Contract Grazing

Successful contract heifer growing arrangements are dependent upon effective communication, mutual benefits for the dairy farmer and the grazier, adequate health programmes and the integrity of the individuals involved.

Steps to develop a contract grazing relationship

Before entering into a contract grazing relationship it is important that the expectations of both parties are understood and documented and that there is an opportunity for regular communication on issues and performance.

1. Partner with the right people

Below are some question prompts to aid discussions with a prospective graziers or stock owners to check alignment of expectations and discuss any issues that might arise from the grazing proposal.

Grazier to Stock Owner

• What is your birth to weaning programme?
• Do you weigh your stock to determine a weaning weight?
• If there are underweight stock arriving on my property what would be your expectations around managing these?
• Can you describe your current animal health plan these heifers?
• Have you had any particular health issues with this group of animals?
• Do you have a preferred vet or are you happy to work with mine?
• What information would you like to have included in my updates/reports?
• What would you expect to be included in this price, e.g. drenching, treatments, weighing?

Stock Owner to Grazier

• How long have you been grazing dairy heifers for?
• What other classes of stock do you have on the property?
• Do you mix mobs together from different owners and what size mobs do you run?
• Do you prefer to have the stock owner present to assist when you are doing jobs such as drenching?
• What vaccinations do I need to have given my stock before they can come to you?
• Do you provide a monthly report and what do you report on?
• How often do you weigh stock?
• Would you mind if I wanted to AB my heifers at your place?

2. Complete a grazing contract

As well as playing a protective role, going through the contract process helps to identify and agree on the issues that are important to each party. Federated Farmers have a heifer grazing contract available for purchase on their website. DairyNZ supports the use of this contract.

Responsibilities should be agreed upon at the commencement of the grazing. Responsibilities to consider include but are not limited to:

Animal arrival

• Managing stock – pre arrival
• Managing stock on arrival
• Transition on farm – first 2 weeks

Day to day management

• Monitoring
• Weighing
• Underweight animals – lost weight post transition
• Deaths

Health

• Worms
• Eczema
• Bloat
• Nitrate poisoning
• Vaccinations
• Disease outbreak
• Minerals

Reproduction

• Heat detection aids
• AB drafting
• Bulls

3. Plan for adverse events

Agree on the highest risk events to your circumstances and create a plan to minimise the impact the events may have on achieving liveweight targets. Examples of adverse events could include but are not limited to declared drought, flood, disease outbreak, snowstorm, other. Agree on planned realised actions from both parties involved.

4. Communicate regularly

Keeping a record of liveweights from each weighing will ensure that both parties are kept up to date with livestock performance.

Monthly reporting of weights, feed levels, animal health concerns, deaths, drenching  and vaccination occurrences etc, will ensure that each party stays informed, and any concerns can be addressed and rectified if required.

6. Resolve problems

Despite best intentions there may be times when some aspect of the stock  owner/grazier relationship is not progressing as anticipated. This is often due  either to a lack of clarity around expectations or poor communication.

It can be hard to know where to start when having these conversations, but it is  important to address problems before they escalate to a point where heifers are  adversely affected, or the relationship breaks down completely.

Spending some time identifying the problem, gathering facts and planning your  approach will help to ensure that the matter is resolved in a positive way.

The negotiation model can be used to work through problem resolution.

Common problems

Underweight stock

This problem can happen in three different situations; when calves arrive at a grazier and have their first weighing (ie. calves that should have been 120-130kg are just over 100kg); during a grazing contract tenure a large portion of youngstock slip below target liveweight at a critical time or for subsequent weighings; or when stock arrive home from grazing when a weight gain contract or regular monitoring process has not been used.

1. Prepare - accessing relevant info

If not already done - weigh stock and compare with targets.

Analyse historical weight data of the group

Use photos if taken during visits to the herd

Refer to targets as outlined in any agreed contracts

Use information from monthly reports to discuss trends over time and actions taken to date

2. Discuss - example questions to ask/statements to share

Do you have any concerns with the size/weight or weight gain of this group of stock?

How do you think they will achieve their liveweight target at ___ months?

What challenges for liveweight gain has there been for this group of stock?

How do you currently assess whether the stock are on target?

I/we have concerns about the weight gain of our stock.  We have noticed that __________

3. Propose - Links to relevant information

Targets in contracts

Payment or invoice concerns

Sometimes expectations are not meet when receiving and paying invoices.

Graziers may find discrepancies in the amount paid relative to the invoice, late payments being made or payments being withheld due to an unresolved dispute.

Stock owners may receive unexpected invoices from a 3rd party for vet services, supplies, feed etc.

Those on liveweight gain contracts may find that invoices from their grazier have excessive (unplanned) weight gain on a kg/lwt contract.

1. Prepare - accessing relevant info

Relevant details from grazing contract on price and payment terms.

Have transactional history summary prepared (include how much and when).

Have copies of invoices from third parties with details specified.

Records of communication between those involved - monthly reports.

2. Discuss - example questions to ask/statements to share

What is your understanding on what needs to be paid and when?

Have there been circumstances which have prevented you from paying your invoices in their entirety or on time?

This invoice is different from what was specified in our contract – are we able to clarify why this has occurred?

This invoice was unexpected because ………

This payment surprised me because I was expecting ………..

Can we arrange a suitable payment plan?

3. Propose - Links to relevant information

Agree, amend and re-sign grazing contract to reflect expectations.

Prepare Responsibilities Checklist to determine lines of communication and responsibilities for engaging third parties.

Discuss and prepare an Adverse Events planner.

Use the Monthly Reporting Template to communicate potential changes in future invoices.

Adverse events

The nature of farming brings exposure to adverse climatic events such as drought, flood, snow, lightning strike, etc.  Herds are also exposed to potential disease outbreak (TB, Theileria), and animal health issues on crops and pastures (brassica toxicity, nitrate poisoning, ryegrass staggers).

All of these events will have an impact on feed required, feeding infrastructure, animal health, growth targets and stock losses.

1. Prepare - accessing relevant info

Check adverse event plan document.

Gather regional data about the event if climatic, or from the vet if herd specific.

Find out the current state of the herd and any immediate animal welfare concerns.

In the event of a med/long term climatic event assess the potential impact on stock achieving liveweight targets. Calculate feed requirements and options to achieve this.

If stock losses have occurred refer to your grazing contract for next steps.

2. Discuss - example questions to ask/statements to share

Are there any immediate animal welfare concerns that we need to deal with?

What challenges will you have maintaining intakes to achieve liveweight targets?

What will we need to do to achieve this?

If an animal health issue – what on-going care will this group of stock need?

3. Propose - Links to relevant information

Supporting info from DairyNZ website on adverse events.

Use the Remedial action plan to commit to steps to get back on track.

Stock losses

Minimal stock losses are a part of farming but it is important that these are communicated in a timely manner and strategies are in place to prevent significant numbers of cattle deaths.

1. Prepare - accessing relevant info

Refer to grazing contract for acceptable levels of stock deaths and notification process

Refer to Responsibilities Checklist for agreed roles

Prepare details of know stock losses - date, number and cause of death

2. Discuss - example questions to ask/statements to share

Find out exactly what animals have died, when and what from.

Were there any 3rd parties involved in this?

If cause of death is unknown do we need to carryout autopsies?

How are these stock being disposed of?

What can we do to minimise the chance of this happening again?

3. Propose - Links to relevant information

Create/or refer to responsibilities checklist to provide clarity on areas of responsibility for livestock welfare and health

Create a remedial action plan if needed to prevent further loses of the same nature occurring.

Identifying animal health concerns

Livestock require constant monitoring, treatment and preventative animal health management carried out. Some individuals or mobs may suffer injury, ill-thrift (un-diagnosed), metabolic challenges, nutritional deficiencies, worm burden, TB reactors. If these are not identified quickly, remedied and prevention strategies carried out, then liveweight targets can be compromised.

1. Prepare - accessing relevant info

Refer to responsibilities checklist for who does what.

Refer to grazing contract if you have included an animal health plan for the stock.

Access info from monthly grazing reports on stock health issues and preventative treatment plans.

Utilise weight data to show any trends where stock may be falling behind targets.

2. Discuss - example questions to ask/statements to share

Clarify what the expectations were of dealing with this particular animal health challenge.

My understanding was that ………… (action) would be carried out by …………… (person). What was your understanding?

How has this animal health challenge impacted on the liveweight targets for the mob?

Are there any animals that require immediate attention? If so, what are your suggestions?

3. Propose - Links to relevant information

Access information on stock health on the DairyNZ website.

Use the remedial action plan to clearly detail steps to recovery for the mob or individual heifers.

Use monthly reporting template to ensure good communication between both parties.

Implementing mating plans

Graziers are requested to carry-out the mating strategy for the R2yr heifers.  Sometimes communication of expectations is not clear enough.  Sometimes the execution of the strategy is not accurate enough.  Monitoring and communication to adjust the plan is essential.

Some challenges arise with queries at a visit to the stock about the bulls – supply, quality and quantity.  This might include visual queries about size/ breed/health if they are supplied by the grazier.

Most issues arise with the retrospective analysis of PD results, mis-matings (early/late, wrong bull), execution of bull ratio, implementation of PSM date.

1. Prepare - accessing relevant info

Refer to grazing contract and responsibilities checklist.

Use Pregnancy Diagnosis results, Minda reports, InCalf tools, Veterinarian advise to clearly understand the challenge.

2. Discuss - example questions to ask/statements to share

What I have seen from the mob or gathered from the repro data is ……….

What was your understanding of the mating strategy for this group of animals?

How did you know whether these were on track?

What corrective actions were taken during the mating period?

3. Propose - Links to relevant information

Utilise InCalf info for heifer repro targets and vet advice to form a strategy.

Engage 3rd party advice as specified in your adverse events plan or grazing contract.

Carryout a remedial action plan if relevant for this season or adjust Grazing contract and Responsibilities Checklist for next season.

Setting liveweight targets

It can be difficult if both parties cannot agree on suitable liveweight targets for a mob of stock. This may also include targets at critical times and target liveweight gain/hd/day during set periods.

1. Prepare - accessing relevant info

Refer to targets set in grazing contract.

Information on setting youngstock targets from Dairy NZ website.

Provide info on herd liveweight BV, weight data from mature cows at 1st Dec and breed tables.

Calf weight data before leaving the property.

2. Discuss - example questions to ask/statements to share

Explain why setting targets are important for the success of the stock.

Ask what they feel is realistic under their system and what their biggest challenges to achieving this are.

3. Propose - Links to relevant information

Outline a variety of methods to set targets - including pros and cons and discuss what best suits your grazing relationship.

Providing weigh data

If your grazing contract is based on weight gain the frequency, consistent method, timeliness, accuracy and missed weighings can be a source of disagreement.

If data is being sent late or in an un-useable format this can cause frustrations.

1. Prepare - accessing relevant info

Refer to responsibilities checklist, monthly reports and grazing contract for evidence of expectations and practice being carried out.

2. Discuss - example questions to ask/statements to share

Clearly state why the weight data is important to the stock and how you use it.

Find out what the challenges are specific to the grazier of meeting your expectations.

As a grazier trying to work with a stock owner, clearly state what weighing process and time suits your system and infrastructure.

3. Propose - Links to relevant information

Devise a procedure together that meets expectations. Refer to the Weighing Heifers factsheet on correct protocol on the DairyNZ website.

Carryout monthly reporting using the DairyNZ template.

Use Minda weights.

Engage a third party to carryout weighing and reporting.

Fit for purpose infrastructure

In order to weigh or carrying out animal health treatments graziers require suitable yarding and race infrastructure to keep people safe and allow efficient work. Stock need to be safe and comfortable moving through lanes, in yards, paddocks and when in vet races and loading ramps. Challenges may arise when stock escape, are injured or when stock owners are challenged by the working environment.

1. Prepare - accessing relevant info

Animal welfare guidelines can be found on the DairyNZ website.

Capture the relevant hazards you have identified while working/visiting the property.

Record accidents or near misses to people while on the property.

Record stock injuries caused by infrastructure issues.

2. Discuss - example questions to ask/statements to share

Share the risks/accidents and near misses you have identified to both stock and handlers.

Discuss what mitigation strategies can be put in place - share strategies that have worked for you.

3. Propose - Links to relevant information

Refer to saferfarms.org.nz

Arrange to use mobile stock yards.

Utilise the services of a 3rd party to manage stock handling, weighing, animal health treatments etc.

Animal care practices

When visiting youngstock you may come across evidence of substandard animal handling procedures including ill treatment, hard dogs, mob size (too big), broken tails, broken limbs/contusions/sprains, etc.

As a grazier you may receive stock that appears fearful, difficult to yard and show physical evidence of abusive management.

Both parties are obliged to address these issues.

1. Prepare - accessing relevant info

Take photos and record incidences.

Reference Animal Welfare guidelines

2. Discuss - example questions to ask/statements to share

Agree on what a well handled animal should look like and how they should behave.

Can you explain what happened to this animal/mob?

I am worried about this animal/mob due to ………………………… (symptoms). Do you have an insights as to why this may have occurred?

3. Propose - Links to relevant information

Refer to Stockmanship info on the website

Discuss stock skills training available in the dairy industry

Completing stock inventory

When animals are grazing off the dairy platform we rely on each other to ensure that animals are correctly identified at all times, and that NAIT requirements being meet, with the right animal in the right herd. Frustrations can arise when animals do not have their correct ID and when they are not in the right mob.

1. Prepare - accessing relevant info

Detailed list of every animal and their ID from the stock owner.

Check tags during any yarding situation.

Identify which stock have been incorrectly identified.

Check notes in monthly report.

2. Discuss - example questions to ask/statements to share

Reiterate why traceability is so important.

Ask which stock are missing tags, data and when they knew about this.

What support do you require to get all stock correctly identified in my mob?

Are there any challenges keeping stock in their correct mobs on your property?

3. Propose - Links to relevant information

Demonstrate Minda data management and NAIT ID requirements.

Changing contract timeframes

Sometime more or less stock than expected arrive in a mob.

Challenging climatic conditions mean that the length of grazing tenure may be requested at short notice to be adjusted (either shortened so that youngstock can be feed better on the dairy platform, or extended to allow more feed to be allocated to milking cows)

Individual financial situation may also require a negotiation around the tenure of the grazing period mid-season.

All these situations make it hard to budget both feed and finances at a farm business level.

1. Prepare - accessing relevant info

Refer to dates and numbers specified in the grazing contract.

Refer to historical numbers from the preceding years.

If wanting to negotiate R2yr grazing through May and June be prepared to discuss required feeding levels for BCS gain and pregnancy. Be sure to discuss any Copper/B12/Se supplements that need to be administered, teatsealing, and Mg intake for early calving heifers.

If wanting to bring R2yr home early due to feed shortage situation be prepared to reiterate the importance of achieving liveweight targets and the advantages of returning stock to the dairy platform to feed supplements.

2. Discuss - example questions to ask/statements to share

Share the impacts that changes in the number of stock grazing have on feed allocation and cash flow and ability to contract to other stock owners.

Discuss when is a good time to provide an indication of how many calves will be reared as replacements - ie. Confirm grazing is required for R1yr’s in June. Update replacement numbers in September and approximately when they will arrive. Confirm grazing for R2yr's in Feb and update numbers (if being grazed elsewhere as R1yr's) in April.

3. Propose - Links to relevant information

5. Deciding fee method

There are many grazing fee options available. It is important that both parties agree that the fee outlined in the grazing contract is fair. Each grazing fee method has an element of risk for someone in the grazing relationship.

Dollar per head per week

Flat rates are the simplest method for payment.  Budgeting is straightforward: the grazier has a fixed monthly income while the stock owner has a fixed charge that could be put on automatic payment.  The downside is that there is no reward or penalty for performance or incentive for improvement.

Example of how it is calculated:  Grazing fee = $10/head/week over a 52 week period the cost would be $520/animal

Dollar per kilo of liveweight gain

This method directly rewards weight gained during the grazing contract.  The risk to the grazier is that cost of the weight gain exceeds the weight payment or it may be expensive to maintain stock weight during the season (drought, flood, winter) without weight gain. Budgeting on the final income/cost is an unknown for both parties. Typically, the stock owner will pay a weekly dollar per head advance rate with an adjustment for liveweight gain based on dollar per kilo weight gain made quarterly or at the end of the grazing term.

Example calculations:

Example 1:

Stock owner and grazier agree on $2.15 per kg Lwt gain during the grazing term and the stock owner will pay $8/head/week in an advance payment, or $416/head over 52 week grazing term.

If heifers arrive at the grazier weighing 190kg on the 1 May and are returned to the stock owner on 30 May weighing 420kg, the weight gain over the term was 230kg.

230kg x $2.15 = $494.50/head for weight gained at grazing minus $416 of the advance payment, the stock owner would pay the difference of $78.50/head at the end of the grazing term.  Alternatively, the adjustment could occur every quarter or after every weighing.

Example 2:

Stock owner and grazier agree on $2.15 per kg Lwt gain during the grazing term and the stock owner will pay $8/head/week in an advance payment, or $416/head over 52 week grazing term.

If heifers arrive at the grazier weighing 190kg on the 1 May and are returned to the stock owner on 30 May weighing 370kg, the weight gain over the term was 180kg.

180kg x $2.15 = $387/head for weight gained at grazing, with an advance of $416, the grazier would reimburse the stock owner $29/head at the end of the grazing term.

Base rate with performance bonus

The base rate with a performance bonus option seeks to capture the benefits of the standard weekly rate in terms of security for the grazier along with motivation or reward for stock growth similar to $/kg Lwt gain. The bonus is paid out by meeting or exceeding the set target at the end of the grazing term. It can also be broken up over quarters to reward meeting targets throughout the grazing term.

Example:

The stock owner and grazier agree that the grazing rate is $9/head/week over a 52 week term. The targeted weight at the end of the grazing term is 400kg, for all the animals that meet or exceed the 400kg threshold there is a bonus payment of $25/head. If 80 out of 100 animals reach the 400kg then the bonus payment would be 80 animals x $25/hd bonus = $2,000 that the stock owner owes the grazier.

Alternatively

The performance payment can be allocated on kilo of liveweight basis on an individual or mob level.

Example:

The stock owner and grazier agree that the grazing rate is $9/head/week over a 52 week term for 100 animals. The targeted weight at the end of the grazing term is 400kg, a bonus payment of $1.25kg Lwt is paid for every kilo that the mob average exceeds the target.

If the final average weight of the mob is 415kg, then 15kg is eligible for the performance payment. The bonus would be calculated at $1.25kg Lwt x 15kg = $18.75 x 100 animals = $1,800 bonus payment for the mob.

Alternatively, the performance payment could be distributed times the number of animals that meet or exceed the target weight. If 80 out of 100 animals achieved the target weight then the bonus would be calculated $18.75 x 80 animals = $1,500 bonus is due the grazier.

Cents per kilo of DM eaten

Cents per kilo of DM eaten is based on the estimated feed intake of the animal during the grazing term from the arrival and exit weight.  Feed is valued at cents per kg of dry matter and the stock owner is charged for estimated feed eaten.  Feed management software or a spreadsheet is necessary to estimate feed intakes based on liveweight gain. This method typically has a payment system similar to kilo of liveweight gain with an advance payment and an adjustment at the end of the grazing term.

Example:

The stock owner and grazier agree that feed eaten will be paid at 21 cents per kg dry matter.  Stock arrive at 3 months of age at 100kg and exit at 22 months of age at 450kg: feed eaten estimates are 3,930kgDM x 21 cents = $786 per head over the grazing term.

Grazing company specific method

Each grazing company will have their own methods for calculating grazing fees that may include: penalties, bonuses, seasonal feed supply, drought declaration, weighing, animal health insurance or service bulls.  All grazing company fees will include their administration and management costs.

A third party should add measurable value for the service they provide over a self-sourced and a self-managed grazing relationship.  If grazing companies are involved then sourcing grazing, animals meeting targets, resolving disagreements, timely action, proactive monitoring should be better and easier than doing the job yourself.