January 20, 2005

Contract Raising Dairy Heifers

By J.W. Schroeder, Dairy Specialist
NDSU Extension Service

As dairy farms increase in size, more dairies are turning the raising of replacements over to someone else. This often involves some form of contract production. There are many reasons why dairy farmers are turning to contract production of their replacement heifers.

For some dairy farms, this may be the easiest way to expand. If current facilities and labor can easily be converted to handling additional cows instead of replacements, the operation may be able to expand output with very little additional capital outlay. Other operations may be faced with a declining labor supply as an older generation retires or children leave home. In these situations, having someone else raise replacements on contract may allow the remaining labor supply to continue milking the same size herd as in the past.

The lactating herd is the most profitable enterprise on a dairy farm. If any other enterprise, including the replacement enterprise, is using up a resource that is limited, profitability generally can be increased by using 100 percent of the most limiting resource in the production of the most profitable enterprise B the lactating cowherd.

Expansion efforts in the Midwest present new opportunities for livestock producers, dairy and beef alike, to contract replacements. However, what kind of contract is right for you?

Contracts can be written with many variations. In general, there are four broad types of contract arrangements used to raise heifers. These vary by method of determining payment, which party is responsible for the various inputs, and who has ownership of the heifers.

• Full contract. With this type of contract, the heifer grower would typically provide only the facility, utilities and labor. The dairy producer provides all other inputs.
• Sell/buy back contract. This type of contract only provides the dairy producer the right to buy back the heifers prior to freshening. The calves are sold to the heifer grower and all costs, including death loss, become the responsibility of the heifer grower.
• Per pound of gain contract. In this type of contract, the dairy producer pays the heifer grower a predetermined amount per pound of gain. Heifers must be weighed in and out for this contract agreement.
• Per day contract. This contract would be like the per pound of gain contract, however payment is determined to be a set amount per day.

Raising dairy replacements is expensive, but can be a rewarding business if you raise them right. This year's Dairy Cow College will discuss many aspects of heifer ranching. Anyone interested is invited to attend any of the five programs offered:

Jan. 31, Linton, Emmons County Courthouse
Feb. 1, Dickinson, Dickinson Elks Lodge
Feb. 2, New Salem, Morton County Fairgrounds
Feb. 3, Minot, North Central Research Extension Center
Feb. 4, Valley City, Valley City Eagles Club

All sessions run from 11 a.m. to 3:30 p.m. local time. Topics include:

• Anatomy of a growing calf
• Stages of development and grouping strategies
• Maximizing future milk potential
• Opportunity feeds or lost advantages?
• Contracting, what's a level playing field?
• Silage processing, When Does it Pay?

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Source: J.W. Schroeder, (701) 231-7663, jschroed@ndsuext.nodak.edu
Editor: Rich Mattern, (701) 231-6136, richard.mattern@ndsu.edu

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