This article can be used for both Dairy and the Beef Industry.
The statement “youth are the future of the dairy industry” is often used when referring to our future dairy producers. However, this statement is also very true as it relates to the youngstock, as replacement heifers are the future of the dairy herd. The future profitability of the dairy herd relies on a good supply of well-grown, genetically superior heifers to replace the market cows or to expand the current milking herd. Considerable time and cost is required to develop quality heifers from birth to first calving.
The trend of increasing number of cows per farm has prompted many producers to examine the need to provide more labor for the milking herd. This may mean additional work hours per day, increased labor force to handle the extra workload or perhaps recognizing that a custom grower would be able to take over the heifer-raising responsibility. In some instances, a custom grower may be able to raise healthier heifers in a more cost-effective manner. A successful custom heifer-raising arrangement can free up the dairy herd owner to concentrate on other management and labor needs with the milking herd.
It is important that both the producer and the custom grower can benefit from a heifer-raising agreement. Both the producer and grower must establish goals and share those goals with each other. Knowing the actual cost to raise heifers is a key factor in deciding if custom heifer-raising is for you. Additionally, assessing the current labor and facility availability on the dairy farm, as well as the ability to raise heifers to calve at 22 to 24 months of age, will help determine if hiring a custom heifer- raiser is a sound economic decision.
When exploring the pros and cons of contract heifer-raising, several considerations need to be addressed. The advantages to the owner could include less labor required, able to concentrate on milking herd management, frees up housing space to expand milking herd, less feed inventory and perhaps, growthier and healthier replacement heifers. Disadvantages could include loss of management control, unused facilities, increased cash flow needs, potential exposure to biosecurity risks, owner/grower conflicts and possible poorer growing replacement heifers.
A decision to contract with a grower will need to be based on sound economic reasoning. If the advantages will increase the profit potential of the milking herd enterprise and the owner is willing to give up the heifer management aspect, it can be a good management decision. It will be important to select a grower who understands growth performance expectations of dairy heifers and who will provide a professional service. Avoid growers who have overcrowded or inadequate facilities, since such conditions will lead to unthrifty, poor-quality replacements.
Contract agreements and considerations
It is extremely important to prepare a written contract. This will be beneficial to both parties and help avoid owner/grower conflicts. The contract needs to outline the expected growth performance, the responsibilities of both owner and grower and the fee arrangements. Heifer growth rates for large-breed heifers should range from 1.6 to 1.8 pounds per day with small-breed heifers achieving 1.3 to 1.4 pounds average daily gain. Accelerated weight gain, especially during the pre-pubertal period, is not recommended and damaging to the future milking ability of the heifer. Therefore, recording height measurements and body condition scoring should be encouraged to monitor overconditioned or underconditioned heifers.
The responsibilities of both owner and grower also need to be written into the contract. These could include such things as breeding cost and sire selection, ration formulation, routine and unexpected veterinary care, vaccination program, hauling, insurance and death losses. Both the owner and grower need to discuss the various responsibilities expected and come to an agreement.
The cost of custom-raising heifers will primarily be based on the assignment of grower/owner responsibilities and conditions as outlined in the contract. Certainly the size of the heifer when entering the grower’s facility and number of days on feed will dictate the cost per animal. There are several ways to arrive at a fair fee arrangement. These include payment based on per-pound of gain, per-head daily charge, feed plus yardage and option to sell and buy back.
Per-pound of gain payments based on pounds of bodyweight gain during the contract period. Cattle are weighed in and out. The predetermined price per pound of gain is simply calculated and the total price is known. It is suggested to pay a portion of the total price on a monthly basis to provide steady income for the grower and avoid putting a large cost burden on the owner at the end of the contract. Then, at the end of the growing period, the dollar difference based on out weight is calculated for the final payment. With the per-pound of gain fee arrangement, it is very important to monitor suggested dairy heifer growth and perhaps establish a penalty for overconditioned heifers.
Daily head charge is a fixed charge, per day, per head and has the advantage of simple billing and easy for planning cash flow. However, if growth rates are slow, the owner could end up paying more due to the extended growing days needed to reach breeding and/or calving weights. The owner will need to specify expected growth rates to avoid this conflict.
Feed plus yardage requires the owner to cover all feed costs with a daily yardage cost to cover labor, facilities and grower operating costs. The risk of feed price changes is borne by the owner. Feed plus yardage reduces any possible conflicts between the grower and owner on the rate of gain. The owner also has the sole decision in determining the nutrient specifications of the ration.
Option to purchase allows the owner to sell the replacement heifer to the grower with the reserved right to purchase her back at the current or pre-determined price. This method shifts most of the risk to the grower. It can create uneven income flows for the grower, at least until established with regular sales. In addition, even though the owner has the money from calf sales to reinvest, the owner may find it more difficult to have enough cash flow to purchase heifers back at calving age. PD