There are five essential components of an effective and durable contract.
First, the arrangement must be mutually beneficial so that both parties wish to continue the arrangement over the long term. A mutually beneficial agreement means the cattle are raised to the owner’s requirements at an acceptable cost and that the heifer grower makes a reasonable profit.
Second, the separate responsibilities of the raiser and the owner must be identified and listed in detail, including expectations about animal performance and care, who will provide and pay for the various inputs like feed, health care, labor, and breeding. Decision-making responsibilities must be clearly stated, including those related to routine management, health treatments, and culling. Risk must be considered including responsibility for the financial consequences of any death losses or culling, hazard and liability insurance requirements, and arbitration and compensation if either party fails to meet any the terms of the agreement. This helps both parties clearly understand the terms of the contract and avoids dissatisfaction arising from misunderstandings.
Third, the cattle should be clearly and uniquely identified and ownership clearly stated.
Fourth, payment amounts and form and frequency should be specified.
Lastly, for the protection of all concerned, the agreement should be in writing and should comply with the appropriate state and federal law. Sample agreements are available to guide you in your negotiations with heifer owners and to serve as a starting point for your agreement. Contact your local Cooperative Extension office for additional information and assistance.
Geoff Benson, NCSU Extension.
