Contract heifer raising

Contract heifer raising should be considered if labor, land, and facilities are limiting, if milk production could increase with less daily heifer work on the farm, if homegrown heifers are currently not performing well, or if a contract heifer raiser is more efficient. Economical analysis should be conducted to evaluate the current heifer enterprise versus contract heifer raising. Contract heifer raisers should be carefully evaluated. Written contracts should be used.

Contract heifer raising has been common in the Western U.S. for some time. It has only been in the last decade that some dairy producers in the rest of the U.S. have been contract raising their heifers. Dairy producers, large or small, must evaluate all aspects of their farm businesses. Heifers are the second largest cost on the farm, just after feed costs for the milking cows. Contract raising heifers is a good option for some but not right for all.

Why Should Contract Heifer Raising Be Considered?

  1. The farm’s labor supply is limiting.
  2. The farm’s supply of land is limiting causing forage supply and manure disposal options to be limiting.
  3. The farm’s heifer facilities, pastures and forages could easily be used for more milking cows without a lot of added expense.
  4. Milk production could increase if the farm manager had more time for the milking herd.
  5. The farm is currently doing a poor job raising heifers and losing money in this part of the business. If heifers are 85% of mature size at calving and they are calving at more than 24 months of age, it’s a good indication that there is a problem. If more than 20% of the first-calf heifers on the farm are being culled during their first lactation, it’s a good indication that there is a problem.
  6. The contract heifer raiser may be able to raise heifers more efficiently and economically.

The Decision Process:

  1. Establish the true cost of raising heifers on your own farm. Studies indicate that the cost is typically between $1150 and $1250 per heifer raised. Feed generally makes up 50-60% of that cost and labor makes up 10-15% of that cost. Calculate out the cost of daily labor, housing, and feed. Costs vary from farm to farm.
  2. Do a partial budget analysis to evaluate the potential savings, extra income, and costs associated with contract heifer raising versus continuing to raise them on the home farm. Surveys indicate that many contract heifer raisers can save dairy producers 5-15% over raising heifers at home. If they do a better job than would be done at home, the extra production potential of contracted heifers should be factored in. As with prices for individual dairy producers, the costs associated with heifer raising will vary.

Increased age at first calving will cost a farm in more rearing days, more heifers on the farm, and fewer days of productivity. Here is an example developed by nutritionists at Washington State University:

Herd:

  • 200 cows
  • 25,000 Pound ME / Cow
  • 13 Month Calving Interval
  • 2 Month Dry Period
  • 40% Replacement Rate
  • Milk Price = $12.00 / cwt
  • Cost to Produce Milk = $9.00 / cwt
  • $1.45 = Daily Cost to Raise Heifers
  • Average Calf Value = $65

Effect of Age at First Calving on Heifer Profitability

  Heifer Calving at 24 Months of Age Advantage for Calving at 24 Months of Age Heifer Calving at 30 Months of Age Advantage for Calving at 30 Months of Age
First Lactation Milk Yield 19,579 lbs   21,453 lbs 1,874 lbs
Rearing Costs at $1.45/d $1,059 $264 $1,323  
Total Milk Production at 4 Years of Age 42,098 lbs 8,654 lbs 33,444 lbs  
Calf Income $130   $130  
Income Over Rearing Costs $334 $524 -$190  

Washington State University

Annual Herd Inventory Costs Associated With Age at First Calving


Heifer Calving at 24 Months of Age Advantage for Calving at 24 Months of Age Heifer Calving at 30 Months of Age
Heifers, 13-24 Mos. 80    
Heifers, 0 – 12 Mos. 80    
Heifers, 19-30 Mos.     80
Heifers, 7-18 Mos.     80
Heifers, 0-6 Mos.     40
Total Heifers on Farm 160   200
Annual Heifer Program Cost at $1.45/d $84,680 $21,170 $105,850

Washington State University

3. Evaluate Contract Heifer Raisers

There are many different contract heifer raisers available. Some do a great job. Some do a poor job. Evaluate a heifer raiser’s enterprise carefully. Go and see the facility. Are the animals the size and weight that they should be according to age? Get references and call current clients of the heifer grower to evaluate their satisfaction. How long has the heifer grower been in business? Is the operation growing or going bankrupt? Look at their rations. Are they feeding enough protein? Are they feeding quality proteins with an amino acid profile that promotes growth of muscle and bone? Are they using an ionophore, such as Bovatec® or Rumensin®?

It is especially critical to have a comprehensive vaccination program both before and during contract heifer raising. Most heifer raisers ask that the dairy producer follow a good colostrum management program and they specify a vaccination program to be followed before the calves are shipped. The contract heifer raiser should then have a strict vaccination program for all animals in the heifer facility.

4. Written Contracts

A written contract ensures that nobody gets any surprises. In this contract, the cost/day or cost/pound of gain should be specified. What age will heifers come and go from the heifer raiser? Transportation arrangements need to be made. Also, the vaccination program and breeding program should be agreed on. Who is going to pay the costs associated with veterinary services? Who is liable if a heifer dies? Often this cost is shared and the grower is responsible for all costs incurred in the facility before the heifer died.

References:

Cady, R.A. and G. Willett. 1996. Case study on contract raising. Presented at the NRAES Conference on Calves, Heifers, and Dairy Profitability: Facilities, Nutrition, and Health. January 11, 1996.

Bechard, S. 1998. Is contract heifer growing for you? In: Proceedings of the Miner Institute Dairy Day. Chazy, NY, Novemer 19, 1998.

Shirk, G.A. and J. Heinrichs. 1996. Dairy herd replacement options: Raising your own versus contracting versus purchasing. In: Proceedings from the Calves, Heifers, and Dairy Profitability National Conference. Harrisburg, PA, January 10-12, 1996. P. 172.

Related Links:

Contract Growing Dairy Heifers: The Good, The Bad, The Ugly
Mike Brouk, Kansas State University
Scroll down to drop down menu "proceedings." Click and go to "2000". Click on "table of contents" Scroll down to "Keynote Speaker" Detailed coverage of both the decision making process to contract raise heifers and of the various types of contracts commonly used.

Dairy Heifer Contracting: Motives, Forms, and Arrangements
Joseph Beiler, Ohio State University
Covers the different types of contracts used in heifer growing arrangements and outlines the many details that need to be considered in creating such a contract.

The Economics of Heifer Contracting
Robert Moore, Joseph Beiler, and Gary Schnitkey, Ohio State University
Thorough discussion of the inputs that go into the per day charge system (the only type of contract considered here). Includes tables that estimate costs based on different variables (I.e. changing price of corn) and a useful worksheet to determine yearly costs and returns from contract raising heifers.

Contract Heifer Raising
D.B. Fischer
A brief review of important considerations to take into account when deciding whether to contract or home raise heifers.

Is Custon Heifer Raising for you?

Author

Mary Beth de Ondarza

Mary Beth de Ondarza
45 articles

Nutritional consultant for the dairy feed industry at Paradox Nutrition, LLC.

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Dr. de Ondarza received her Ph. D. from Michigan State University and her Masters Degree from Cornell University, both in the field of Dairy Nutrition.

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Paradox Nutrition

Paradox Nutrition

Paradox Nutrition, LLC is a nutritional consultation business for the dairy feed industry. Mary Beth de Ondarza, Ph.D. is the sole proprietor.

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