Feb/March 1998
Looking to Grow a Specialty Crop? Be Sure to Contract
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Prairie Grains is the
official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain
Growers Association,
South Dakota Wheat,
Inc., and the
Minnesota Barley
Growers Association.
"There are no heroes out there. The idea is to compliment small grains not only to diversify, but to improve the productivity of your small grains in rotation," says Joe Bloms, manager of Continental Grain in Ray, N.D.
Bloms is a buyer of small grains and specialty crops. He sees more durum in nontraditional growing areas this year, perhaps less mustard acres. Pea acreage should remain close to last year. With lentils reaching a 10-year market low this winter, the acreage of that crop may be kept in check.
"But we think that market has bottomed and anticipate spring contracts will be close to $10.50 a hundredweight," says Bloms. The contract price of green peas will hover around $4.20, and feed peas, in the $3.25 range. Bloms says his contract period usually starts in January and typically runs into spring.
A contract isn't necessarily needed to produce a specialty crop, but it's recommended.
"If you grow a specialty crop this year, make sure you lock up a contract," says Steve Edwardson, research and development director for Minn-Dak Growers Ltd. Minn-Dak contracts and processes specialty crops, with offices in Grand Forks and Dickinson, N.D.
Like Bloms, Edwardson doesn't see any one particular crop standing above the rest for production and market potential this year. "There's interest in buckwheat and mustard; in western N.D. there's an interest in millet and corn for grain. Some no-till farms out west are pulling off 70 to 90-bushel corn yields, and they're selling it for grain. In the Valley, there's an interest in everything but wheat - which is a bit worrisome. I wouldn't want to see guys pulling away from wheat completely."
Make sure you have a contract if you're growing field peas, he says, and consider a contract also for millet - for the bird-feed market, markets can be limited.
There are things to consider before welcoming a specialty crop into your operation: regional adaptation, markets, production practices, and profitability. How are other local producers making out with a particular specialty crop? Is the market open, or could it become flooded by overproduction? Will the production practices necessary to raise the crop fit into your current operation smoothly? Do you have the necessary equipment, or can you get it easily?
Specialty crop marketing
Marketing is a key factor. Markets are smaller and require building direct relationships with processors and buyers. Production risk can be greater, prices more volatile, and transportation costs higher.
Specialty crops can be marketed two ways: through a contract price and the spot market. Most contracts are "partial production contracts," meaning they have set a predetermined price on a predetermined amount of production. For example, a contract for buckwheat may only specify a $12.00/cwt price on the first 600 lbs/acre. This serves as a hedge on part of your production. However, excess production is typically subject to the spot cash price at time of delivery.
In order to market your crop, and be sure you're getting a fair shake, make certain that these elements are in your specialty crop contract:
- Names of buyer and seller.
- Acres and/or pounds to be produced.
- Acres and/or pounds to be purchased.
- When payment will be received.
- Price.
- Any discounts and/or premiums.
- Where crop is to be delivered.
- An "Act of God" clause. This is a standard provision stating that a grower is released from his responsibilities if a situation develops that is out of his control, such as weather or labor problems.n