Custom Feeding - Make Sure It's In Writing

Agreement Considerations

A written agreement should be utilized for the protection of both the livestock owner and the custom feeder. The main benefit of an agreement is to identify the responsibilities of the owner and custom feeder.

Agreements should specify performance guidelines, marketing and fee & payment arrangements. Any written agreement should be done in duplicate, dated and signed by both parties.

Types of Agreements

An agreement is a way to document the different expectations that owners and feeders might have. There are several types of agreements that can be drawn up.

1. Gain-based agreements. Under this arrangement, the owner would pay the feeder per pound or kilogram of weight gained by the animals. Gain is established by measuring the difference in weight at the beginning and ending of the feeding period. Assessing shrink is critical for this type of agreement.
   
2. Feed plus yardage agreement. Under this type of contract, the owner would pay for feed, plus a pre-set yardage fee to cover labour, overhead and operating costs of the feeder. This type of agreement may be used for cattle being fed to market or cattle being maintained for a period of time i.e. wintering cows.
   
3. Set fee contract agreement. The title to the animals remains with the owner and the custom feeder is hired to provide the labour, feed, housing and other items for a specified period for a specified price.
   
4. Daily charge per head per day. This type of agreement is common. It has the advantage of allowing monthly billing for cash flow planning of both parties.

Once the type of agreement is decided upon, the following potential items should be considered:

• Payment - There are probably as many different kinds of payment plans as there are people in business; make sure it is clear!
  
• Performance Standards - Spell out the expectations for age, weight, body condition and other standards.
  
• Health - The feeder should provide the owner with details about the health care plan. Details about vaccination programs, castration, dehorning, breeding (if applicable), and treatment should be included. Transportation issues should be clearly understood.
  
• Death Loss - There will always be some death losses no matter who is raising the animals. Some agreements assess a per cent loss to the owner and the feeder accepts responsibility for losses above the agreed level. In some agreements in the event of the death of an animal, the owner absorbs the loss of animal and the feeder absorbs his costs.
  
• Nutrition - The feeder should have predetermined rations to meet the performance expectations. The feeder and owner need to agree about what to do with non-performing animals.
  
• Insurance - Both parties need to determine whose insurance company will cover losses due to a catastrophe i.e. fire, theft & lightning. Include a legal description of where the animals will be kept during the feeding period (township, lot, concession, and civic number) for insurance records.
  
• Goods and Services Tax – The cost of feed supplied is zero-rated, but yardage, veterinary supplies and services are subject to GST.
  
• Security- Custom feeders should consider registering their claim under the Personal Property Security Act.

Additional responsibilities for each party to consider are: trucking costs to and from the feedlot, manure ownership and removal, I.D. tags, who calls veterinarian in the case of an emergency, who pays vet expenses, gain lost in the event of death.

Make sure there are no misunderstandings. Put it in writing.

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