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Corn+Soybean Digest

Will your farm fit the identity-preserved profile?

With all that's said and written about value-added crops, you get the idea it's a market that's open to just about anybody willing to sign on the dotted line.

The truth is that, just like the Marines, companies with contracts are looking for a few good men. And the more valuable the crop, the more selective they will be.

"Our company looks at it from the 20-80 rule. Twenty percent of the farmers will be growing 80% of the contract crops," says Kim Kuebler, ExSeed Genetics LLC, Owensboro, KY. "There's no doubt contract crops are the way ag is going."

Farm size isn't a criterion for landing those contracts, according to companies developing value-enhanced crops. "Our data base of high-oil corn growers shows there isn't a clear-cut farm size. It ranges from the small to mega-farmer," says Linda Wyss, Pioneer Hi-Bred's product manager, corn feed traits.

But at grower meetings sponsored by chemical companies, some farmers have been asked if they're willing to sign up for contract crops in 1,000-acre increments. Other companies specifically target growers with 2,000 acres or more.

Large contracts work particularly well for export crops.

"We look for barge-load quantities," says Kuebler. "One barge holds 50,000 bu. If we contract 1,000 acres with a farmer we'd anticipate 150,000 bu of production, or three barge loads. Three barges is the size of a hold in an export ship."

Conversely, the company has contracted as few as 100 acres with farmers, according to Kuebler.

Quality, more than quantity, however, will put you on the list of contract growers, according to Mike Stiefel, vice president of specialty grains at Wilson Genetics LLC, Harlan, IA.

"The better the product that you produce, the more you'll get," says Stiefel. "You better be one of the best at growing, drying and storing a crop. The higher on the value curve that a crop is, the more criteria there will be to grow it."

Where you farm may open or close the door to some contracts, particularly for export crops, according to Wyss. "It's the No. 1 criterion on my list," she says. "If you're not close to the Mississippi River or a railroad that serves the Northwest, transportation costs can reduce the value of the premiums. As the domestic market grows, it will put more sites on the map."

"I think we'll end up going to soil-type-specific value-enhanced crops," says Stiefel. "Some contracts will be geo-specific and regionalized based on growing conditions."

Wyss lists storage capacity as another main criterion for contracts. "You need to match contract fields to bins. Growers who have multiple bins have an edge," she says. "Sometimes several small bins work better than one large one to allow a grower to select multiple contracts or products."

Technology, both in the field and in the office, will be important if you want to grow contract crops. Growers who use computerized field maps and records coupled with precision ag practices will be preferred by companies in the value-added chain. In some cases, the contracts may dictate what machinery you use.

Companies will also expect you to be a regular Internet user. "Contracting will be closely tied to e-commerce," says Stiefel. "Farmers online will be finding marketing opportunities year-round. It's just a natural. I don't know that there's a better means of communication. The better operators are already online."

"The growers we're looking for may spend more than $500 a month on telephone, Internet and other communications in order to network with like-minded growers," says Kuebler. "They want to keep abreast of the latest developments in value-enhanced grains."

Who you know counts. The value-added chain links companies from genetics all the way through to the end user. If you want to be part of that chain, you need to know the rest of the links.

"A farmer needs to become part of one or more networks. It's a center of influence that puts you in the information loop," says Stiefel.

"The high-premium contracts will go to farmers already established in the chain. You need to understand the system and be aware of what's out there," adds Wyss. "It may mean you need to look for a new place to sell grain, work with different seed providers and get to know the end users and what their criteria are. Grower meetings can be a good place to start."

Minden, NE, farmer Dave Grams and his brothers meet most of the criteria the contracting companies look for. They farm several thousand acres, understand and use new technology and marketing programs and are looking for new profit opportunities. They recently bought an older elevator that includes eleven 20,000-bu bins. And they have grown a number of value-enhanced crops.

But these likely candidates for contracts cut back their acres this year. "In the past we've grown a number of value-enhanced corn and soybean crops," says Grams. "But the companies have de-tuned the contracts to the point the risk isn't worth the reward. This year the only specialty crop we're growing is popcorn."

The Grams' situation isn't unique. There's significant turnover among contract growers as the entire industry tries to figure out who ultimately will grow the contract crops.

But there's little doubt that contract crop acres will continue to increase.

"I think 10 years from now you'll see about one-third of the corn contracted as a commodity and another one-third contracted as a super commodity grown for a designated end use much like high-oil corn is today," says Kuebler. "The other one-third of the corn will be contracted as a custom-designed crop that meets the specific needs of a single end user.

"All the corn grown in Australia now is contracted before a seed is ever planted. That doesn't necessarily mean it will happen in the U.S., but I think it will," Kuebler says.

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