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Friday 2 December 2016

Putting a value on the rearing of dairy heifers

Grasp expansion opportunity by rearing replacements off the milking platform and boosting cow numbers by up to 25pc

Martin O'Sullivan and John Anthony

Published 02/11/2010 | 05:00

The system of rearing will be agreed by both parties in advance, as will target growth rates. Like any system, there are benefits and weaknesses which both parties must carefully weigh up
The system of rearing will be agreed by both parties in advance, as will target growth rates. Like any system, there are benefits and weaknesses which both parties must carefully weigh up

The prospect of the removal of quota restrictions offers the opportunity of expansion for many dairy farmers. However, geographic and demographic factors, in regard to land structure, present a barrier to expansion in many cases. The solution may lie in collaboration among farmers.

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Collaboration between dairy and non-dairy farmers in replacement heifer production may offer scope for a substantial increase in milk production, while also presenting non-dairy farmers with a reliably new income opportunity.

Contract rearing will generally be considered only when access to land is a serious impediment to expansion. However, contract rearing may also be an attractive option for those with adequate land but with a labour or farm infrastructure deficiency as it can allow a dairy farmer to concentrate solely on milk production.

The arrangement, in simple terms, involves a dairy farmer entering into a contractual arrangement with another farmer. Replacement stock is reared on the other farmer's holding. All variable and overhead costs associated with rearing are incurred by the rearer, eg bedding, feed, fertiliser for grazing land, etc. Sometimes the stock owner -- the dairy farmer -- will cover the extra costs of specific vaccinations and breeding.

Charges are agreed in advance, dependent upon the system, and will be on a 'per head per day basis' or 'per kilogramme of liveweight gain' basis. The system of rearing will be agreed by both parties in advance, as will target growth rates. Like any system, there are benefits and weaknesses which both parties must carefully weigh up.

BENEFITS

  • Where land availability is limited, it can offer the opportunity of increasing cow numbers by 20-25pc.
  • Where labour availability or farm infrastructure is deficient, contract rearing could be an option.
  • Removing drystock (ie, replacements) will simplify the entire farming system, particularly grassland management.
  • The dairy farmer can focus his skills and capital on producing milk and the contract rearer on rearing stock.
  • Labour savings for the dairy farmer.
  • The quality of heifer coming into the herd may improve.
  • The rearer has the assurance of a set price.
  • An ideal opportunity for retiring dairy farmers.
  • The dairy farmer is using his own stock, thereby retaining control of his herd's genetic profile.
  • The arrangement is regulated by a formal contract with clearly defined roles and responsibilities.

WEAKNESSES

  • Reduced control over the rearing of stock.
  • Heifer quality may actually deteriorate.
  • Future productivity of a herd can be partially influenced by the abilities of the stock rearer.
  • Requires frequent communication and management.
  • The consequences of stock coming into contact with other stock on the contract rearer's farm, whereby disease issues may arise after they return.
  • The consequences of disease issues arising on the contract rearer's farm.
  • Disputes can arise.

COST and BENEFITS APPRAISAL

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The costs of production as set out at table 1 and are based on the cost of rearing a heifer post-weaning to a target weight of 530kg at calving at 24 months. Contract rearing arrangements may vary in terms of the age that the calf leaves the farm and the amount of time prior to calving that she returns. Typically, it is recommended that the calf is transferred post-weaning and returns within four weeks of calving, thereby spending around 630 days on the rearer's farm.

Table 2 sets out the amount that the contract rearer will be paid per heifer produced over the duration of the contract. The contribution towards fixed overhead costs is based on the typical fixed costs for a 40ha drystock farm stocked at 0.5ha per livestock unit. In this example, the contract rearer is getting a total of €645 in respect of a return on land, labour and a contribution towards fixed overheads for each heifer returned. Needless to say, this figure is negotiable and will vary from case to case.

Table 3 sets out the total cost to the farmer for each heifer from birth to delivery and back to the farm.

FINANCIAL BENEFIT

Contract heifer rearing, at first glance, will appear far more expensive than home rearing because the farmer will not include a charge for his land, labour or overheads. However, each contract-reared heifer can be replaced by one cow and table 4 sets out the financial benefit accruing.

In addition to the direct financial benefit, there are obvious labour savings for the dairy farmer, who will be in a position to concentrate his focus on milk production, which should result in improvements in margins.

WHAT should your contracts CONTAIN?

In all cases, written contracts are vital. The success or failure of a contract heifer-rearing enterprise may depend on the quality of the contract between the heifer rearer and the dairy farmer. Badly constructed contracts, incomplete contracts or no contracts often result in uncertainty and ultimately a dispute between the parties. Contracts should include:

  • Farmer and contract rearer's obligations, clearly set out;
  • Minimum weights and condition for heifers to enter the programme;
  • Target liveweight at set ages;
  • Weighing and reporting procedures;
  • Penalty payments for non-achievement of target weights;
  • Dosing and vaccination programmes;
  • Payment rates, method and timing of payment and variations due to performance and non performance;
  • Death and losses provisions;
  • Disease prevention assurance provisions to include the situation where other stock is present on farm
  • Provisions for heifers not in calf
  • Mating procedures and responsibilities including AI and synchronisation
  • General pasture and stock husbandry practices
  • Removal and addition of stock
  • Keeping of records
  • Access and observation issues
  • Dispute resolution procedures to include an agreed arbitrator
  • Role of monitoring adviser/ consultant if relevant.

SUMMARY

It is generally the case that replacement heifers can be bought on the open market at a lesser cost than contract rearing or, indeed, home rearing. However, the foregoing analysis clearly shows that in the overall context, contract rearing can have a direct financial benefit and key associated benefits.

This article is an extract from the forthcoming Farmers' Handbook, which is produced by the Agricultural Consultants Association (ACA). The handbook will be available after the Budget from most bookshops or online at www.irishfarmershandbook.ie. Martin O'Sullivan and John Anthony are agricultural consultants.

Irish Independent



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