Contract Dairy Heifer Rearing

May 19, 2020

Gavin Duffy, CAFRE Dairy Development Adviser

Rearing dairy herd replacements represents a major investment by dairy producers in the future of their business. In the majority of cases farmers will rear their own heifers on farm but contracting out this responsibility may be an attractive option for some producers. For example where land, labour or buildings may be in limited supply or where the profit for the farm could be increased by concentrating solely on the milking herd with possible opportunities for expansion. In some situations transferring the heifers off farm may reduce the need for additional conacre and may benefit compliance with nitrates and slurry storage regulations.

Delegating the responsibility for heifer rearing to an outside specialist provides the potential to gain from the rearer’s livestock experience and sole focus on this enterprise. The arrangements in place for the rearing of heifers can vary from farm to farm depending on circumstances.

Heifer Rearing Contract

Maintaining a good working relationship and having an agreed written contract in place are key factors for the success of contract rearing. Contracts allow for some of the day to day issues that may arise to be identified, discussed and agreed before the heifers arrive on the rearer’s farm. A contract will also reduce the possibility of disappointment and disagreement between parties. The contract should include the following sections:

Responsibilities of the rearer

Generally, the rearer will be responsible for looking after the stock on a daily basis and in most cases will provide housing, feed, water and electricity. However in addition it may be agreed that the rearing farmer will administer all medicines, wormers, vaccines and fly treatments according to protocols established with the owner. A key task for the rearer is to ensure the heifers go in-calf early in the breeding season as per the owner’s instruction. This will require good breeding management, ensuring heifers reach target weights and are in the correct body condition at breeding.

Responsibilities of the owner

Depending on the contract, it is common for the owner to provide and pay for the main veterinary work such as the main health treatments such as medicines, wormers and vaccines and hoof work. Where AI is used the owner would normally select and pay for semen and pregnancy diagnosis if carried out.

Dates for the supply and return of the heifers

This particular area is important to both the rearer and the owner of the stock because the number and age of animals and time present on the rearers farm will determine the payment rates and the total revenue expected. Deviations from this will also have to be factored into the agreement.

Performance targets agreed between both parties

It is crucial that heifers are reared cost effectively to calve at an age and body size which will maximize lifetime performance. An example of the key performance targets for Holstein heifers calving at 2 years old are shown below which assumes a mature cow weight of 650kg.

Target weight at 6 months old (30% of mature weight) = 195kg
Weight at service – 15 months (60% of mature weight) = 390 kg
Weight at calving – 2 years old (90% mature weight) = 585kg

In order for these targets to be achieved, heifers need to be performing at an average daily liveweight gain of 0.75kg/day from a birthweight of 40kg to calving down at approximately 580kg. Achieving these targets on a consistent basis will require good housing, husbandry, and feeding management and an adherence to a good health management programme. The owner of the animals needs to satisfy themselves in advance that the rearer has the necessary skills, facilities and commitments for this to happen.

Contract heifer rearing allows dairy farmers to specialise further

Regulatory issues

In an ideal situation, agree a contract with a single rearing farm where no other stock are on site. Key regulatory areas for consideration will be:

• Regulations regarding movement and testing of stock
• Farm quality assurance scheme requirements
• Rules in place for claiming the basic payment scheme
• Requirements for adherence to the nitrates and phosphates regulations

It is best to seek veterinary advice from DAERA in advance so that each party is familiar with their responsibilities and the protocols should there be a disease breakdown.

Insurance

Responsibilities regarding insurance of property and in particular the livestock should be agreed in advance. It is recommended that both parties should make their insurance providers aware of the agreement, so that all appropriate risks are covered either by the owner of the heifers or the rearers insurance. Provision of appropriate insurance against the theft of animals from the property of the rearing farmer should also be agreed.

Payments

An important component of any contract heifer rearing agreement is the payment to be made for the service. In order to give some guide to the costs involved, the typical average variable costs associated with rearing an autumn born dairy replacement to calve at 2 years old is shown in Table 1 below (based on DAERA Farm Business Data 2019)

Table 1: Average variable costs to rear an autumn born heifer.

This is equivalent to 84p per day excluding fixed costs and land/building rental.

In addition to the above baseline variable costs, the rearer will have to factor in an allowance for his/her own labour and the share of the fixed costs on the farm such as machinery upkeep and running costs, depreciation, electricity, and insurance. Land and building rental will also have to be factored in. It will be important from the rearers view point that they have some knowledge of their own production costs. A heifer rearing contract has to be financially attractive to both the dairy farmer and the rearer as it should be a relatively long term arrangement and thus both parties need to be content with the financial agreements.

Additional incentives may be built into the contract to encourage and reward above average performance in areas such as growth rates, fertility or health management. In contrast some thought also has to be given to situations where key performance targets are not achieved or how animal deaths are treated.

Potential risks associated with contract rearing

a. Loss of control over the day to day management of replacement heifers
b. Risk of disease outbreaks
c. Possibility of heifers performing poorly where the rearer may not have the system or husbandry skills to achieve key performance targets
d. Risk of disagreement between the owner and the contract rearer

Summary

Contracting out the rearing of your replacement dairy heifers may be an attractive option well worth considering for some dairy farmers. A detailed written contract specific to the farms involved and to include key performance targets, should be agreed in advance of heifers moving. This will help avoid disappointment or disagreement between parties. Ideally heifers should be weighed regularly to closely monitor performance and identify under-performing animals quickly. Each heifer is an investment so it is important that both parties can work together smoothly to achieve the best results.

If you require help or advice regarding contract heifer rearing contact your local CAFRE Dairy Development Adviser or ring the helpline on 0300 200 7843 and ask to be directed to your local adviser.