-reared. Dairy adviser John MacNamara started the event by asking the crowd to separate into dairy and beef farmers and each group should then discuss what they want from contract-rearing. This clearly outlined the expectations of each group to the other.

Dairy farmers listed the following as their key requirements:

Non-dairy farmers outlined the following:

Karen Dukelow, Teagasc cattle specialist – advice for potential contract-rearers:

“The profit you make from contract-rearing will depend on your stocking rate and your costs. If you can achieve cheap weight gain from well-managed, quality grass during the grazing season, then there is much less need to feed expensive meals to hit target weights. Stocking rate needs to be matched to what grass you can grow. A stocking rate of 2LU/ha is close to the equivalent of two weanling and two yearling heifers on each hectare. If selling stock, the money should be banked as working capital should you want to restock all or part of the farm in the future.”

John MacNamara, dairy adviser, Tegeasc – advice for interested dairy farmers:

“You need to find the right person to rear the future of your dairy herd. Set out clearly what is expected in terms of animal performance. It’s a good idea for the rearer to visit your farm, as well as vice versa, to ensure a good understanding. If they have good fencing, good grass and good stock then you are onto a winner. The rearer is paid an agreed price monthly, so this needs to be planned for in terms of cashflow.

Tom Curran, farm structures specialist, Tegeasc – on maintaining a good relationship:

“A contract helps achieve clarity between the two parties around responsibilities and expectations. When contract-rearing, two farms are relying on each other, so establishing a good working relationship is crucial. Regular communication can’t be stressed enough. ”