Last week the VT Food Venture Center hosted a panel discussion on contract growing. The focus of the event was to discuss the opportunities for vegetable producers entering into contracts with food processors. Contract growing is not the high margin, niche product, direct-to-consumer business model that often becomes associated with VT “local food”. This event reflects the “scaling up” of local food. Robust food systems need lower cost/higher volume producers to provide the produce and the food manufacturers to convert it to the final form that the market place demands. So, is contract growing right for you?
Here is short list of considerations for contract growing. At the bottom we have posted a nice legal overview of contract agriculture.
High Volume Delivery: Processors get more efficient when they can run their lines longer. A full day of product is better than 2/3 a day. Several hundred to 1/2 Ton deliveries will be the norm.
Product Specification: Processors have clear specifications for each crop and contracts will reflect that. Expect to get paid a better price when you hit or exceed spec’s. Expect to be paid less if you can’t hit the specs. Do you have the skills to produce to these spec’s? Do you have the technology or the labor to grade out your produce according to specifications?
Mechanization in the Field: Higher volume contracts fit well with farms looking to invest in specialized equipment to grow the crops with the necessary mechanization.
Streamlined Market Communications: Working with a small number of buyers is expected to require far less communication and marketing materials compared to a business that manages relationships with dozens of buyers (or hundreds of subscription members).
Legal and Risk Planning: Contracts might require legal review. Farm owners will need to explore insurance and contingency plans to deal with the consequences of losing a crop, not hitting specs or not fulfilling the full contract.
For more information on the Legal Considerations of contract growing, click on this link to
Minnesota Extension: Ag Production Contracts
New machinery custom rates for 2013 have been published by Pennsylvania’s National Agriculture Statistics Service. Their report provides average rates for many categories within primary tillage, planting, haymaking, silage making, hauling, spraying/fertilizer/manure, tractor rental and other.
Rates have gone up for numerous activities. If you plan to hire someone for custom activities you can expect to be charged higher rates. If you are providing custom services, be sure to evaluate your own expenses so that you can adjust your own rates to the proper amount.
Here is the link to the 2013 PA Machinery Custom Rates:
What is wrong with this picture? This is a bunch of kale for sale last week at a supermarket. I have a serious problem with the “merchandising” of this product. I have a problem as a consumer and as a farm business specialist. I’ll give you a hint, think of the 5 P’s of Marketing. Did you get it? Narrow it down to two P’s….product and price. Trick question right, I did not tell you the price of this product. Stick with me for 2 paragraphs and I give you the answer.
For this case, the definition of merchandising is the act of promoting products for sale in a retail setting . This is the retailer’s grand chance to do what retailers do…present a product to the customer to make them want to buy it. How is your merchandising? Are you doing a good job getting customers excited to buy your products and then creating a good atmosphere for them to make the final purchase? Remember the 5 P’s of marketing: Product, Price, People, Place and Promotion. Place is covered, I’m already in the store. People: the produce lady smiled at me when I started taking pics of her kale. Promotion: the store sends out flyers and sales updates. Product: Getting warmer….take a close look at this product. Does anyone notice the top of the kale stalk still attached here, about 4 inches worth. I’ve sold kale before, usually we bunch the leaves. On occasion you’ll see a top cut but here is my problem, Price. They priced this product by the pound. So I am paying for the weight of that 4 inches of kale stalk. I would have preferred to see this product priced by the each, so the consumers that got 5 inches of stalk vs. 3 inches of stalk still got the same value in usable kale.
Call me picky or thrifty, but remember… The customer is always right!
The Vermont Small Business Development Center (SBDC) has launched the VT Digital Economy Project. This project can support small business, farms included!, with a variety of business training, advisement and potential grant funds to support the following items:
online presence, websites, social media, cloud computing, market analysis and potential funding to support specific projects where outside consultants are needed.
This is a great opportunity for VT farms that seek to use the internet to market products and communicate with customers. For more information, click in this public flyer from VT SBDC SBDC Launches Digital Economy Project
Everyone loves the idea of a better accounting system but we often get stuck on what system to invest time, money and training into. As Farm Viability financial analysts we see farms using all sorts of systems. From shoe boxes and notebooks right through to customized commercial software programs there are many different was to record finances and produce meaningful reports to guide your management decisions.
It is common for people to adapt their Quicken home finance program into a farm accounting system when the farm first develops. With a couple years, the business grows and the farm is not sure if they have also grown out of that initial accounting system. Is it time to purchase Quick Books or one of the other software programs out there? The answer will depend on many things: do you have employees, do you invoice you buyers, do you seek to calculate payroll withholdings, do you seek to track enterprises (maple vs beef) separately?
Here is a link to a series of recorded videos from Oklahoma State Extension that explain Quicken vs. Quick Books. Take some time to learn about what these programs can offer you and decide which system will give you the information you need to make the best decisions on your farm.
We have launched this Blog to share current news, events and resources from our statewide farm business planning team. Watch for new posts and check out the RESOURCE LIBRARY to download useful farm business and financial planning resources.