"The benefits for the dairy farmer is that he has the use of the contract rearer's land and his labour - the use of all his facilities in the winter. He is in a win-win situation. He doesn't have to look at the stock or invest in wintering accommodation for them.
"He also doesn't have to go out and seek the additional land."
Yet, one of the biggest issues to date is getting dairy farmers to agree to relinquish their youngstock to another farmer.
Some of the farmers, which include part-time AI technicians and a vet, operating as contract rearers in his discussion group, are having to go as far as Meath, Mayo and Galway to source stock.
However, Tom feels there will be more stock available in the western counties in the coming years, due to the number of new entrants, dairy farmers expanding and also people looking to economise on labour.
The prices being paid vary widely from around €1 to €1.50 per head a day. Each agreement is individually drawn up to take into account that some are just summer grazing; others are being housed over the winter; the feed variations, plus vaccination programmes differ. The animals generally go to the rearer at 12 weeks - however, some take them as young as four weeks.
They are kept until 20 months and returned in calf to the farms. "You are only really wintering the nought to one-year-olds. The two-year-olds leave in October and November and calve down in February," he says.
The best dairy farmers are able to rear a heifer for €540, compared to an average of €700, with the least efficient on €900.
Tom explains the cost varies between seasons, as he estimates the cost of rearing at €1 a day for the first summer, €1.50 for the first winter, while the second summer costs €1.10 and the second winter €2.
Mostly they perform synchronised AI to ensure they are returned in calf, with bulls then used to mop up the remaining animals. Vaccination programmes can vary depending on the contract.
A key component of successfully contract rearing has been improving the efficiency of the farming enterprises, with grass management key.
Tom explains that the farmers have signed up to Teagasc's PastureBase and are measuring grass so they have a full picture of their feeding requirements.
The lighter youngstock also mean that stocking rates can be increased, which can also boost profits.
Tom says some farmers are now entering the contract rearing in conjunction with ongoing enterprises such as suckling, finishing beef or sheep.
However, others are taking it on as a sole enterprise. Tom says it can have advantages in terms of being able to boost the stocking rate of the farm without having to tie up large sums of money in stock.
Some of the key stumbling blocks the farmers found in the early stages were animals coming in sick and underweight.
"They are the ones that always cause problems and there'll be difficulties in reaching targets and they'll reduce their own profit then," he says, adding this can be avoided through working together on weight and vaccination issues to ensure animals arrive on target.
He points out that both parties have to agree and meet their own targets.
Also, many have found that it is key to maintain close contact with the Department of Agriculture on the TB test. Most try to ensure the herd test takes place in the early part of the year, so that means they will not end up having to keep them on if any difficulties arise later in the year. There is a cost so farmers are advised to check with their local DVO in advance.
"There is not a lot of it happening around the country and it does benefit the dairy lads in terms of the labour. It does take time to build up trust. Once a relationship has been formed for a year or two, we would be hoping to strike a long-term agreement," he says.
The pros and cons of Contract Rearing
There are many pros and cons that rearers need to analyse when it comes to signing up to take on dairy stock.
Teagasc's Tom Coll says that a detailed contract agreement is essential, with some farmers agreeing to an intermediary who they can turn to if any difficulties arise.
All of the requirements for target weights and pregnancy rates must be set out, with regular weighing to monitor the performance of animals.
After two years facilitating the discussion group, he has found that building a good relationship between both parties is the key to ensuring that a more long-term arrangement works.
He advises building up the numbers slowly over a three-year period.
The stocking rate can be increased on rearers' farms as heifers weigh lighter and can be stocked at a higher rate. Some of those going into contract rearing had been running suckling operations where the average animal might weigh around 700kg, compared to heifers at 250kg.
It is good for cash flow. The rearer knows at the start of the year just how many animals they will be stocking and what income they will be expecting. The payments generally arrive on a monthly basis by direct debit into the bank account.
It can improve farm income as, rather than depend on the vagaries of the market, a set payment is agreed.
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Clear guidelines are set out so the rearer knows what they are expected to deliver and how much it will cost them to rear that animal.
The initial contact in any business deal can be difficult and it takes time to build trust and form a working relationship - the first bump on the road and how it is dealt with is vital.
Heifers arriving below target weights can scupper the rearer's chances of meeting weight targets on budget. However, weighing them before they leave the dairy farmer's yard, and again on arrival at the contract rearer's yard, can stop this issue.
Heifers or calves arriving sick or scouring can also bring extra costs and hinder weight targets. All animals must be properly examined and the vaccinations agreed in advance to stop this.
Vigilance must be maintained in ensuring against outbreaks of disease and health plans followed.