Little by little, custom feeding arrangements secured by a handshake are going the way of the four-row planter. As contract growers and livestock owners become more sophisticated the handshake is being replaced by the “Livestock Production Contract”. Approximately a week ago, I came across this Livestock Production Contract Checklist produced by the Iowa Department of Justice.
The checklist provides 6 important issues a producer should understand and questions a producer should ask before entering the contract. For example:
– Consult Experts: Do you understand all of the contract provisions? If not, consult somebody who does, such as an attorney, lender, tax consultant, Extension Service, insurance agent, or agricultural consultant.
– Facility Obligations : Do you know who is responsible for any required facility construction, including covering costs, and obtaining permits? Do you know who is permitted access to the facility?
– Operational Requirements: Do you understand your responsibilities for delivering, feeding and maintaining the health of the livestock? Who is responsible for managing manure, labor, and record keeping? Are you responsible for insuring the livestock?
– Payment for Services: What are the terms and schedules for payment of services and how do those terms affect your production costs? Do you know how to protect your payments through liens on the livestock?
– Legal Provisions: How is the contract renewed or terminated? Can the parties assign the contract and how are disputes resolved under the contract?
– Long Term Planning: How does the contract affect the long term planning of your operation and relationships with your neighbors?
As emphasized by the Iowa Department of Justice, the checklist is not a comprehensive list of all issues which producers face when entering a production contract. However, understanding the issues posed by the checklist may protect producers from entering an unfair production contract.