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Lock in sales with a special contract

Looking for a way to differentiate your crop from the rest of the pack?

Are you looking for ways to change your marketing situation? Differentiate your product from everything else at the elevator?

Signing special contracts with specific companies is one way to do this. Avena Food pays its contact holders premium prices for gluten-free oats. Warburtons, a U.K. bread company, pays premiums for specialty wheat grown by contract holding farmers.

You may have a neighbour growing Nexera canola. Nexera canola is a canola hybrid that came out of Dow Agricultural Sciences in the mid-1990s. It produces a unique end product, an Omega 9 oil that has a “higher oil stability” and therefore a “longer frying life,” says Mark Woloshyn, Nexera canola brand manager for Dow Agrosciences Canada. It’s a healthier oil than the hydrogenated oils that came before (these oils created trans fats, which are now banned in the U.S. and are likely on the way out in Canada too). Companies like A&W, Frito-Lay and others in the fast food and packaged product industries are the end buyers of the oil that comes from Nexera canola, says Woloshyn.

Nexera canola is an example of a special contract — the canola you’ll grow for Nexera is different than other varieties, and you need to sign a contract before you put it in the ground. Nexera has an established value chain and it’s a closed system — they produce only as much canola as end-use customers need, and Dow Agrosciences works with the whole value chain. In other words, they have customers lined up for the product before the growing season starts and they grow enough canola to meet those sales.

Nexera canola is not grown “on spec.” Dow works with contractors who “are in dialogue with the end-use customers and will negotiate oil agreements for the Omega 9 oil: time, place, delivery, price, and terms,” says Woloshyn.

Once the contractors know what the end-use customers want, they’ll go into Western Canada and will start contracting with growers,” says Woloshyn. “Growers will then sign a production contract to grow the Nexera canola for any of the contractors.”

For every specialty crop, there is a special process to becoming a contract grower. Avena takes applications from potential oat growers. To discuss Nexera contract options, farmers need to contact Dow AgroSciences or seed distributors. Contracting for the 2017 crop began on August 23, but there may still be room for more contract growers.

Taking the time

Unlike some special contracts, Nexera canola contracts don’t require farmers to do anything particularly special. Farmers have to be willing to “follow high standard agronomic practices like you would for growing elite hybrids: we want growers to seed early into good growing conditions, we encourage fungicide use, we want top growers that perform well. We have a stake here we need that oil for the end-use customer,” says Woloshyn.

The main on-farm complications are storing the Nexera canola the grain separately from other canola, and sometimes, waiting longer than usual for a delivery opportunity.

If you don’t want to be tied to a particular contract or if you already have a relationship with a grain marketer, specialty contracts like Nexera won’t be for you. But there are obviously some important pros to consider. Profitability is the big one. “We want to be the most profitable canola on the grower’s farm,” Woloshyn says. Nexera canola does sell for a premium price because it is going to a specialty market.

In some cases, crop insurance contracts will insure special crops at the higher contracted rate.

Jordan Kambeitz of Kambeitz Farms near Regina has been growing Nexera for about five years now. He was initially attracted to Nexera, he says, because of the inroads they’ve been making with their healthier oil. Beyond that, he says, “it is competitively priced for seed cost, understanding that in ideal growing conditions it might give up a little bit of yield compared with some of the other competitive hybrids that we grow, but the premium associated with it generally takes care of that. We’ve been left with similar margins when having to deal with less product to store and move. I wouldn’t be growing it if it wasn’t profitable.”

Some advice to other farmers, Kambeitz says, is consider what you’ll be planning to grow in future rotations beyond Nexera. For example, the Nexera’s Clearfield system (which Kambeitz is using now) may not work if you plan to grow peas or lentils next year because the chemical profile of the Clearfield doesn’t work well rotationally with those crops.

Find more information on Nexera’s website: nexeracanola.ca.

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