Dairy farmers caught up in the collapse of Dairy Farmers of Britain who are still struggling to find an alternative buyer should consider cow leasing, according to Promar regional consultant Jonathan Hill.
The concept is very simple and has been used by other dairy farmers to help those who wish to expand production do so quickly, and those who wish to take a break from milking to still derive an income from their cows.
“In cow leasing agreements, one farmer agrees to lease his cows to another farmer for a set annual fee,” Mr Hill explains. “The lessee has the immediate benefit of increased milk sales, with all the costs of acquiring extra animals being covered from the milk cheque as opposed to an upfront capital outlay.
“The lessor retains ownership of the cows, receives an annual leasing fee and also receives the cull and calf income from his cows.”
Mr Hill says that, typically, there has been more interest in leasing cows in than there has in leasing cows out.
But that could change, he suggests, with more calls coming in from DFoB producers who have not been able to secure a contact with a new buyer, either because they are in the wrong location or because their volumes are too small.
“By leasing out, they can still retain ownership of the cows and come back into milk production once they have a new contract,” says Mr Hill. “That way, they have not been forced to sell cows in a market which has recently fallen in value, and they have not burnt their bridges as milk producers,”
As with any agreement, a formal contract needs to be drawn up and it is not unusual to involve the vets, he adds. “Both parties need to be confident that the health status of their animals will not be compromised by a leasing scheme.”
The leasing fee is usually based on a herd replacement cost with rates of £250 per cow per year being typical. But Mr Hill says it is possible to set up cow leasing schemes for shorter periods – three or six months for example – if that suits either party better.
Under the contact, the lessee covers all the costs of keeping the cow, except semen costs, and keeps all milk income. The lessor is responsible for providing a replacement should one of the leased cows have to be culled.