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Onion contracting can be good sales strategy, Owyhee Produce says

As the 2014 Idaho-Eastern Oregon onion shipping season draws closer and the industry looks forward to volume and excellent quality out of the Treasure Valley, some sellers and buyers have already planned for consistent availability by contracting supplies ahead of time.

According to Shay Myers, general manager of Owyhee Produce in Nyssa, OR, the best time to contract is in early spring, before planting begins in March. Veteran onion buyer John Vlahandreas of Wada Farms Marketing in Idaho Falls, ID, agreed with Myers, noting, “Contracts should be set up a month before the start of planting.”shay-myersShay Myers, general manager at Owyhee Produce in Nyssa, OR, talks with his grandfather and company founder, Owen Froerer. (Photo courtesy of Blake Branen Photography)

Myers, who blogs at his company's website, owyheeproduce.com, said that planning ahead allows the grower to focus on the customer's specific onion needs.

“There are many ways to grow an onion,” Myers said. “You can focus on size, single centers, storability, sweetness, pungency, duration of season or any other variable. If I know what to grow and how to grow it, I can assure the best results for my customers. That is why buying from a true grower-shipper-marketer is so important.”

Vlahandreas added that knowing the end user of the onions — retail consumer or foodservice preparation — is an important component to contracting as well.

“Know what your customers' needs are and what they are doing with their onions. Some may need onions more suitable to food service and others to the retail market. Knowing when to switch from old crop to new crop is also key. Contracting without the outbound business there is a gamble, but if you have committed customers, you should contract year-round,” Vlahandreas said.

Foodservice and processors with consistent outbound pricing should contract, the men said. And Myers advised that structured retail pricing is best served through contracting.

“Worst-case scenario you should be at least 50 percent contracted,” he said. “This will help hold you average and protect you in volatile markets both low and high.”

One question Myers and Vlahandreas have been asked is with whom a buyer should contract. Myers said the grower-shipper provides more control than a custom packer that brings in onions from multiple growers, and Vlahandreas said the buyer should work with the “ person you are the most comfortable with.”

Both men agree that onion contracts can be more important than other farm commodities, with Vlahandreas saying, “Onions are used in large volume across the country [and they] have a tendency to go up and stay up unlike leafy items that go up and stay of for shorter amounts of time.”

Myers said conventional wisdom might indicate that following a year with high prices is not the best time to contract “as farmers like to 'chase money,' but with onions that isn’t always a wise move.”

He continued, “Like other commodities, the down swing on onions may be 20 percent when compared to the open market, but the upswing can very different from many other commodities. Instead of seeing just 20-40 percent on the upswing of the market as is generally the case with ag commodities, it is not uncommon to see increase of 200 percent or more when it comes to onions. In other words if you don’t have a contract, it doesn’t take long to wish that you did.”