Don’t rely on good faith in contract rearing

A Contract Rearing of Heifers Agreement can be a flat rate contract, with the payment to the rearer based on a per head per day rate that is negotiated at the beginning of the contract, or it can be a weight bonus contract. Every agreement will be different.

Contract rearing of replacement heifers is an arrangement where a dairy farmer enters into a contract with another farmer for the replacement stock to be reared on the other farm, writes Karen Walsh

The other farmer gets paid to rear the heifers for the dairy farmer.

Many dairy farmers contract out the rearing of heifers, in order to free up land for milk production.

Rearing heifers for a dairy farmer is attractive for non-dairy farmers, the “rearers”, as it provides an income with less pressure in relation to buying and selling.

It is strongly advisable to enter into a written contract, if engaging in contract rearing of replacement heifers.

A Contract Rearing of Heifers Agreement is the relevant legal document between the dairy farmer and rearer.

Rearers will agree to rear the heifers on their own land and return them to the dairy farmer at a specified time.

The most important consideration for the rearer is that their costs are covered, and they are adequately paid for their labour.

The dairy farmer’s objective is measured by reference to the weight of the heifers being reared elsewhere.

Target weights must be reached at housing after the first grazing season, at mating, and when approaching calving after the second grazing season.

Regular weighing of heifers is generally undertaken in order that both parties can monitor the progress of the herd.

Many rearers and dairy farmers will be neighbours, and obviously a relationship of co-operation and mutual trust is necessary for a successful arrangement of this type. The parties will be in regular contact to discuss the health and progress of the heifers and any issues that may arise.

It is foolhardy to rely merely on good faith, however, as farming is still a business, no matter how friendly two parties are.

A written contract ensures that both parties are in agreement, and affords protection to parties if any disputes arise as what was agreed.

Some important terms that should be included in a Contract Rearing of Replacement Heifers Agreement are as follows:

  • Responsibilities and obligations of both parties
  • Confirmation that the dairy farmer’s animals are free of TB and have been tested in the last 12 months. Evidence of this test should be sought by the rearer prior to entering into the agreement
  • Animals that are to be contract reared should be kept separate from other animals kept by the rearer

It is wise to expressly state this in the contract.

  • Usually, the dairy farmer supplies vaccines for the heifers, and the rearer administers them. The desired process should be discussed between the parties, and set out in the written agreement, for clarity and to avoid later disputes
  • Targets in relation to weight milestones should be specifically defined

At what stage heifers should be weighed and by whom should particularly be set out. It is extremely important to set this out in writing, to be signed by both parties as the parties can then iron out any disagreements prior to entering the arrangement.

  • Details of how often the dairy farmer will check the heifers should be agreed in writing, as well as details of the arrival and planned removal of the heifers
  • Details of the position when targets are not met should be included in the contract, as well as a clause relating to disputes

A provision for a facilitation, conciliation, and arbitration clause, should be included, which will oblige the parties to resolve disputes in a prescribed, previously agreed manner.

Arbitration usually avoids court proceedings, which is the worst case scenario, and proves much more time and cost-effective.

  • The contract should state how and with what frequency payment is to be made to the rearer

Regard should be had here to the rearing periods, as rearing calves to 12 weeks and keeping the animals over the winter are the most expensive periods, while the grazing season is the least expensive.

If the rearer is to receive a bonus for reaching target weights, this should be detailed in the agreement.

In a flat rate contract, the payment to the rearer is based on a per head per day rate that is negotiated at the beginning of the contract.

In a weight bonus contract, a base level payment is agreed, with a bonus payable based on the animals reaching an agreed percentage of the target weights.

Every agreement will be different, and it is important to engage legal advice to ensure that both parties understand what is being agreed, and the consequences of the contract.

The success of a contract rearing enterprise can depend on the quality of the contract between rearer and dairy farmer.

Karen M Walsh, B.Comm, Dip. TEP, Commissioner for Oaths

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