Choosing the Right Partner for a Custom Grazing Deal

Custom graziers and herd owners both need to be very careful when choosing to work with one another. It’s difficult to put together a deal with stability and longevity, mostly for interpersonal relations reasons.

Both parties should ask around about their potential business partner. I don’t ask for references, because people only use for references those they get along with. I am more interested in the person’s reputation in their community and in the grazing industry. Farming communities tend to be full of gossip, so if someone has been dishonest, it gets around. Keep a list of contacts you meet at grazing conferences, farmers’ markets, and other such events. Run a potential partner’s name by them. Talk to the local livestock truckers, feed mill and farm store management, and your potential partner’s neighbors. Doing this kind of digging would have saved me from at least two failed custom grazing/land leasing deals in the past.

A grazier should look for a herd owner with a track record of success in the livestock business. Try to get a hold of people who work for that farm or company to find out what you can about the state of the business. If the employees don’t enjoy working there, that’s a strong indicator to proceed very cautiously. An inexperienced grazier needs to find a herd owner who is willing to forgive rookie mistakes. Watch out for control freak herd owners who will want to treat a grazier as their employee or farm manager. Be clear that you wish to work together as an independent contractor. The herd owner must be willing to let you call the shots and trust your expertise. Do not enter a deal under terms that create a conflict of interest (for example, taking on a herd owner who wants to grow his herd, while also having plans to grow a herd of your ownership on the same acreage).

I prefer to work with herd owners who are motivated by some factor other than just profit. Everyone needs profit, but I want a partner who is in the livestock business for the love of cattle, land and farmers. These owners are more likely to build a friendship with you, and that’s what keeps contracts. If they are just in the deal for the money, and someone comes along who can make them more money, they won’t have any loyalty to you.

Lots of new farmers look to custom grazing as a way to learn and store up capital. Some herd owners will be okay with you learning as you go. They might provide education and mentorship. Some wish to work with experienced, turn-key graziers. Be honest with potential owner partners about your level of competency. It’s better to be turned down in the negotiation stage than to lose your contract later due to a dissatisfied partner. I started custom grazing without much livestock management experience outside of a 6-month internship with Greg Judy. Greg is probably one of the most proficient grazing managers in the world, so he made it look easy! I came out of my internship knowing enough to be dangerous, but it didn’t take long to realize that I’d overestimated myself. My first couple years running my own farm were rough. By years four and five, things got a lot easier. I think that in order to be able to approach a potential herd owner with confidence, a custom grazier needs 2-3 years of experience as the primary decision maker for a cattle herd. For livestock with shorter production cycles, you can learn more in a shorter time.

If you want to gain more experience before you take on a custom herd, start a very small scale operation of your own. Rent a few acres and get a couple cattle. Keep your project small enough that you could absorb the cost if it doesn’t work out right away. Scale up as you get more comfortable and as you become better qualified for financing and contracts.

An owner needs to find a grazier with at least a few years of experience directly managing livestock, if unwilling to mentor and train a grazier. The grazier needs to have a secure land base, a bulletproof business plan, and a reputation for honesty. Since a lot of graziers see custom grazing as a short-term endeavor on the way to a different goal, make sure you have compatible future plans for both of your operations. If you want to grow your herd through custom grazing but your potential grazier does not plan to continue leasing additional pasture, this grazier may not help you accomplish your goals. A grazier must be willing to call in your help or professional (veterinary, legal, etc.) help when necessary. Ask what their emergency plans are for natural disasters, drought, escaped livestock and other situations.

This is a popular business model for startup companies in all sectors of the livestock industry, but making a deal with a startup is risky. An inexperienced custom grazier can cause a lot of stress and lost money for a herd owner. A startup entity sending their cattle to a custom grazier can go out of business, leaving the grazier suddenly without income. I worked with a startup grassfed beef company raising their cowherd for a few months. The person in charge turned out to be impulsive, indecisive and very new to farming. I should have been more careful to choose a herd owner with a track record of knowledge, effective management, and a secure market for their products. If your herd owner is having trouble selling what they produce, you need to be very worried. This company was struggling to move beef because of unreliable marketing partners.

Custom grazing is an attractive option for failing businesses on both sides of the deal. It’s good for a struggling operation to explore its options. But always make sure you have a backup plan in case the other guy goes under, so you don’t go down with their sinking ship. As an owner, what will you do if you suddenly have to bring all of your cattle home? As a grazier, what will you do if you unexpectedly lose your land, lose your herd owner, or get injured? Make sure anyone you’re negotiating with has plans to handle emergencies. Another past herd owner of mine chose to work with me because he was unable to find land and labor where he lived. Those issues had to be solved in order for his business to continue. I provided the land and labor he needed, but income over hay cost then became an issue. It was a small herd of 25 head. In order for me to cover my overheads with so few cattle (and just manage to break even), he needed to pay me so much that he was just breaking even. He chose to retire from the cattle business, and I switched to a seasonal enterprise that made better use of my resources.

In my next custom grazing advice article, I will cover pasture and livestock considerations.