Livestock contracting is when a farmer is paid to produce livestock or to fatten livestock and in return receives consideration for providing facility and management. There also are livestock contracts where a farmer agrees to sell his livestock to a processor for a guaranteed consideration. For bankers and their customers, these types of contracting have several benefits, especially for a beginning farmer and for a farmer bequeathing the main enterprise to a daughter or son. Additionally, it generates good retirement income for older bank customers. However, some potential drawbacks are associated with livestock contracting, including: 1. The contract is only as good as the contractor. 2. Most contracts are open ended for the contractor. 3. The contractor might deliver livestock with health problems.
