Custom Raising of Replacement Heifers

Custom heifer raising is not common in Ontario. There are only a handful of commercial custom heifer feeding operations and even fewer that have been established long enough to qualify as successful businesses. Most agreements involve small numbers and part time labor utilizing otherwise empty facilities. Many are seasonal and based on nonworkable pasture land on a neighboring cash crop operation. Despite its unpopularity, custom agreements for heifer raising can have major benefits for both the dairy producer and the custom feeder.

Custom raising is far more common in the U.S., undoubtedly because of the different structure of the dairy industry. In the U.S. Northeast, 2.4 % of dairy farms contract out the heifer raising and in the far west the practice is followed by 7.8% of farms, according to a 1991-92 survey(l). To the dairy producer, the main benefits of a custom raising involve freeing up resources for other uses. Moving the heifers out can reduce the requirements on the dairy farm for housing facilities., feed, feed storage, labor, management, manure storage and land base for manure application. To a progressive dairyman in a free market, these resources are valued at "opportunity cost". This producer looks at the space, feed, time and management resources used by heifers as resources that would otherwise be available for milking cows. If an average cow nets a return to labor of $500 per year, and eliminating two heifers means there is space, time and feed for another cow, this dairyman is money ahead paying a custom feeder up to $200 or more over raising costs to allow him to milk more cows. Ontario dairy producers usually have more than enough land to feed the herd and have no shortage of labor or management time. They are often not interested in adding more milking cows because they perceive high quota values and high risk in quota purchases.

When there is interest in custom heifer raising, the reason is usually a lack of adequate space or housing facilities. Even in this scenario, expanding dairy herds, faced with the option of adding twenty stalls to the tie stall barn or building a free stall facility usually choose free stall conversion and end up with more than enough heifer space while they grow into the new facility. The focus on free stall conversion is probably the greatest disincentive for investing in new heifer housing, and there may be a growing demand for temporary custom raising arrangements while the herd expands beyond its present facilities and before the new free stall barn is built.

A dairy farm raising its own replacements probably devotes about 35% of barn space, 30 % of its forage, and 20% of its labor on the heifers. Since heifers require separate management such as health care, ration formulation and control, etc. from the cow herd, management time is also about 25% less on farms with no heifers to raise. Resources focused on milking cows, such as parlors and milking equipment will be utilized more efficiently all available space, feed and labor is applied to milking cows.

A commercial custom heifer feeder has opportunities to reduce cost through economy of scale in several ways . For example, an important element in successful heifer raising is the ability to reduce stress through grouping by age. Typical recommendations are to limit groups to an age range of no more than three months. This means at least eight groups of heifers, a requirement which can add dramatically to the labor of feeding, manure handling etc. in a single farm operation with 40 or 50 heifers to raise (in groups of 5 head). The larger custom feeder raising 5 or 10 times this number has little difficulty with 20 to 40 head groups, with an age range of only two months. There is no doubt that tighter grouping results in a growth advantage. In a parasite control study I conducted several years ago, the need for treatment and control groups doubled the age range in each group, from 3 months to 6 months. Heifers in the youngest two month category consistently grew 10-15% dower than those in the oldest two months.

Larger custom feeders can also justify better handling facilities and can reduce the labor of specialized management practices applied to heifers such as parasite control, vaccination, growth monitoring and hoof care. Since these needs are unique to heifers they often do not get done at the right time or in the most profitable fashion on dairy farms where the milking cows are the priority Studies show it is the heifers which chow an economic response to strategic parasite control because they are much more likely to exhibit reduced performance due to worms, lice or warbles. The conscientious custom feeder, specialized in heifer raising can get these things done, on time, with minimal labor, and at lowest cost.

With respect to nutrition, the specialized custom feeder has the opportunity to devote the appropriate time and effort to balancing rations specific to the age of the heifer group and the forages available. In my experience heifers on the dairy farm receive a ration based on untested lower quality forages, combined with variable amounts of leftovers from the milking cows. Little thought is given to the nutritional balance of this ration and the heifers are inadequately grouped to allow much in the way of ration balancing anyway. On the other hand a good custom feeder will be able to test the forages and feed a strategically balanced ration according to age and measured intake. In recent years there has been tremendous progress in research defining the nutritional needs of heifers growing at the desired 0.75 to 0.9 Kg per day. This new knowledge includes a good understanding of requirements for various protein fractions, carbohydrates, minerals and vitamins. Unfortunately much of this knowledge goes to waste because dairy herds lack the facilities or resources to implement good heifer feeding regimes. The custom feeder may also be better equipped to make strategic use of feed additives such as Rumensin or Bovatec or low cost non-protein nitrogen sources such as urea or anhydrous treated

Lastly, the custom feeder may own facilities which are uniquely suited to heifer raising. In Ontario, there have been several good examples where older free stall barns with smaller stalls and no drive through have been renovated for heifers through use of slightly narrower alleys. Similarly, slatted floor beef barns have been adapted at little expense and provided an alternative to beef production.

There are also disadvantages to custom feeding arrangements. The obvious one is the cost of transporting heifers, to and from the custom feeding facility. The most common complaint from dairy producers who have farmed out the heifers is that they now have fewer options for dealing with there lower quality forages and manger sweepings, traditionally fed to heifers. Low quality forages are usually best allocated to dry cows but be cautious in using manger sweepings from the milking herd for dry cows. They are typically too high in energy and calcium to form a large part of a dry cow diet.

The other major drawback of custom arrangements is the increased exposure to disease inherent in mixing animals from more than one farm at the custom feeding facility. Properly designed vaccination programs based on local needs reflected in the health status of all herds contributing heifers to the facility are an absolute must, and need to be designed in consultation with the veterinarian. Despite such precautions, health risks will still be greater than if heifers are raised at home. As an example, in Ontario, we still have a number of closed herds which purchase no livestock and raise heifers at home that have no reported incidence of strawberry foot or hairy heel warts. The majority, which do have this condition, have undoubtedly suffered serious economic losses from the problem. Custom heifer raising in a facility accepting cattle from a number of herds would obviously contribute to the spread of this problem and others like it.

Of course if custom feeding leaves available resources on the dairy under utilized this is not economical either The dairyman must recoup custom raising costs from reduced expenses and better profits in the home farming operation.

But the main reason custom agreements in Ontario fail is precisely the opposite of what one would expect from the above discussion! Despite all of the potential for better growth in the specialized custom rearing situation, the Ontario experience is that dairy producers quit the custom agreements because they are dissatisfied with the size of the heifers to them. Traditionally it is our most progressive dairy producers who recognize the opportunity cost and enter custom feeding agreements in the first place. But the custom feeder, of te n with a beef or less progressive dairy background, may lack the skills to achieve the desired growth rates these dairymen are accustomed to.

Upon entering a custom agreement it is imperative that "who is responsible for what" is clearly understood by both parties. Binding legal contracts which cover all possibilities in the appropriate language are probably desirable but not practical. A more practical approach is to discuss the responsibilities in table 1, define in writing who is responsible for what, who pays for what, and how disagreements will be resolved. Then keep payments regular and the commitment open to permit both parties the opportunity to end the agreement on appropriate notice.

Typical custom heifer raising programs in Ontario today, start at 3 to 4 months of age and return the heifers 1 month before calving. I know of no custom calf feeding agreements, although the concept of a specialist, perhaps with white veal facilities and experience, custom raising calves from 3 days of age has definite possibilities. Payment is monthly and is usually defined on a per head per day basis only. Typical charges today are $1.75 per head per day or up to $2.00 for short keep arrangements with cattle dealers etc. It is not uncommon to see different rates for different ages, such as $1.65 under 1 year and $1.85 over 1 year. Usually these rates include feed, bedding, routine health care, labor and housing. Semen, vaccines, specialized health needs are extras billed at product cost with the labor supplied by the custom operator. Typical physical quantities of resources consumed by heifers, suitable for use in developing a budget, are attached as table 2. As pointed out earlier, costs vary with age and this may be a factor in defining the fee schedule and the age and stage of pregnancy at which the heifer is returned. An illustration of how costs vary is given in table 3. Note that the problem breeder that remains with the custom operator beyond 24 months becomes a financial burden. This is a direct incentive for the custom operator to practice timely and successful heat detection and insemination.

Since the most common cause of failure of these arrangements is unsatisfactory growth of the heifers, regular growth monitoring and financial penalties for failure to achieve a minimum standard should be more commonly used than they are at present. As the ultimate form of incentive, payment could be based directly on growth defined as a set amount per centimeter of wither height increase or Kilogram of gain. The limitation of wither height is that it is difficult to measure with high repeatability. In my own efficacy studies of parasite control products height measurements taken by the same team on the same day commonly varied by as much as 3 cm. depending on the position of the head. The limitation of weight gain is that fattening without growth in frame is undesirable. Probably daily rates with defined expectations for growth are the most practical option.

Table 1. Responsibilities to be defined in a Contract Heifer Agreement

ITEMS WHICH MUST BE SPELLED OUT IN WRITING INCLUDE:

-How animals are identified
-Pre-arrival treatment or conditioning required (perhaps a minimum health standard to protect other livestock at the facility, dehorned before arrival)
-Transportation in, who arranges, who pays
-Age at arrival
-Insurance coverage, who provides, what perils, how is uninsured loss dealt with
-Age and or stage of gestation at departure
-Transportation out, who arranges, who pays
-Growth rate expected, how defined, how monitored, penalty if not achieved
-Heat detection, what systems are used and what is success rate, is there a plan for problem heifers (ex. Prostaglandin if not bred by x months), who pays for problem resolution.
-Insemination, what age or size at first service (Holstein example, breed first heat after 13 months, 131 cm and 360 Kg), who does, who pays, how are repeats dealt with.
-Semen, who selects sire ,who pays
-Pregnancy checking, done when, who pays
-Vaccinations, what, when, who does the work, who pays
-Parasite control program, what, when, who does the work, who pays
-Hoof trimming, what, when, how is need determined, who does it, who pays
-Non-routine health care for sick animals, who does what, who pays
-Death losses, who pays (common suggestion is owner losses calf, feeder refunds all raising costs)
-Access to animal for other procedures such as E.T. work, display for sale, how arranged, notice required
-Access by owner to view heifers and monitor program (Public relations on Sunday afternoon inspections are a major time commitment and infringement on weekend privacy according to experienced custom feeders)
-Notice required for either parry to terminate agreement
-Rate of payment for custom feeding services, are arrival and departure dates included, what costs in addition to feed, bedding, utilities, labour and housing are included.
-Frequency of billing and time frame within which payment is due
-How and when can rates be adjusted or renegotiated (ex. notice given, new rates for new animals only or all animals etc.)
-Method used to arbitrate disputes.

OTHER THINGS YOU MIGHT ASK ABOUT INCLUDE:

-Who else has heifers in facility and on what terms are new clients added
-Feed, who supplies, what quality, how tested and balanced, are there nutritional consultants used
-Bedding, who supplies and what is used

Table 2. Quantities Useful in Developing a Heifer Raising Budget (Adapted from (2))

	0-3 months	3-6 months	6-12 months	12-24 months	Total
Whole milk	155 Kg	0 Kg	0 Kg	0 Kg	155 Kg
Calf starter	40 Kg	0 Kg	0 Kg	0 Kg	40 Kg
Grain Ration	60 Kg	200 Kg	340 Kg	400 Kg	1000 Kg
Hay or Equiv.	25 Kg	200 Kg	900 Kg	3535 Kg	4700 Kg
Bedding (straw)	100 Kg	150 Kg	250 Kg	500 Kg	1000 Kg
Vet. And Med.	$8.00	$4.00	$4.00	$8.00	$24.00
Utilities	$6.00	$1.50	$3.00	$6.00	$16.50
Insurance: livestock	$0.50	$1.00	$2.00	$4.00	$7.50
Insurance: buildings	$1.90	$0.60	$1.20	$2.40	$6.10
Repairs	$9.60	$3.00	$6.00	$12.00	$30.60
Breeding	0 Kg	0 Kg	0 Kg	$30.00	$30.00
Tractor Scraping	0.25 hr	0.25 hr	0.5 hr	1 hr	2 hr
Miscellaneous	$5.00	$2.00	$4.00	$8.00	$19.00
Mortality	3%	1.0%	0.5%	0.5%	5.0%
Labour	6 hr	2 hr	2 hr	4 hr	14 hr

Table 3. Estimated proportional costs of heifer raising by month of age (from (3))

Age (months)	% of Raising cost
0-2	8
2-4	5
4-6	6
6-8	6
8-10	7
10-12	8
12-14	8
14-16	8
16-18	9
18-20	11
20-22	12
22-24	12

References

1. (1993) "Contract Heifer Raising", USDA Leaflet N115.193
2. (1986) "Dairy Heifer Budgeting Guide", Manitoba Agriculture Pub. 410-15
3. Hoffman, C. Pat, (1992) "Before You Hire Your Heifers Raised", Hoard's, p.533
4. Clapp, H.J., (1982), "Charting Heifer Growth", Ont. Min. Of Ag. Pub. 82-064