Checking Out Production Contracts
Production contracts can provide certain advantages, so more and more farmers are turning to them. For example, production contracts can provide producers with access to additional capital, advanced genetics, new production techniques, and wider marketing opportunities.
But production contracts change the nature of the game for family farmers and independent producers. Under production contracts, farmers ordinarily do not own their crops or livestock. They agree to raise and deliver the crop or livestock under terms established with the contractor, which could be a livestock processor, seed company, or food processor.
Production contracts bring new legal obligations and financial consequences. They change relationships and even how decisions are made on the farm.
Because the stakes are so high, there are many important issues farmers should consider before signing on the dotted line.
The Farm Division of the Attorney General's Office has created production contract "check-lists" for both livestock and grain farmers. Each list contains dozens of points farmers should weigh before they enter into a production contract.
The ten-page livestock production contract check-list challenges farmers to consider issues such as what facilities might be required, who is responsible for delivery, which party makes the decisions on questions of feed and animal health, who is responsible for manure management, and a variety of other issues including record-keeping, insurance, liens, and contract termination.
The grain production contract check-list discusses contract provisions involving grain facilities and equipment, costs of production, yield, growing obligations, payment terms, premiums, condition of crop, amount of production, delivery and payment dates, grain dealer laws, protection of intellectual property, and other legal issues.
The check-lists were developed by the Farm Division and the Attorney General's Task Force on Production Contracts, which included independent producers, ag experts from ISU and Drake, and individuals representing a wide spectrum of farmer organizations and agribusiness.
The check-lists are available at no charge from the Attorney General's Farm Division:
Iowa Attorney General Farm Division
321 East 12th St., Room 018
Des Moines, Iowa 50319