The Local Grain Network
Direct-to-farm contracts focus on sharing risk
When you step outside the commodity system and work directly with farmers, contracting contracting for grain can be a different animal.
In the current commodity grain system, farmers generally shoulder all of the risk in growing grain for maltsters, brewers and distillers. If the grain comes off the field out-of-spec, it may only be good for animal feed.
A few approaches exist that distillers have used in working directly with their farmers; these methods could just as easily be used by brewers or distillers.
At Tattersall Distilling in Minneapolis, co-founder John Kreidler said they primarily work with one farmer, who delivers 20,000 pounds of grain a week for them. The scale helped make it worthwhile for their farmer to build a milling facility on the farm and batch their grain for delivery.
Working locally was a sea change for Tattersall, Kreidler said, a “massive” difference (though they still source most of their malt from Brewers Supply Group or Briess Malting).
“When we switched over, going direct-to-farm versus buying from BSG, you’re paying half the price, if that,” he said. “That was the shocking part. We were paying 60 cents a pound, and we’re down to a quarter a pound.”
He calls their method of pricing and selecting varieties it “a gentlemanly relationship,” without a formal structure.
“We just tell him what we want and he plants it. We don’t set pricing until afterwards,” Kreidler said. “Right now, the market for rye has shot up in the last six months, and so he’s like, ‘Hey, i gotta bump it up to make this work. Yields are down.’”
Since the farmer has “built this part of his business around us,” and Tattersall is focused on the “much more interesting story” of pulling all their grain from one farm, it’s a healthy sort of co-dependence that makes both businesses work.
“Both sides are so dependent upon the other side that we just take care of each other,” Kreidler said.
For Copperworks Distilling in Seattle, a guaranteed price per acre forms the foundation of their relationship with farmers. Because they might be contracting for unique varieties, co-founder/President Jason Parker said the distillery has to share in the risk that they’re asking farmers to expose themselves to. They’re taking on greater risk, and receiving a premium for it.
“They still need to grow malting-quality grain, and they’re not going to do it if it’s all on spec,” he said. “If they’re getting paid a higher price per pound than feed barley, then they’re going to be willing to take that risk. Then you can ask them, ‘Let’s grow this variety, not an AMBA-approved variety.’ They’re going to take a risk, but they know they’re going to be paid well enough to deal with that risk.”
In a worst-case scenario, everything has to be tilled under. So they have to ask the question: What is the minimum amount the farmer has outlayed, so that they’re not losing money?
“If you’re going to take a risk with them, and convince them to do something that they would say, ‘I could grow alfalfa on here and make this amount of money, or I could grow hay, or I could grow a feed-grade quality and be assured of making this amount of money,’ that should be your baseline,” Parker said.
He said they deal with variability by using a base price for a certain yield, plus a variable for additional grain above that threshold.
“You want to be really conservative together, maybe say we’re only going to get 40 bushels per acre. ‘What if we got 50?’ We’ll pay you extra,” he said. However, the extra rate only goes up to another threshold, then the price actually tapers back down. “If there’s a bumper crop, the distillery also wants to share in the success,” Parker said. “Once the farmer has done very well, it’s time to pass some of those rewards back to the distillery.”
At Westland Distillery, also in Seattle, Master Distiller Matt Hoffman also uses contracts to share risk with the farmers they work with to grow some more adventurous grain choices. Like Parker, he talks about sharing risk with the farmer.
“When we want a farmer to grow a variety that they know is going to yield 30 percent less than what a commodity variety yields, they’re not going to take that hit for us,” he said. “We’re going to pay them a premium for it, and probably some extra on top of that, because it’s not safe for them, either.”
For Hoffman, though, connecting personally is the crux of sourcing locally.
“Having relationships is super important,” he said. “Theoretically, the farmer can have a relationship with the maltster, and the maltster can have a relationship with the distiller. If those two things are separated, as a farmer and as a distiller, you don’t really know fully what is possible.”
He said for those without an existing relationship with their farmer, a guaranteed price-per-acre is a good place to start building that relationship.
“It’s a two way street, and the way that the agricultural system has developed in the past 50 years, it puts all of the the risk on the backs of the farmers. that’s not right,” Hoffman said. “You have to be able to take on some of that if you’re going to get somebody on board. they’re not going to do something for you just because you ask them nicely.”
For Westland, some of the cost goes above and beyond what others experience because of their predilection for unique malts, such as Obsidian and other black, hulless barleys.
“The darker ones are the hardest to get into production,” he said. “When we started this project, I had no idea there was such a thing as dark barley, just like people are learning that corn isn’t just yellow.”
He said he tasted it when Skagit Valley Malting did SMASH (single malt and single hop) beers to showcase some of the more unique varietals, and “the results were extraordinary.”
“You could tell the difference in beers. It would taste like pilsner, some with tropical fruit, others earthy,” he said. With Obsidian, “it was like drinking plum wine. It was this totally different universe of flavors. It’s hard to describe … tomato bisque, these dark plum jam (notes), a huge array of savory and sweet and fruity (flavors) all at the same time.”
To grow something like that, with a higher probability of crop issues and the expectation of yield, farmers need to know that they’re going to be left holding the bag if something goes wrong.
“These farmers in the Skagit Valley get paid double or triple what the commodity barley price is. That’s a function of the cost of their land and the cost of growing these specialty varietals that they can only do every two or three years,” Hoffman said.
He added that it’s “a risk for the distillery, also.”
“When I describe something as tasting like tomato bisque, you know, what does that mean (in the aged spirit)? We’re apparently on the extreme end. not everyone is up for that.”