Some landowners prefer to provide all livestock and land, but do not pay other expenses. Their contributions would consist of livestock, pastures, hay and barge pastures, and corralundons. Table 1, example 2, shows that these costs amount to about 40% of the total, so that the calf`s income would be divided at 40 per cent between the owner and 60 per cent between the operator. Breeding herds should be treated as capital investments, as should land, machinery or buildings. The ownership documents of each animal must be carefully kept for tax documents. Proceeds from the sale of slaughter cows, bulls and dyers should go to livestock owners, regardless of how calves are shared. Similarly, the herd owner should provide replacement bulls and dyeing. These can be acquired from the outside or from the herd owner`s share in the calf harvest. In joint agreements, the question also arises as to how to distribute income.
The basic principle is that calves or income from the sale of calves are distributed in the same proportion as the total cost of production. Non-solvency contribution costs, such as unpaid work and grazing, should be taken into account with the out-of-pocket costs. In addition to work, management fees should be included to reflect both day-to-day and long-term decision-making. A basic rule of 10 per cent of all other costs is often used to assess the administrative contribution. Another alternative is that an investor only supplies livestock, which represents about 14% of the total cost (Table 2, example 3). On the other hand, someone who provides only work for herd maintenance would earn about 20 to 25 per cent of the turnover or the calf harvest (Table 2, example 4). An agreement on the leasing or sharing of cattle allows the two trading partners to share the costs of production and hence the income of cow herds. The good thing about a stock market rental is that production costs can be distributed in several different ways as long as the calf harvest is divided into the same ratio as the costs. Entry into the livestock sector can be difficult for livestock producers, as investments are needed in advance. You probably cannot borrow enough money to buy everything that is needed for an operation, because the four-legged stool of beef production includes cattle, food, equipment and work. Often, work is the most important thing that producers can put on the table.
This work can be very valuable for a cattle owner who is looking for help with the operation or if he wants to leave the cattle store in the years to come. Some of the ways in which this transition can take place are with cow shares or leases. It takes the right owner and operator to operate an agreement on the proportion of cows, and there are no two agreements that are exactly the same because of different contributions from each party. The key to keeping in mind in the contract agreement is that because of market conditions, they are not always profitable for either party. But you won`t know until you put the pencil on paper. I argue that a fair lease for cattle cows is a contract in which the two partners share the harvest of calves from the cattle herd in the same proportion as they share the costs of production. Now, let`s decide how the production costs are distributed. A model cow calf lease is available from the North Central Farm Management Committee as follows: www.aglease101.org/Doclib/docs/NCFMEC-06.pdf.
Many other combinations are possible and can be evaluated by simply adding up the estimated cost of each party`s contribution and converting it into a percentage of the total. Typical budget costs as included in the Ag Decision Maker Information File B1-21 Livestock Enterprise Budgets can be used to formulate a new agreement.