Getting Buyers Before You Plant: A Practical Guide to Securing Off-Takers
Farming can be a demanding business, with long days and months of hard work invested before knowing whether the effort will be profitable.
You battle the unexpected changes in weather, the rising cost of fertilizer, and the occasional pest invasion. Growing the crops is tough, but making money from them can be even tougher.
It is extremely discouraging and painful to work hard, produce a large amount of high-quality produce, and then struggle or fail to sell them at the market.
If you’re tired of the “Plant and Pray” method, then consider this powerful strategy – The Off-Taker Agreement – which guarantees that you sell your farm produce without hassle.
What is The Off-Taker Agreement?
The Off-Takers Agreement is a handshake deal backed by a contract. It is an arrangement where a buyer (the “off-taker”) commits to buying a specific portion of your future harvest before you even put a seed in the ground.
Think of it as a pre-order for your farm. While this has been the standard in the oil and gas industry for decades, it is currently revolutionizing agriculture for small to mid-sized commercial farmers.
Why do Off-Taker Agreements matter?
In the 21st century, uncertainty comes at a real cost. When you are unsure you can sell your maize, you hesitate to invest in high quality seeds. When tomato prices are uncertain, you delay critical irrigation repairs. Off-taker agreements remove the doubt and replace “what if” with “when.”
Most farmers need a seasonal injection of cash to get things moving. But if you walk into a bank and say, “I’m planting onions and I hope people buy them,” the loan officer is going to show you the door.
However, if you walk in with a signed contract from a major supermarket chain or a food processing plant promising to buy 20 tons of onions at a set price, you are not just a farmer anymore, you’re a contracted supplier.
The Off-Taker Agreement acts as collateral. It proves you have a guaranteed cash flow. This makes you competent in the eyes of lenders, opening doors to lower interest rates and better credit facilities.
The Three Pillars of a Rock-Solid Off-Taker Agreement
1. The Quantity/Quality Balance
For quality of yield, a buyer doesn’t just want “corn.” They may want Grade-A yellow maize with a moisture content below 13%.
Also, don’t commit to supplying 100% of your expected harvest. If a drought hits and you only produce 70%, you could be in breach of contract. Aim to commit 60-70% of your projected yield to the off-taker.
This approach gives you a solid safety net, while leaving the remaining 30 percent free to sell on the open market if prices rise sharply.
2. The Pricing Formula
When it comes to pricing, many farmers start to feel unsure. Do you lock in a fixed price or keep some flexibility?
A fixed price can be a safe option if the market drops, but it can be frustrating when prices rise and you are stuck earning less than the going rate.
That is why many see the floor price plus market option as the gold standard. This is where you agree on a minimum price that covers your costs and includes a modest profit. Then, if market prices are higher at harvest, you benefit from a share of that increase. It offers protection on the downside while keeping the upside within reach.
3. The “Force Majeure” Clause
Force Majeure is the inability to fulfil your obligations due to events beyond your control. If a once-in-a-century flood wipes out your field, you should not be held liable for not delivering. Ensure your contract has a clear out for events beyond your control.
How to Find an Off-Taker
Step 1: Keep Records of your previous Harvest
Before approaching a buyer, you need your “Farm Resume” ready. Do you have records of your last three harvests? Do you have soil test results? Can you prove you follow sustainable practices? Professional buyers want to see that you run your farm like a business.
Step 2: Join an Association
If you are a small farmer, a big processor might not want to deal with you individually because the logistics are too messy. But if you join a co-operative, you have collective bargaining power. Twenty small farmers acting as one “entity” can secure massive off-takers agreement that none of them could get individually.
Step 3: Targeted Networking
Focus on food processors such as companies that produce juice, flour, or canned goods, as well as exporters. They rely on a steady and reliable supply of produce to keep production running and to fill shipping containers on schedule.
You should also target hotels and supermarkets. For them, consistency and quality matter more than anything else, making them strong long-term partners.
The Hidden Benefits of the Off-Taker Agreement
Many off-takers (especially large ones) will send their own agronomists to your farm. They want you to succeed because they need your harvest! You get free expert consulting on how to improve your yields.
Some off-takers will provide you with seeds and fertilizer upfront, deducting the cost from your final payment. This solves your “liquidity” problem before the season even starts.
When you know exactly what the buyer wants, you don’t grow “waste.” You grow exactly what is needed, reducing the environmental footprint and your labor costs.
The Risks to Watch Out For
The biggest danger in an off-taker agreement is “Side-Selling.” This happens when the harvest comes, the market price is suddenly higher than your contracted price, and you’re tempted to sell your crop to a random guy with a truck for quick cash. Don’t do it. Side-selling ruins your reputation, gets you blacklisted from future contracts, and can lead to lawsuits.
An off-taker agreement is a long-term play. Think about the next ten years, not just the next ten minutes.