A handshake has successfully sealed many business deals over the years. But, as your business gets more complicated, written contracts need to replace oral agreements.

Heifer-raising agreements are a prime example. As your dairy grows and you turn heifer management over to other professionals, it’s time to take steps to formalize these relationships. Likewise, if you’re a heifer-raiser, written contracts are one key to your business success. The ultimate objective is to protect both parties and clearly outline who is responsible for what when it comes to the care and management of these essential animals.

“The expectations of both parties must be clear,” insists Lewis Anderson, calf-care specialist with Calf-Tel. “It’s the gray areas that will lead to misunderstandings.”

With that in mind, check out the following advice about what to include in a heifer-raising contract from Anderson; Matthew Oesch, finance and systems manager for Swisslane Dairy Farm, Inc., Alto, Mich.; Eugene Myatt, Glasgow, Ky., owner of Kentucky Heifer Growers, and Sean Quinn, owner of Sunset View Farm, LLC in Schaghticoke, N.Y.

Begin with questions

This doesn’t have to be an intimidating process filled with legalese. Instead, it’s an exercise in asking lots of questions — of your operation, as well as of your business partner in this heifer-raising endeavor. In addition to setting a contract start date and renewal date, you should cover these seven critical areas as you develop the terms of your contract:

1. Death, injuries and poor-doers

Define the difference between death or injury via natural incidence vs. death or injury due to neglect. Set an acceptable rate of natural incidence for these events. Then determine how the dairy will be compensated for injuries or death in cases of neglect. This is also a good time to discuss and set agreed-upon penalties for losses above the previously defined acceptable rates of death and injury. Set reporting requirements for these parameters, as well as when (or if) necropsies will be required in the case of animal death. And, define culling criteria, as well as the economic considerations and compensations of the cull.

2. Vaccination and testing requirements

Make sure source-farm vaccination protocols match expectations of the heifer-raising operation. Define calf-testing requirements prior to admission to the heifer-raising facility; for example, whether blood serum tests are required and acceptable levels, and who will fund the testing. Also set animal pick-up protocols. Determine whether tests for bovine viral diarrhea (BVD) and Johne’s disease are required and who will pay for them. Also set parameters for vaccination protocols for growing animals.

3. Breeding program

Set forth who selects AI service sires and who pays for the semen. Determine from where semen is purchased and whether sexed semen will be used. Decide how many times heifers will be bred, goals for conception rates and how non-breeders will be handled (include reproductive culling criteria in this step, too.). Set parameters for use of natural-service sires.

4. Animal health

Determine what (if any) part of animal health is included in the base fee, then spell out who pays for veterinary services, for example in the case of dehorning, hernia surgery, extra teat removal and so on. Also decide who is responsible for treatment cost for other health concerns. Don’t forget to factor in how to handle heifers with udder damage. This may also be a good place to define animal performance expectations and any ration requirements.

5. Payment terms

Define the fee structure. Is it a charge per head per day or another formula? Spell it out. Determine whether premiums will be paid for heifers calving between 22 and 24 months of age and what those premiums will be. Insert payment parameters regarding feed cost changes. That is, who will absorb the cost if feed prices take a significant hike? Include a price-increase schedule, as well as how you will handle unforeseen operational cost concerns. Also, define how payments will be made, like via wire transfer, and what happens if payment is not received on time. Include interstate commerce concerns. For instance, does the state in which the heifer-raiser resides require that a vendor lien be in place that establishes that the heifer-raiser must be paid before any animals can leave the operation?

6. Communication and site visits

Spell out how often dairy managers or owners will visit the heifer-raising site; it should be at least quarterly. Monthly would be better. Also include how often the heifer-raiser is expected to contact the dairy. Define recordkeeping requirements and which herd management software will be used. Set up a plan for heifer-raisers to provide feedback to dairy owners about any issues that may arise and vice-versa.

7. Contract cancellation

Nothing lasts forever, so determine ahead of time the procedures to be followed if either party wants to terminate the relationship. Is written notice required? Set the length of termination notice required. List any penalties for early termination. Determine how animals will be returned to the dairy and whose responsibility it is to return the animals.

Lastly, periodically take time to review the document and refresh your memory as to your responsibilities and those of your partner in this arrangement.

Library corner

Here are a few additional information sources to help you devise a fair heifer-raising contract.

•   University of Minnesota resources

•   Dairy Heifer Contracting Fundamentals

•   National Animal Health Monitoring System Dairy 2007 study