With falling beef prices and the continued dark cloud around Brexit, there is considerable interest among beef farmers in earning extra money by taking in dairy heifers or even bull/beef calves from dairy herds, writes Gerry Cregg- Teagasc Business and Technology Advisor, Castlerea, Co Roscommon.
There are many beef farmers considering contract rearing as a knee jerk reaction to poor cattle prices and the considerable media campaign to promote contract rearing in light of expansion of our dairy herds.
While there are good opportunities, there is a potential for a train wreck ahead for many of these farmers if they do not properly research and financially plan where they are going.
In my experience over the past 20 years working with technically efficient beef farmers in Co. Roscommon, the returns from improvements in their farm business have not been financially rewarded and have been looking for opportunities for better returns on investment.
A beef farmer, who can provide a contact rearing skillset and land-base for dairy farmers and build a solid relationship overtime, can become an integral part of developing better dairy business.
The key part of developing thrust in this symbiotic relationship is that the contract rearer is working to the highest of standards and returning as close to 95% of heifers in-calf and on target weight within the twenty months.
Teagasc Roscommon Contract Rearing Group
Seven years ago, I selected a group of top beef farmers in Roscommon to research opportunities in contract rearing.
We realised that there were potential farm business opportunities in contract rearing but that we were not yet ready as a group to provide that service as there were gaps in our knowledge.
We visited Moorepark, some top dairy farmers and a number of existing contract rearers around the country.
We realised that the key to providing a good contract rearing business is to reduce the workload and pressure on dairy farmers in February/March. The suckling farming background of this group ensured they were competent stockmen and hence breeding heifers was not a big challenge.
The long-term sustainability of contract rearing as we saw it is to provide the full package taking the dairy calf at 3 weeks of age returning them in calf at 20 months.
The success of our group over the past number of years is largely based on developing that service with a primary focus on strict protocols.
Protocols around animal health, constant monitoring of live weight gain and grassland management were developed.
The greatest risks to this system are around the breakdown in animal health, which manifests itself in underachieving live-weight targets and ultimately higher mortality and infertility in the system.
A fundamental requirement of the group is technically to understand grassland management, make top quality silage (over 70% DMD), be competent at heat detection to achieve 95% of heifers in calf within a 6-week period.
This is the basic criteria of the contract and why the contract rearer is paid for that service.
With the expansion in dairying largely slowing down, granted in areas of the country as in the west, there is further opportunity, but the tide is turning with concerns over nitrates and global warning threats applying a braking system to further expansion.
This, in turn, will limit the potential for wide-scale contract rearing.
The reality of the situation in Ireland is that there is a shortage of top-quality calf rearers and too many beef farmers wanting to start contract rearing.
Having spent a long day on a contract-rearing stand this summer at the Dairy Open Day in Moorepark, on reflection, what I took out of the day was ninety per cent of people I spoke to were farmers wanting to be a contract rearer rather than dairy farmers looking for the service.
As with any business, demand and supply will drive contract-rearing rates down and what is already a marginal business will become less viable into the future.
There are; however, opportunities for top farm managers to work with top dairy farmers but the real opportunities are in calf rearing pre-weaning with proper facilities and with calf rearing skill sets.
This is labour intensive service and requires a greater knowledge bank but in the long term is where dairy farmers see real merit.
The way the dairy farmer looks at it particularly in the spring with high cow numbers and excessive workloads they will choose to pay a labour unit to someone to manage their calves and replacement enterprise off-farm.
The key requirement is for that individual is to hit close to national targets and provide healthy stock on their return, otherwise, they can pay someone locally to do the same job at the minimum agricultural wage.
The benefit to having access to contract rearers land for reducing nitrates tips the balance in favour of opting to send dairy heifer enterprise off-farm.
For many beef farmers, they would only consider taking on weaned calves or yearling heifers and will it be a sustainable opportunity if too many farmers drive down rates at a time of falling milk prices.
Therefore, the real opportunities in the long-term is to add on the calf rearing skill set with proper facilities. Farmers need to take a planned approach for the next few years to have a sustainable contract rearing business.
The other big consideration is how good or profitable is the dairy farmer you are working with. The first part of the dairy business to be streamlined if milk price falls or where a dairy farmer is under financial pressure is reducing replacement costs.
Contracts and penalty clauses
From a dairy farmer's point of view under short-term financial pressure, initially it is not recognised as primary in increasing revenue where cash flow is tight, or debt is escalating.
Therefore, if you are working with better financially performing dairy farms, you will be exposed to lower risks.
Remember also that poorer performing dairy farms are struggling with animal health issues or infertility in the herd and no contract rearer in one year can resolve these factors.
In my experience when targets are not met, the dairy farmer will be quick to blame the contract rearer and the blame game starts.
That leaves me on to the issue surrounding the issue of contracts and penalty clauses, which are often not discussed until the actual contract is being drawn up.
From the dairy farmer’s point of view, while they are paying considerable monies to a contract rearer for the service they require, some security to cover the risk in terms of poor performance from the contract rearer.
This is a very important consideration for any beef farmer before embarking on contract rearing.
The biggest lesson we have learned over the last four years contract rearers working in isolation can find themselves in extremely stressful situations when targets are not being met.
The support of a discussion group or a group of likeminded people helps to alleviate and reassure the contract rearer when systems are breaking down.
Of paramount importance also is to have a support network of technical professionals to support the contract rearer.
Overall, there are opportunities for beef farmers to go contract rearing. The choice they have with their current land base is to replace their own stock with contract dairy stock and as a result, their overall net worth is reduced, but this can be justified with a long-term sustainable contract rearing business.
A word of caution here, a dairy farmer not committed to a longer-term arrangement can leave the contract rearer very exposed financially if they break contract or do not renew it.
The other option is to have beef farmers contract rearing as a smaller add-on to their current business; however, this can leave both herds exposed from animal health issues but is less of a financial risk.
A long-term planned approach to contract rearing, rather than the current knee jerk reaction in light of poor beef prices, is what is required.