Kieran Coughlan: Contract rearing offers real opportunity for hard-working farmers this spring

Contract rearing this spring offers an opportunity for both dairy and beef farmers alike.
Kieran Coughlan: Contract rearing offers real opportunity for hard-working farmers this spring

As the weather has settled again, the cattle grazing season has got under way in earnest. The Spring watershed, the point at which the weather settles enough to turn cattle out to the fields without return, marks a key decision making point of the year.

Livestock farmers across the country will be weighing up their options — whether it’s to stock up on yearlings, or two year old store cattle to graze down pastures, to hold tough for another few weeks to allow prices settle, or for those who have overwintered cattle to sell now while demand is strong.

A relatively new phenomenon of contract rearing is gaining more traction as a viable alternative to “main stream” farming.

Wealth of advantages

The many advantages to would-be rearers include a set income stream usually payable in monthly instalments, relatively predictable costs, no exposure to volatility in beef prices, sales are locked in through the contracted daily rate, the rearer remains in control of their land, the rearer is an active farmer for the purposes of claiming their basic payment scheme entitlements, the rearer is using their skills and resources to maximum benefit.

From the a dairy farmer perspective, contract heifer rearing is an option worth considering where in their absence a farmer could carry additional milking cows, where labour is stretched, where a farmer does not have sufficient time to devote to quality heifer replacement.

No typical profile

There is no typical profile of contract rearers — a variety of different farmers have now switched to contract rearing, from suckler farmers, retired dairy farmers, calf to beef farmers including a mix of both full-time and part-time farmers.

Typical grazing rates

Typical rates of up to €1.15 per day for grazing periods and €1.45 for winter housing are being paid.

Agreements can cater for things like dosing, breeding and meal costs to be covered by the owner and as such a contract rearer can limit their variable costs to fertiliser and silage.

On the downside, contract rearer’s are by their nature tied into a contract to rear the animals subject to the agreement, this involves an onerous responsibility, ensuring for example adequate feed, water, monitoring for health issues, breeding management and of course ensuring animals are properly fenced and protected from hazards.

Proper consideration should be given to how the contract between both farmers is drawn up.

Along with the standard measures of performance, say for example an expected average daily weight gain, the contract should deal with payment arrangements, and importantly the factors which would cause the contract to be break, such as non-payment, but also the rights attaching to the contract rearer to recover monies owing and the rights attaching to the farmer to recover his or her stock.

Contingency plans must be put in place to ensure that an outbreak of disease does not have implications for the smooth return of the heifers to the dairy farm at the end of the rearing period or result in calving heifers ‘stuck’ with a contract rearer with no facilities to calve or milk such animals.

By arranging annual herd tests at least four months prior to the expected return date to the fairy farm, the contract rearer and farmer are giving themselves a good window of opportunity to pass the test, with sufficient time for retest in the event of a TB outbreak.

Practical advice

Other practical advice would include dairy farmers selecting a contract rearer in an area free from TB, with good bio-security measures, and a closed herd i.e. not buying in cattle from mixed sources.

From a taxation view, income from contract rearing is to be treated as part of normal trading income.

Though the heifers to be reared will transfer into the rearers herd number, the animals remain beneficially owned by the dairy farmer, and the contract rearer should not reflect the value of such stock in their accounts, nor claim stock relief on their value.

Teagasc has published a very useful contract rearing template and guidelines — both of which offer a useful starting point.

This template contract can of course be tailored to meet individual requirements.

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