Is contract grower the landlord of the agri sector?

"It's always something. One year there are too many potatoes and onions and the following year there are too few. The weather is also increasingly difficult to predict. Have I committed a lot or little via contract? It's not easy, but well then I should have chosen a different profession."

I recently sat at the table with a farmer in his mid-40s. He (and his colleagues with him) has had a lot of worries for the past 2 months. He worries about getting the work done and about what it will cost extra. Then there is the key question: how will this all end financially?

Various sales contracts
He grows a large part of his products for a number of regular customers, through various sales contracts. It is a system with which he is (on average) satisfied and can continue to farm. I understand and understand his situation, but I do ask some provocative questions: "What are the arguments for your sales structure, and what does this mean for your entrepreneurship?"

I take it even further: "I learned from my father that what you don't have, you can't sell it. Contracts are concluded in the winter, as hedging risks, but it is rather speculation. Or am I wrong? Before you know it, you're a customer's field employee, including your land, labor and capital."

The farmer nods, but not heartily. The temperature of our conversation (just like the temperature outside) is rising considerably. We philosophize about how the market works and what the possibilities are to deal with it as wisely as possible now and in the future.

For problems resulting from exceptional circumstances, the various interest representatives managed to convince the minister that help is necessary. The proposed support measures will ease the pain and make it more bearable, but we agree that it is a kind of horse remedy that you really don't want to need.

The long term
We continue to talk about the long term. A 'normal' market is determined by supply and demand. If there is little product, the price rises, and if there is a lot of product, the price falls. The latter was confirmed again with the 2017 harvest. As it stands at the moment, the 2018 harvest seems to be lower than average. He therefore believes that higher prices are necessary. "What does that take?" I ask. 

He has an answer to that question: "Free market forces. However, that has been disappointing so far. Which is also good: contracts that are better for us as growers. The buyers have their affairs in order, but some of the farmers not. The growers cannot do without the buyers, but the same applies the other way around. That will not change." Mutual dependence, that's nice. While talking, he is first relieved and then disappointed.

"However, we're not going to act like a landlord," he says. "They rent the building, tap beer and do this at prices and conditions imposed by the brewery. They are supposedly hard-working entrepreneurs, but in reality they have little say and they are employees of the brewery. Often with bad contracts, too. nothing more and nothing less."

Complex problem
"Wait a minute," I say in response to him. "I recently read somewhere: you enter into contracts with your full mind and I think that's right. A farmer who has his problem solved by the buyer should realize beforehand that he is becoming more dependent on the same buyer. complex and there may also be a simpler solution. Grow less for which you can and dare to bear the risk."

"That's burping backwards. Or am I not getting it anymore?", he hisses. I respond: "You bring it up, but at the same time prefer to continue with (somewhat modified) contracts than to look at how you can actually improve your own position? Fine, but haven't you been promoted to a bartender of the agri sector after all? " It is now very hot, we first drink a beer and talk another time. The last has not yet been said about this.

Peter Pals

Peter Pals is an entrepreneur at Farmers Funding & Advies and grew up on a farm. From his farming heart, he has decided to build up a business for business, financial and tax advice for agricultural entrepreneurs.