In order for custom grazing (or any type of contract livestock raising arrangement) to work out, both the herd owner and the custom grazier must have a firm grasp on the economics of their farm businesses. Three main factors must be dealt with: scale of production, overhead structuring, and direct livestock production costs.
Scale of Production
Herd size is crucial in custom grazing. Because both the owner and the grazier have to make money, each person’s profit margin per head is slim. The only way for either party to prosper is by earning that small margin on a large number of animals. Though every farm’s sustainable stocking rate is different, this inherently means that lots of acres are needed if animals are to be fed solely through grazing.
I worked for a while as a custom grazing coordinator for a grassfed beef company, and got a lot of calls from small farmers with 50 acres of pasture. Since a well-managed grazing operation in the Northeast US is rarely stocked heavier than 3 or 4 acres per head, these farms could hold less than 20 cattle without an economically prohibitive amount of hay. For some small farms it’s possible to be in the black on a custom herd, but it won’t pay for the mortgage and a trip to Disneyland. It may make more business sense for these farms to raise an artificially high number of custom animals on harvested feed. (I do not recommend this because it is the start of a slippery slope toward conventional confinement agriculture.) What I do recommend for small farms that want to earn more than a couple hundred or thousand dollars annually is to scale up through leasing land, or to choose a different enterprise that generates more revenue per acre. Small-scale custom grazing can be a great way for a startup farm to generate quick cash flow. However, a new farm needs to either scale up or use custom grazing income to start a higher-return enterprise relatively quickly in order to grow into a profitable business.
Custom grazing only works for a herd owner when he is not depending on the custom-grazed herd to help pay the overheads on his home farm. This means that an owner must either have other livestock or other enterprises on his home farm that completely pay for the home farm, or not have a home farm at all. It makes sense for a livestock owner to consider custom grazing only when his home farm is running at maximum sustainable carrying capacity. When that is true, keeping a herd with a custom grazier is like undergoing a farm expansion without having to buy more land and hire more workers.
Profitability for the custom grazier depends on having low overhead costs compared to the number of custom animals he raises. Once again, stocking rate and sustainable carrying capacity is a huge player in this. If pasture quality and dry matter yield is low, the land can’t support a big enough herd for a grazier to get far beyond breakeven. Management affects carrying capacity significantly. The more often grazing ruminants are moved and the more attention a grazier pays to building soil health, the bigger herd his pastures will feed. Every head is a unit of production and every acre is a unit of overhead, so the key to success lies in reducing the acreage needed to feed each animal. The cost to lease or own each acre is equally important. Pay attention to the classic overhead “danger zones”: vehicles and equipment, fuel and labor to name a few.
Direct Livestock Production Costs
Profit margin for both the grazier and owner can increase if direct costs to raise animals can be cut. Holistic management and strong genetics make a lot of inputs unnecessary. By far the biggest direct cost is feed, especially for winter. It is much harder for either party to make a profit from custom grazing in climates where a lot of winter feed is needed. For herd owners in high-snowfall areas with short growing seasons, it might make sense to look for a custom grazier farther away in a more favorable climate. The non-growing season is where the grazier’s management skills are really tested, through the challenge of keeping cattle on stockpile and off harvested feed as long as possible. It is also where a grazier earns the right to demand higher rates for his expertise in avoiding direct production costs for the owner. (Because most custom graziers are paid per head or per pound instead of on salary or hourly wage, I consider custom grazing fees a direct per-head cost rather than an overhead for the owner.) This is a business very dependent on integrity, interpersonal relationships, expertise and responsibility. The owner must be able to trust you to not spend their money foolishly. If they can’t, you will not be in the custom grazing business for long.
Getting the Best Rates
A custom grazier who demands the highest rates must bring more to the table than everybody else that an owner could make a deal with. You won’t get the best rates until you’ve been in the business for multiple years and you have built a reputation for doing a great job. The way to do this is by consistently turning in excellent results (healthy cattle that perform well) and by adding value to yourself. Go on pasture walks and internships, read articles and ask questions. My definition of “an expert” is someone who may not necessarily be brilliant in his own right, but retains, synthesizes and uses a ton of information from a ton of sources. It’s called professional development, and custom grazing is a profession.