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