Grazing Contracts for Livestock

By Tim Johnson and Lee Rinehart, NCAT Agriculture Specialists

Abstract

Grazing livestock for other farmers or ranchers is a good way to make an income from rented or leased land without the expense of livestock ownership. It requires knowledge of livestock, but more importantly, knowledge of how to make money from grass. This publication discusses some of the issues involved with contract grazing, including pasture and grazing, the various classes of livestock, equipment, a sample contract, some of the economics to consider, and other resources available on the subject.

cattle in pasture

Photo: USDA NRCS

Introduction

The dream of working the land, managing livestock, and having a rural lifestyle fills the minds of many young people who want to get into farming, as well as those who want to make a career change and are looking to agriculture for that next stage in their life. In addition, many experienced livestock producers are looking for interesting ways to add an enterprise, or to scale their operation up or down. The question is, what are the opportunities to engage in an animal enterprise that doesn’t require land ownership and that offers year-to-year flexibility? The answer may be contract grazing.

Custom grazing livestock on contract is a business enterprise in which you become a land, grass, and livestock manager, not an owner. Many dairy farmers and beef producers cannot sustainably raise young livestock on their own farms due to feed costs or land limitations. As a custom, contracted grazier, you will be “filling an important niche as a forage chain, animal-raising, relationship specialist whether it’s seasonal, year-round, full or part-time” (Bishopp, 2015).

Whatever the goal, you must always evaluate any potential opportunity thoroughly and make sure that the desired outcome is sustainable and realistic.

To Own or to Contract…

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Contract grazing is more likely to generate positive returns than owning stockers, which in turn generates better returns than cow-calf operations. This is because there is less variation in profitability from year to year. Contract grazing has the most stable profits over time, while cow-calf operations have wide swings from year to year” (Teegerstrom et al., 1997).

This publication describes how to minimize the capital investment required to generate an economic return from owned or rented land by grazing cattle on contract. For some landowners, a return large enough to pay the property taxes is sufficient, offering a cattle grazier the opportunity to rent very affordable pasture during the growing season.

Could you possibly contract graze rented or leased pasture to generate a return with very little or no capital investment? In his book No Risk Ranching: Custom Grazing on Leased Land, Greg Judy describes his method of utilizing rented, leased, or bartered land to make money raising cattle on contract. See the Further Resources section for information on ordering this book.

Contract grazing is not a casual enterprise. It requires a thorough knowledge of both pasture and animal management. For instance, intensive grazing of an extra parcel of land may not always result in the weight gains expected on stocker cattle or dairy heifers, for many reasons. Meanwhile, continuous grazing often results in problems with persistence of valued forage species and erosion in environmentally sensitive areas. Contract grazing requires knowledge of pasture dynamics and some grazing management skills on the grazier’s part to get the results that livestock owners (your customers) will expect. Typically, the custom grazier is expected to achieve what the livestock owner can’t accomplish at home due to resource or management limitations. Anyone considering contract grazing should have several years of grazing experience and good stockmanship skills prior to engaging in any legally binding arrangement.

If you are interested in contracting your grazing services with a livestock owner, the most difficult part of the process may be convincing the livestock owner that you can properly manage both the land and the animals, especially if you have no experience in contract grazing. The first few years may be the most difficult, until you have demonstrated some success. One suggestion is to start small and ensure success with fewer animals and more acres than you think you need. It is better to get a smaller return with limited grazing than to overgraze and have to purchase additional feed. Building a history of the land’s actual production capabilities, along with some personal experience, will allow you to fine-tune the system as you gain the knowledge necessary for successful grazing.

Role of the Contract Grazier

As a custom grazier you will be filling an important niche as a grazing contractor. With this in mind, you can think of yourself as a niche-marketer. Identify your niche: what you have to offer that is above and beyond the norm. Think of what you can offer, such as taking on risk that the livestock owner inherently has but can outsource to you. Your price will justify the unique services you can offer to address the risks livestock owners wish to outsource. Think of yourself as a livestock risk-management specialist.

Livestock owners have management constraints (like time and land availability) that can be taken on by you as the grazier (Anderson et al., 2003). Marketing this to your customers, and backing it up with excellent management, can result in making a name for yourself as a conscientious grazier who delivers the goods…whether those goods are weight gain, animal health, percent heifers bred, etc. Also, providing AI services for heifers on contract is an excellent way to add value. If your cost of production is near the breakeven price for grazing, then differentiation through adding more value can justify a higher price.

Sourcing Your Customers

Getting customers is one of the many uncertainties that come with agriculture. There’s no easy way to do it… it just takes persistence and a bit of creative thinking. In 2007, a Midwest consortium of university and non-profit professionals conducted a contract grazing survey that provided some insight into customer acquisition and tenure. Table 1 suggests that obtaining clients by word of mouth is strong in this sector.

Given that word of mouth has been the best (if only) way to secure customers, it’s incumbent on you as the grazier to do some marketing of your own, based on careful thought about your message and what you can offer that’s different. Consider listing with breed associations, conservation districts, your local Extension service newsletter, or local and regional sale barns. Also, a grazing land-management or conservation district workshop or conference may be a helpful way to meet prospective customers. Make a simple poster or flyer that will make cattle owners curious about your operation.

Networking with farm and ranch realtors is another means of finding land owners who want their land grazed, if you should end up with more livestock than your place can handle. This can also sometimes act in reverse too. A ranch realtor may know of a livestock owner wishing to contract out the grazing of his or her animals. And don’t forget to advertise in a regional agriculture newspaper, as this is often the best way to periodically get the word out that you’re in business.

Ideas for Developing a Contract-Grazing Business

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Source: Meg Grzeskiewicz, who operates Rhinestone Cattle Co., a mob-grazed, grass-fed beef enterprise in Colden, New York

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Leasing land should be your first consideration in looking for land if you are young, new to agriculture, planning to expand an enterprise you already run, have limited financial resources, or for any reason are reluctant to buy land.

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With leases, you don’t need to come up with a down payment, and the lease payments can be negotiated with your landowner.

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A lease has no interest or property taxes. You can obtain land and get started in grazing without going into six figures of debt. This leaves your money free for purchases that will bring a faster return on your investment, such as buying animals.

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The opportunity to renew or discontinue a lease every few years gives your business flexibility to grow and change. An informal one-page contract is usually all you need. If you’re not sure you want to commit to farming or living in your current area forever, lease before you buy.

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Local farm newspapers and bulletin boards around town often have “for lease” ads. You can place an ad of your own, seeking pasture to rent. Keep an eye out for potential leases as you’re driving around. If small brush is beginning to grow up in a field or the fence is in bad shape, that land has probably sat idle for a few years. There are many elderly farmers, people with demanding jobs, and absentee landowners who aren’t able to work their land, but don’t want to sell it. Plenty of people are looking for a leasee. When word gets around that you’re in the market, it’s very possible that someone will come to you!

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(Grzeskiewicz, 2015a)

The following are key points to consider before entering into a contract-grazing arrangement:

  • Forage and pasture resources: What is the quality of the forage base? What kind of grazing system will you use?
  • Class of livestock: Will you graze stocker steers, heifers, or cow-calf pairs?
  • Equipment and facilities: What is available and what will you need to purchase or barter?
  • Contracts for grazing: What is the basis of your contract? Dollars per pound of gain? A flat fee?
  • Economics of contracting: Use of budgets to plan and evaluate new enterprises

Pastures and Grazing

A continuous supply of high quality pasture and stored forage is crucial to success in contract grazing. In many cases, in order to optimize the available resources, some type of managed grazing system will be needed to ensure that forage quality and quantity can be maintained throughout the growing season. Regional differences will dictate what forages are appropriate for the different seasons and environments. In many cases, local assistance with forage selection and pasture improvement is available from the Cooperative Extension System or the USDA Natural Resources Conservation Service (NRCS). To access additional resources  on managing pastures and grazing, head over to the Livestock and Pasture section of the ATTRA website.

NRCS and Cooperative Extension phone numbers can be obtained in the federal and county government sections, respectively, of your local telephone directory. Also, you can access local NRCS and Extension directories on the following websites:

In order to supply high quality pasture, you should diversify your forage base, recognizing that different forage varieties fill a wide range of environmental niches on the farm. A diverse forage base will help ensure that seasonal impacts on the pastures are minimal and that forage will be available during different times of the year. Some producers interseed annual grasses at the proper time of year to supply additional high-quality feed. In many cases, a few paddocks planted with annual grasses and legumes can make the difference between simply surviving periods of low perennial-forage production and maintaining weight gain at the desired rate.

Pastures should also be rested periodically to ensure a healthy stand and maintain forage quantity and quality. Most pasture forages do not persist or perform well under continuous grazing. In some situations, the rest period may be only a few weeks in an intensively grazed, multi-paddock system where animals are moved regularly. Other situations may involve resting pastures for a year or more, such as native rangeland where moisture is limited. Maintaining the appropriate forage cover will improve soil health, reduce weed pressure, lessen erosion, and improve drought resistance.

Rotational grazing systems allow for the rest pastures need to be productive. Although continuous grazing systems can have positive effects on animal weight gain due to grazing selectivity, they can cause problems if animal distribution cannot be controlled adequately. A Canadian study found that when grazing systems were evaluated for total efficiency and net returns, a six-day, high-stocking-rate system was the best of those studied (Phillip et al., 2001). The researchers evaluated beef cow-calf pairs grazed with nine treatments in a 3×3 factorial of rotational frequencies: two-day, six-day, or continuous, with three different stocking rates: 1.23, 1.77 and 2.22 acres for a cow-calf pair. While animal performance showed little benefit from intensive grazing (and usually doesn’t), the efficiency of land use and total economic performance was significantly improved. On a 100-acre farm, even considering the additional labor and fencing, the six-day, high-stocking-rate grazing system returned $10,000 more than a continuous system.

In another, more recent, study, University of Wisconsin-Madison researchers looked at the effects of forage yield and quality among several common management systems. They developed a randomized complete block field experiment with three separate replicated blocks of four treatments, including a rotational system (Management Intensive Rotational Grazing, or MIRG), continuous grazing, a harvested forage system, and treatment of unmanaged grassland.

Twenty-five cow-calf pairs were grazed in the MIRG system for two days in a 1.5-acre paddock, then moved to the continuous grazing system for 30 days, then back to the MIRG paddock for another two days, for a total of six cycles through the grazing season. This study allowed for a 28-day rest period in the MIRG paddocks for each grazing cycle, and a two-day “rest” per cycle for the continuous grazing paddocks (when the cattle were in the MIRG paddock). A 6-inch residual was left in the MIRG paddocks after the two-day grazing period. The harvested forage fields were clipped twice during the grazing season based on plant height to a stubble height of two and a half inches, and the unmanaged fields were not grazed during the grazing season.

For both grazing seasons (2006 and 2007) the MIRG paddock yielded more forage than any of the other treatments in the experiment, and the unmanaged plot had the lowest forage yield of all. In 2006, the MIRG system provided around 9,000 pounds per acre of potential forage productivity and the continuous grazing plot yielded around 7,000 pounds per acre. For the 2007 grazing season, a wetter year, the MIRG system resulted in approximately 11,000 pounds per acre compared with roughly 6,500 pounds per acre in the continuous grazing plot. The MIRG system also performed well above the other treatments in the study for forage quality (Oates and Jackson, 2015).

The researchers concluded that higher production levels for rotational grazing likely resulted from the fact that this management strategy ”periodically resets plant development and maintains a preferred plant community composition because livestock are grazing down all plants in a brief interval as compared to continuous grazing, when they selectively and repeatedly graze down preferred plants” (Oates and Jackson, 2015).

The key concept here is management. “The success of your grazing management should be predicated and evaluated on a desired outcome—that is, a result” (Budd and Thorpe, 2009). Those outcomes could be any of several goals, including increasing or sustaining livestock production, increasing water quality and soil health, maximizing plant diversity, improving wildlife habitat, conducting land restoration, or controlling invasive weeds. Often, the goal of the grazier is a combination of many of these outcomes. “By viewing grazing as a tool to achieve a desired, clearly enunciated result, managed grazing can be used to achieve multiple purposes” (Budd and Thorpe, 2009).

Perhaps the most interesting finding of these studies was that the use of a managed, intensively grazed system can reduce the overall variability of net returns by increasing forage quality and quantity. In addition, the managed, intensively grazed systems showed a higher likelihood of generating a positive return when compared to the continuous grazing system.

For more detailed information on managing pastures and grazing, see the ATTRA publications Pasture, Rangeland and Grazing Management and Irrigated Pastures: Setting Up an Intensive Grazing System that Works. In addition, ATTRA’s Managed Grazing Tutorial discusses practical options for planning a grazing system in an online, interactive course designed to help producers improve soil health and pasture condition while maximizing income potential through grazing.

Classes of Livestock to Graze

Once you decide that you want to graze animals for someone else, this is one of the biggest questions: What types of animals are you interested in working with? There are many options, and the best choice depends on your facilities, your expertise, and how much work you want to take on.

The examples used in this publication focus on cattle, but sheep, goats, and even horses can be contract grazed if you have pasture that needs to be used and a livestock owner who needs pasture. In many cases, multispecies grazing to take advantage of diversity within your pastures may be possible, making improved parasite control and additional economic opportunities available. For more information on grazing multiple species, see the ATTRA publication Multispecies Grazing: A Primer on Diversity.

stocker cattle

Photo: University of Florida Extension

Stocker Cattle

Probably the easiest grazers in terms of workload are stocker cattle. Stocker cattle are young weaned calves, usually around 500 pounds, that gain weight on grass prior to finishing in a feedlot. A good grazier, with good-quality forages, can expect cattle to gain from 1.5 to 2.5 pounds per day. In many cases, a load of calves will be delivered for a set period of grazing, after which they are picked up and continue on to a feedlot. Grazing this class of cattle can be a challenge at times due to their inexperience with certain feedstuffs and lack of previous exposure to humans. Every group has to be trained to respect fences and not all cattle have had contact with electric fences. To help reduce the training problems, some producers have found it useful to keep a few cull cows around to serve as trainer animals for the new calves. Many producers have found that small corrals close to the barn, with solid fences and several offset hot wires, work well in training cattle to electric fences without the risk of escape.

An important consideration for younger animals is the quality of their forage. If contracts for stocker cattle are based on the weight they gain during the grazing period, higher-quality forage should make for better weight gain. Improving pastures, seeding annuals, and grazing management are important for ensuring that the nutritional needs of young, growing animals are met.

Cover crops complement cattle grazing particularly well and provide excellent forage. Consider, in addition to clovers and cool season annual grasses, vetch, brassicas, and warm season crops like forage peanuts or sorghum sudan. Cover crops have been noted for their soil-building qualities and are often used as a green manure for succeeding annual cash crops. Grazing cover crops can be a way to increase forage quality while benefiting the soil. For more information, see the ATTRA publication Integrating Livestock and Crops: Improving Soil, Solving Problems, Increasing Income.

In some instances, depending on your location and situation, supplemental energy may also be needed to enhance conversion and utilization of high-quality pasture, because in good pastures, adequate protein is rarely lacking. Especially in cool-season pastures, the energy-protein balance for efficient conversion is often tilted too far toward the protein side of the equation, and supplemental energy can often improve overall gains and profitability. Grazing cool season grasses when they are a little mature, but before they become fibrous, can provide a forage that has a better energy-to-protein ratio, which is more efficiently utilized by the animal. Be sure to assess your pasture quality accurately so that you can supplement correctly if needed. The Pasture Condition Score Sheet (Cosgrove et al., 2001) is a good resource for assessing pasture quality.

As a grazier, you want to make sure that you receive healthy animals that have good growth potential and will make you money with fast weight gains. Work with the livestock owner to ensure that the animals are vaccinated, healthy, and have already been weaned and well backgrounded (ensuring the cattle are over the stress of weaning). This will reduce stress on the animals and make the first few weeks of adaptation much smoother. Be cautious about groups of calves recently purchased from sale barns. Since commingled calves may have been exposed to additional stress and pathogens, they may not perform as well as animals coming from a single source. Consult with your local veterinarian for proper health procedures and vaccinations that will make your job easier and result in healthier, faster-gaining animals.

Beef Heifers

Beef heifers can require more management, facilities, and labor than steers. The key difference is that the heifers will likely be bred while in your possession and would be expected to calve at approximately 24 months of age. Therefore, the heifers may be grazed for a longer period; perhaps left with the grazier from weaning until close to calving time 16 months later. Managing heifers can be labor-intensive when synchronizing the mating of sizeable groups of females. This may require more facilities and equipment, and probably some training, since the human factor in these types of heifer- development operations is critical for success.

Well-managed heifer-development operations allow heifers to receive the attention that they need to be bred within a short time, so that calving can be more easily handled by the owner. For the additional work, there is additional return, but the expectations are also higher. In many instances, it is expected that a high percentage of the heifers will be bred to specially selected bulls via artificial insemination. If this is the case, additional arrangements need to be made for semen, supplies, and breeding expertise. If bulls are going to be used for breeding, it is necessary to have enough of them to ensure that all heifers are bred within an acceptable time. Young bulls can be expected to cover only 20 to 25 females, whereas a mature bull, two to three years old, can cover up to 40 females if he is in excellent physical shape. If bulls are going to be used, be sure to get their fertility tested before each breeding season. Just because a bull settled cows last year doesn’t mean he is still able to settle cows this year. Many cattle owners have suffered major setbacks due to the incorrect assumption that a bull was still functioning properly.

Any feeding program — either supplementation during grazing or full feed during the non-grazing period — will need to be closely monitored to ensure adequate growth of the heifers. Heifers should be on a high plane of nutrition, but allowing heifers to get too fat can cause problems during calving. Contract graziers may want to consider establishing a set fee for each animal that is grazed under this system, with incentives for making breeding targets and weights during development. Developing and calving out heifers should not be the first contracting choice for people with limited cattle experience.

dairy heifers

Photo: NCAT

Dairy Heifers

Much of the information about beef heifers also applies here. With dairy heifers, the cliché that heifers are the most overlooked enterprise on the farm is too often true (Cady and Smith, 1996). Therefore, the opportunity to contract-graze dairy heifers is sizeable and getting larger all the time. Replacement rates on most dairies are 25 to 30%; therefore, on most dairies many heifers are needed to fill the vacancies along the way. Another consideration is the cost of replacement animals, which accounts for 15 to 20% of the total cost of milk production on farms, second only to feed costs (Heinrichs, 1996). Because between 50 and 60% of heifer costs are associated with feed, contracting heifer grazing to another party presents a great opportunity for dairies to reduce costs and improve profitability.

Troy Bishopp, a contract grazier in New York, cites a 2012 Cornell survey of New York organic and conventional dairy farmers, revealing that on-farm daily dairy replacement costs 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] grazing professional,” he notes, “a problematic situation turns into an asset for both parties“ (Bishopp, 2015).

The period that a dairy heifer may be on the contract grazier’s farm can be longer than with beef heifers, and different age groups may be handled simultaneously. In some cases, the dairy-heifer owner may deliver a group of young heifers every month and pick up the pregnant heifers at the same time. Dairy heifers may be younger to start with — perhaps a day-old calf that needs milk or a two-month-old weaned calf. The nutritional requirements for these younger animals are much different from those of a 500-pound beef heifer that is seven months old.

There are targets for weight gain for each age group so that heifers do not become too large or too fat. It is crucial for productive dairy heifers to reach a critical body weight at a young calving age. Some dairy experts stress the importance of age at first calving (AFC) as the most important economic trait associated with heifer programs. Increased AFC raises herd costs in three ways: (1) increased days of rearing, (2) increased number of heifers on the farm, and (3) lost production potential (Cady and Smith, 1996).

Breeding Heifers

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If breeding the heifers is part of the contract arrangement, make sure this point is written in the contract. In most cases, the owner will supply the semen and breeding supplies. Who will supply the labor for heat detection and breeding? Are you qualified to artificially inseminate the cattle? There should be added value in delivering heifers that are bred on time.

Since breeding is the most complicated part of raising heifers and demands higher levels of management, graziers should consult with experts in dairy heifer development to fully understand the requirements and expectations. More information on raising dairy heifers can be found in the Missouri Extension publication Dairy Grazing: Heifer Development. See Further Resources below on how to obtain this publication.

Other Classes of Livestock

There may be possibilities to contract for other classes of cattle. Many dairy farms do not allot enough room for dry cow management, and some farms may want to move the dry cows to better facilities to reduce management problems.

Another type of contract involves grazing beef cow–calf pairs over the summer, or even year-round for the cows. Typically, there is a monthly fee for the pair, perhaps with an incentive for improved weaning weight of the calf.

Other Considerations

Younger animals, such as stocker calves and heifers, may graze unevenly and be unwilling to graze the pasture down to the desired residual height before moving on to the next pasture or paddock. In some cases, you will have to clip or mow pastures to keep some of the forages from getting too mature before the cattle return to them. Another way to manage this situation is to allow mature cows, with generally lower nutritional requirements, to follow the younger animals in what is often called a leader-follower grazing arrangement. The younger animals, the leaders in this situation, get turned in first and are allowed to remove the higher-quality forage from the pasture. After the calves are finished, depending on your paddock grazing period, the cows are allowed to follow and eat the remaining forage down to the residual height you want. This method requires less mechanical input to manage the pasture and will reduce the problems of some forages becoming over-mature and less desirable to the cattle. Pay careful attention to the length of your grazing period to ensure the cattle are not on the pasture long enough to negatively affect regrowth.

What is Overgrazing?

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Overgrazing is grazing before the grass plant is fully recovered. This can occur with too long of a paddock grazing period or returning too soon to re-graze a paddock. The result is the same.

Equipment

Handling Facilities and Scales

Contract grazing requires facilities suitable for handling large animals, minimizing animal stress, and ensuring worker safety. Good facilities allow one person to perform multiple tasks without risking injury to him- or herself or the cattle. Handling sick cattle in a timely fashion will be easier if proper facilities are in place. Depending on the size of the farm and how far the cattle are from a working facility, graziers may want to consider temporary facilities in addition to a central location for receiving and treating sick cattle. Cattle-working facilities do not have to be fancy, expensive, or brand new. What is important is that they are well designed, can withstand repeated use by large animals, and provide protection for both animals and workers. Effective cattle handling facilities have been constructed from materials such as used well pipe (drill stem), timbers, recycled steel silos, guardrail, and railroad ties. It is more important that the facility be built to deal with animal flow patterns and handling requirements than that it be shiny, new, and expensive. Two good resources for corral and working facilities include Humane Livestock Handling by Temple Grandin (2008), and Corrals for Handling Beef Cattle by Robert Borg (1993). Complete information about these and other facility references can be found in the Resources section. The best advice regarding any livestock facility is to plan for future expansion and leave plenty of space for ventilation, equipment, trailers, penning, manure storage, and drainage. Do not shoehorn a new investment into a space too small for it.

Perhaps the best advice when it comes to handling cattle is to prepare your cattle for future handling events (Hibbard, 2016). Temple Grandin has said “every time you are working your animals you are training them. You can train them to be easy to handle or you can train them to be difficult.” Handling cattle in a low-stress environment involves a mindset, and the ability to “read” the cattle. Whit Hibbard, a Montana rancher and editor of The Stockmanship Journal, is an advocate of Bud William’s low-stress animal handling and stockmanship. Read more about these low-stress principles and techniques at Cattleexpressions and Bud Williams Schools.

Grazing contracts typically include performance standards for the grazier to meet. Therefore, a quality scale that can be certified for commerce is usually a wise investment. In some cases, a truck scale in a nearby community may be sufficient, but few producers who have purchased animal scales have regretted the decision. Once a scale is available, monitoring animal performance is much easier. You do not have to wonder whether the animals are gaining weight and at what rate, or whether they will reach the targets specified in the contract. A scale can be used not only to weigh a group of cattle routinely, but also to compare different groups of cattle on different forages in order to monitor what forages yield better gains at different times of the year. A livestock scale will allow you to be a better manager of both forages and livestock.

A scale can be incorporated into a working facility to weigh individual animals or groups. Position the scale where it can be the most useful to your overall system. Some scales are placed in a working alley to weigh groups of animals; others are placed in line with the working chute to weigh individuals. In most cases, unless individual weights are the only ones of interest, positioning the scale in a working alley to weigh larger groups as well as individuals will probably give the most flexibility to your system. But keep in mind the cost of a system: alley scales are much more expensive that individual scales. Be sure to do a cost analysis to see if a scale would benefit your operation.

Fencing

Fences are a major investment that can make or break an operation. Time spent designing efficient fencing on the farm will eliminate problems in the future.

The most important fence is the perimeter fence. Additional cost and effort should go into building a quality perimeter fence to ensure livestock will remain on the farm, out of roadways, and clear of neighbors’ crop fields. In most states, a legal fence is defined under state statutes. Talk with your local Cooperative Extension or NRCS office to make sure your perimeter fences are adequate.

Once the perimeter fence is in place, simple interior fences can be built by using a single or double strand of electrified high-tensile wire. Some farms make extensive use of polywire and poly-tapes to subdivide larger pastures. In fact, portable electric fence cable is becoming more popular, especially in the western states. It’s more conductive than poly and is three-and-a-half times as strong. Electric fencing makes it easier to control pasture use and stocking rates and get the most from your forage. Younger animals will typically respect a single wire if they are properly trained, but a double wire may be required to ensure that a few young animals don’t graze ahead of the others. On smaller farms with mature cows and dairy heifers, a single wire can work well. For larger spreads, such as range situations in the West, a single wire may not work due to the amount of labor required for upkeep.

If you are going to use electric fences and the animals you are grazing have not experienced them before, a training pen might be necessary. A training pen, adequately sized for the animals to roam and rest, can have multiple strands of electrified fence — typically made very hot (highly charged) because of the proximity to the barn where the fence energizer is housed. Animals stay in the training pen for as long as needed to become accustomed to the folks working on the farm, to receive daily inspections for health and condition, and to learn to respect the fences. For more information on fencing, see the ATTRA publication Paddock Design, Fencing, and Water Systems for Controlled Grazing.

Water

Water is the most important nutrient and must be in ample supply at all times, or productivity will decline. In fact, cattle require twice as much water when the temperature goes from 70 to 90°F. Behavioral studies show that when cows travel more than ¼ mile to water, pasture utilization and time spent grazing decreases. Pasture utilization will suffer because cattle will graze the part of the pasture closest to the water supply or transit lane, while other portions of the pasture go untouched. Overall grazing time will decline if animals have to spend too much of their time walking to and from water points. If water is readily accessible (usually within 300 feet), animals will travel individually to it as needed. If water is not readily accessible, the entire herd will travel together seeking water. This behavior has an impact on how well pastures are used and how much time cattle spend grazing. Make sure that your pastures have plenty of water sources available. Also, have a backup plan, just in case you lose electricity for extended periods or suffer a pump failure.

Other Equipment

Depending on your geographic location and local weather patterns, some shelter may be required to protect animals during bad weather, minimize stress, and ensure that proper care can be given to animals entrusted to you. In most cases, a simple pole barn is adequate. Proper ventilation is important, as well as enough room to prevent overcrowding. For grazing animals, a crowded barn can be worse than no barn at all. Protection from the sun and heat stress can also be important in some climates. Remember that if your goal is to maximize gains and you have no trees or other form of shade, your returns will probably begin to suffer when temperatures go above 70°F and stay there for 24 hours or more. Some heat is fine, as long as the cattle can recover during some part of the day or night. With no recovery period, heat stress will accumulate and gains will suffer. Some farms with few shade trees have made portable shades consisting of a durable, lightweight frame covered with shade cloth. Moving the shades helps spread out the impact that large groups of cattle can have on a pasture, and, like water sources, serves as a tool for cattle distribution. For wind protection you can use windbreaks, both natural and man-made, to provide shelter.

Leasing Pasture

Leasing land for contract grazing is a good option for many graziers due to the fact that there are no ownership costs. Finding land to lease can range from easy to difficult, depending on land-use characteristics and land values. For instance, many rural areas have large tracts of unused land that could be leased from absentee owners or retired farmers. On the other hand, in some regions unused land is a rare commodity due to pressure from developers.

Once you’ve found land you can lease, you’ll probably be asking yourself, “What is a fair market lease price, and how do I find out?” The landowner may know nothing at all about how much to charge for her or his land. There are several ways to arrive at a lease price, and whether your landowner is unsure of what to charge or is financially savvy and up to date on lease prices, knowing how to figure a fair lease is in your best interest.

The land you will lease is more than just a plot of land. Several factors should be considered in determining the lease price. Forage value is one such factor, as is infrastructure. Is the land fenced? Is water developed or will you have to dig a well or, for smaller acreages, run pipes from a municipal source? These things should be kept in mind when thinking about a lease price.

To come up with a lease price, Kathy Voth, founder of Livestock for Landscapes, suggests five methods, each with their own advantages and drawbacks:

  • Check the National Agricultural Statistics Service for historical data on pasture rental rates and land values
  • Calculate lease price based on return on investment
  • Calculate lease price based on forage value
  • Calculate lease price based on animal unit months (AUM)
  • Calculate lease price based on shared profit and risk, or a seasonal cost based on number of animals and the number of months grazed (Voth, 2015)

Voth works through each of these methods, with calculations and explanations, in her February 2015 blog entitled “How Much Should You Pay to Lease Pasture?”

Grazing Contracts

A grazing contract is an agreement between you and the livestock owner to perform certain functions over a certain time period for a certain outcome. The contract can be as complex or as simple as both parties agree. What is important about a contract is that it gives both parties a record of what they have agreed to. Some important points to remember about grazing contracts are as follows:

  • Contracts can be simple but should be detailed in specifying the expectations of both parties.
  • Contracts should include dates of grazing period, number of head, weight of cattle, and grazing fees.
  • They should also address issues such as drought provisions, payment schedule, death loss liability, down payments, trucking, veterinary care, treatment of sick animals, worming, fly control, vaccinations, brand inspections, health certificates, animal identification, performance records, method of weighing, shrink, insurance, supplementation, mineral program, fee adjustments, management protocols, and anything else that is discussed and agreed upon (Fulton, 2015).

“The grazing contract is an integral part of the relationship between you and the customer,” says Kevin Fulton, a custom grazier in Litchfield, Nebraska. “Obviously the contract should be one that both parties feel comfortable with and [that] protects the interests of both sides. Generally the custom grazier will provide the contract and I highly recommend that. We have had customers that want to use their own contracts and we have declined to use them. Generally they are not in the best interest of the grazier” (Fulton, 2015).

In the end, a grazing contract is only as good as the two parties involved. If a contract is breached, it is almost always more expensive to litigate than it is to accept the consequences of the breach. This is important to remember when selecting who you are going to do business with. Perhaps the most important skill of a contract grazier is human relations.

Key Points to Consider in a Grazing Contract

  • Identify the responsibilities of both named parties — who will provide what and when?
  • Define labor, equipment, and management of livestock, including animal health.
  • Specify targets appropriate for the type of animals, including weight gains, body condition scores, etc.
  • Define who will pay for various types of services, such as additional feed, vet bills, medications, trucking, breeding, etc.
  • Specify the dates that the contract will be in force and the types, sizes, and sexes of animals to be grazed under the contract.
  • Specify how and where the animals will be weighed; specify any appropriate shrink.
  • Specify under what conditions the contract can be terminated – by either party – and the notice required to terminate a contract.
  • Specify how the grazier will be paid after animals are removed and on what basis, such as rate of gain, number of days, or other options.

(Kidwell, 2000)

Prices for Grazing – Setting Your Fee

Calculating prices for grazing services can be difficult, especially for a beginner. The two most common price structures are flat rates and incentive rates (Sellers and Cates, 2013).

Flat rates are used by many graziers; these are constituted by the charges for grazing services on a per animal, per day basis. There are many factors that go into figuring a flat-rate charge, and Sellers and Cates (2013) have identified some important ones:

  • The estimated value of the land that is being grazed
  • The level of labor and number of services provided by the grazier
  • The type of cattle grazed
  • The weights of the cattle received (cattle that are heavier at receiving are often charged more than lighter cattle, as they typically will be on grass for less time than lighter cattle
  • And, most importantly, the reputation of the grazier

Incentive rates can be applied to a flat rate for special care that is given to the animals by the custom grazier (Sellers and Cates 2013). These can be thought of as goals for excellent management, and might include weight gain or high conception rates for heifers. Table 2 shows some custom rates with incentives for Iowa. Average custom rates for your region can often be obtained from your state’s Cooperative Extension Service.

There are many variations of rate calculations. For instance, custom grazier Kevin Fulton’s daily fee is a good example of a structure that captures all his costs associated with grazing (Fulton, 2015):

.

(weight of the animal) X (forage intake) X (forage price) + daily management fee = daily grazing fee

.

The fee can easily be adjusted (and written into the contract) based on animal gain each month and billed to your customer on a monthly basis.

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For experienced contract graziers, rates calculated as shown can be beneficial, and can capture all costs associated with the operation, especially if the grazier is highly respected and is known for achieving good results. If you’re going to set your price based on gain, it’s important to know the cattle you’re receiving. Make sure they have good genetics for gaining on pasture and have the ability for compensatory gain.

In almost all cases, the owner is responsible for supplying mineral supplements and covering other costs associated with animal care. However, make sure that the details are spelled out in the contract, where everything is subject to negotiation. If supplemental feed is required, delineate in the contract who will be responsible. In some cases, supplemental feed costs could be subtracted from the grazier’s fee at the end of the contract. Other items can also be negotiated. For example, if the grazier is located at some distance from the owner, and supplemental feed is required, the grazier could be responsible for purchasing acceptable feed locally and billing the owner.

Liability Considerations

Because you as a custom grazier are ultimately responsible for someone else’s property, you should have a discussion with your insurance agent to determine your possible liability in a contract-grazing arrangement. Mortality is a common point to include in a contract, but what about theft? Weigh your risks carefully; it may help you sleep better at night knowing that some of those risks are covered.

Economic Projections and Budgets

The following projections and budgets are only starting points for your own economic evaluations, because the numbers used here are simply averages. Based on your geographic location, forage production, and competition, the numbers used may not represent your farm. The budgets have pricing matrices at the bottom to help estimate the break-even points for cost of production. It is important to realize that you need to ensure long-term returns above total costs, since this is where true profitability begins. In the short run, returns above variable costs are important. If an activity has no returns to variable costs, then you should not engage in it, even for a short time. Any return above variable costs could be used to pay for fixed costs, and in some cases, some return to fixed costs is preferred over no return at all.

Budgets

The following budget resources are available online from ATTRA. Contact ATTRA at 800-346-9140 to request a print copy of these budgets.

Beef Stocker Calves Spreadshee

Dry Cows Spreadsheet

Dry Cows PDF

Dairy Heifers Spreadsheet

Dairy Heifers PDF

Recordkeeping

Recordkeeping is often ad hoc or even overlooked. But if you are contract grazing, you have the responsibility for someone else’s property and you’re going to want to substantiate adherence to the contract and back up your price structure. You’ll need to document your grazing with a log, along with animal weights, supplements fed, health treatments, and other expenses. A simple notebook or a spreadsheet will work fine for this purpose, based on your own preferences.

Recordkeeping Checklist for Contract Graziers

The items you’ll need to keep track of include the following:

  • Animal identification and inventory
  • Breeding information for heifers
  • Health and vaccination information
  • Pregnancy testing
  • Weights, averages, and rates of gain
  • Pasture condition and monitoring
  • Pasture usage and pasture and hay costs
  • Hay and forage yields
  • Purchasing records
  • Mineral supplement bills and feeding records

Conclusion

Custom grazing is a great business opportunity for the financially savvy farmer, and it’s the perfect business model for someone who is passionate about livestock and land but doesn’t have the resources to own a herd. It requires a deep understanding of livestock behavior and management and, to be successful, an advanced understanding of grazing management. The “paperwork” for this type of operation isn’t too much to handle, as contracts don’t need to be long and complex, and records can be simple as long as you’re recording what you need to substantiate your end of the contract. Your income can be more stable than if you were raising a cow-calf herd, and your expenses will be significantly less than operating a dairy.

It’s important to stay connected with others who are interested in grazing and animal management. “There are numerous resources you can utilize for input in making management decisions,” says Kevin Fulton. “We find that the best resource is forming a network with other graziers that are in the same business as you are. We have learned a lot from interacting with peers and visiting other operations.” Seek out field days and farm tours through local Extension, Conservation Districts, and non-profit sustainable agriculture organizations. Attend conferences in the winter when the pastures are dormant but your mind is active. With some research, passion, a little luck, and a network of support, you can be successful in this rewarding business venture.

Grazing Contracts for Livestock
By Tim Johnson, NCAT Agricultural Specialist
Published 2005
Updated August 2016
by Lee Rinehart, NCAT Agricultural Specialist
©NCAT
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Slot 248
Version 080816

This publication is produced by the National Center for Appropriate Technology through the ATTRA Sustainable Agriculture program, under a cooperative agreement with USDA Rural Development.