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.
Overhead Structuring
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.
Hi Meg,
I love your article. My name is Lhagva, I’m writing to you from eastern Mongolia and I’m a person who trying to be a Single-Family Farmer. We have certain conflicts with the traditional pasturalism and modern approach of pasture, farming, overgrazing etc. Because the way we do live now for the most of the herders economically is very questionable (not profitable), but the custom grazing or cover cropping methods will be very difficult to bring on to the table. So I asking you please, could you help us out to figuring it out how we can try to do it. I can send you all our data and more information on that per Email. Thank you.
Meg, If I could be so bold as to ask you to address the customer who doesn’t recognize the price point of grazing livestock and continues to want to pay a low fee but could see the benefit of paying 1.85/day (in the NE) for confinement feed and care. We’ve been stuck in the .75 to $1 per day scenario for years. What will it take to garner the confinement price? I don’t see a difference especially with a high level of management. I’m of the minority opinion that folks don’t feel like we should be compensated well or the grazing tradition is supposed to be low cost. With all the benefits of animals being on grass and highly managed within an HM mentality, the $1.85 is a no-brainer. Comments?
Good question, Troy, and one that I’ve pondered about myself. I believe there is an odd psychology of “fairness” at work here. The cattle owner knows that your cost of gain or cost of keeping the animal is vastly lower than the fellow who keeps the animal in a confinement situation. Therefore, it is only “fair” that you get paid less. This is obviously goofy thinking, but typical. I think one remedy is to begin transitioning from custom care to ownership. If your cost of gain is $.50 on grass, you should be able to make good return on investment, surely better than the fellow who owns the confinement yard.
Two thoughts:
1) An owner who is dedicated to the holistic movement will A) understand the value of grazing and B) have a high-value market in which he will make a good buck selling his end product. Go after these guys instead of trying to convince the conventional/confinement guys how awesome holistic management is. They’re very rarely going to believe you.
2) You can explain that you need to cover more overhead per animal, since you can’t fit as many animals on pasture as you can in a confinement barn. Grazing requires more maintenance of infrastructure, since you have many more water points and miles of fence. Possibly more labor to catch animals that need to be treated, since you have to round them up and walk them to a corral instead of just throwing grain down in front of a headlock. If grazing was easier than sitting on a tractor, everyone would do it!
On Meg’s point 1): those farmer owners who are committed to HM and have a specialized market are taking over additional land as needed, and generally are not looking for custom operators to take some of their cattle. The potential clients in the NE largely are, like Troy’s, confinement farms looking to expand and/or reduce replacement costs.
They might not really know how much their replacements cost. If they truly understood that their replacements cost them $1.85/hd/day, then they would be very glad to send them elsewhere for $1.50/hd/day.