Is Contract Grazing in Your Future?

Businessman Nido Qubein said, “Change brings opportunity.”  With the volatility of conventional milk prices and the surging interest in local beef and organic grass-fed dairy products, change is in the air for farmers and ranchers working to keep local agriculture strong. And, even if you don’t own land or cattle, or milk the cows you can become a part of the effort. Contract/custom grazing is an avenue where you become a land, grass and livestock manager, not an owner.  In my humble opinion, you will be filling an important niche as a forage chain, animal-raising, and relationship specialist whether it’s seasonal, year-round, full or part-time.

While contract grazing is an accepted ranching business model west of the Mississippi River, it’s not as common in the east, where we’re still learning how to integrate the millions of acres of underutilized pasture-land into our farming systems, environment and socio-economic business climate.   The Department of Agricultural Economics at Mississippi State University says, “Relatively little academic work has been done on the issue of contract grazing”.

Contract grazing is simply a fee-based seasonal arrangement in which one person provides the pasture, shelter, water and grazing management expertise for the care of another person’s animals such as dairy replacements, dry cows, beef cows, stocker calves, small ruminants or horses.

“In a typical stocker calf contract grazing arrangement, a cattle owner contracts with a caretaker to turn calves out on pasture owned or leased by the caretaker. The caretaker is paid a yardage fee (a flat charge per day on pasture under the caretaker’s management), a set amount per pound of gain for the time the cattle are in his care, or some combination of yardage and a per pound of gain fee. Any number of arrangements are possible regarding which inputs will be provided by the owner, which by the seller, and who will bear the cost of death loss” (From Stocker Catle Ownerships vs. Contract Grazing by Anderson, Lay, Forrest and Little)

Benefits of Contract Grazing

Schuyler County Cornell Cooperative Extension Specialist and Angus Glen Beef Farm Owner, Brett Chedzoy sees two big benefits with contract grazing.  “Each person can focus on what they’re good at (their strengths) and what their land is best suited for (“highest and best use”).  This is especially important for dairies, but also relevant with all other livestock enterprises.  “It also allows operations to grow to profitable scales.  This works on both ends (those who do the grazing, and those who hire it done).”

“It’s a great way for people with access to land, but not lots of $$ to invest, is to look for animals that they can custom graze – at least until they can someday get their own herds built up.  Likewise, the main reason I’m going into a relationship with another farmer is because I want to keep my cow numbers up, but don’t have the access to more land here adjacent to the farm,” says Chedzoy.

Ryan Fibiger, CEO of Fleisher’s Pasture-Raised Meats in Brooklyn, NY sees considerable benefits:  “At an enterprise level we need the assurance of a steady supply of consistent product that meets our strict protocols.  This serves the double purpose of mitigating risk as well as a growth accelerator.  Speaking from front-line experience, demand for pasture-based livestock is growing sharply and has begun to outstrip supply in some markets.”

He continues, “My hope for contract grazing is that we can put a pipeline together by contracting with multiple farms to ensure that our supply grows at the same (or slightly higher) rate as demand.  We also want to achieve as much consistency as possible by trying to coordinate breed, feed, age, carcass weights, etc.  The contract grazing approach can help to maximize the value chain and allow for expansion at every level.  We want our farm partners doing what they do best –growing grass and grazing animals in a sustainable way that’s best for farm families, the animals, the land and our customers.”

Dollars and Sense

The usual suite of problems addressed by this arrangement revolves around lowering high input costs which in this context are mostly feed, land and labor related. In a 2012 phone survey of NY organic and conventional producers, on-farm daily dairy replacement costs alone have exceeded $3.50 and $2.99 per day respectively, while contracted grazing fees for care are ranging from $1.00 to $1.75 per day.  With a 50% cost savings potential from working with a network of grazing professionals, a problematic situation turns into an asset for both parties.

The decision to implement a contract grazing business requires a trusting mindset and management style change between two farm operations in order to reduce back-grounding costs of dairy replacements, dry stock and beef cattle by moving animals off one farm to farmers who manage abundant forage resources.  This also can provide opportunities for bringing animals and dollars in from out of state farmers where land prices are pushing $14,000/acre.

Before You Leap

Quite frankly, this business relationship between two farmers, often several miles apart, has many logistical, financial, environmental and social challenges too.  Items include: a lack of contract grazing  and grazing management knowledge, lack of infrastructure, trust issues, logistical concerns, looming TMDL/nutrient management restrictions, contracts and liability, herd health worries and land leasing constraints to name a few.

The key to understanding the nuances of all these relationships IS education and listening to the field-tested practitioners.   The tenets to knowledge are knowing your goals and the goals of the customer.  It means investigating the business model with a fine tooth comb through a budget process, having good communication skills and marketing yourself and your farm as a competent manager.

You need to learn about land management including finding land, leasing contracts, infrastructure needs, landowner needs, building trust, loading logistics, grazing management, biological monitoring and record-keeping.  You will need to become confident in animal management including learning customer expectations, animal needs based on class, pricing, conflict resolution, mineral and supplemental feeding and dealing with weather extremes, etc.

The Saskatchewan Agriculture Knowledge Centre adds these considerations:  “Producers need to consider all their options when looking to custom graze cattle. It is important to consider both the class of cattle that will be grazed and the custom grazing charge. In order to generate a profit, a custom grazier needs to calculate his or her own production costs based upon expected forage yield. Fence and water development are two important investments when custom grazing. A functional livestock handling facility is also required to load or receive animals as well as to treat any that may be sick. Access to a scale is required when payment is based upon weight gain.  Prior to entering into a custom grazing agreement, it is essential to have a written contract that specifies the responsibilities of each party. The contract should also specify the payment terms.”

Editors Note: Troy is coordinating the Northeast Contact Grazing Summit scheduled for Saturday March 28th, 2015 from 9am to 5pm at the Weaver Family Farm 4933 Peterboro Road  Morrisville, NY  13408. One of the speakers is On Pasture’s own Meg Grzeskiewicz who has written extensively on this topic. Click here to see the full agenda and the speakers.  Pre-registration admission is $70 per person or $120 for two from the same farm.  Space is limited so get signed up early by emailing Troy (Troy-Bishopp@verizon.net) or calling him at (315)824-9849 ext. 110.