Do you want to start a contract farm and need to write a plan? If YES, here is a sample contract farming business plan template & FREE feasibility report.
There are loads of business opportunities open to investors and interested entrepreneurs in the commercial farming industry and contract farming is one of them. Contract farming is known to be a profitable business and has evolved from small scale to a global industry.
Countries in South America, Eastern and Southern Africa et al are known to be in the forefront when it comes to contract farming.
A Sample Contract Farming Business Plan Template
1. Industry Overview
According to Wikipedia, contract farming involves agricultural production being carried out on the basis of an agreement between the buyer and farm producer. Sometimes it involves the buyer specifying the quality required and the price, with the farmer agreeing to deliver at a future date.
More commonly, however, contracts outline conditions for the production of farm products and for their delivery to the buyer’s premises.
With contract farming, the farmer undertakes to supply agreed quantities of a crop or livestock product, based on the quality standards and delivery requirements of the purchaser. In return, the buyer, usually a company, agrees to buy the product, often at a price that is established in advance.
The company often also agrees to support the farmer through, e.g., supplying inputs, assisting with land preparation, providing production advice and transporting produce to its premises There is no restriction to the activities of contract farmers, they are involved in both organic and non – organic cultivation of fruit, vegetables, grains, other crops or livestock.
The contract farming industry provides a variety of farm produce including beef, fruit, grains, vegetables and poultry. Statistics has it that farming (most especially commercial farming) of which contract farming is a part of employs more than 24 million American workers (which is roughly 17 percent of the total workforce in the united states).
For example, in 2006, the average American commercial farmer grew enough food for about 144 other people and also in 1940, the average farmer grew food for about 19 other people (which was close to enough food). Records has it that in 2007, just 187,816 of the 2.2 million farms in the United States of America accounted for 63 percent of sales of agricultural products, marking a trend toward the concentration in agricultural production.
Agricultural efficiency has increased over the past century from 27.5 acres/worker in 1890 to 740 acres/worker in 1990. It is important to note that contract farmers are known to pay attention to one or more different farm produce, depending on farm location and types of farm produce suitable to the local climate.
Market trends can also influence farmers’ choices of more profitable crops or produce. Organic vegetables and fruit are the most established products provided by the industry. Contract farming has vast opportunities but we are not ruling out the fact that as with any contract, there are a number of risks associated with it.
Common problems include farmers selling to a buyer other than the one with whom they hold a contract (known as side selling, extra-contractual marketing) or using inputs supplied by the company for purposes other than intended. From the other side, a company sometimes fails to buy products at the agreed prices or in the agreed quantities, or arbitrarily downgrades produce quality.
In a nutshell, with contract farming business, it will pay you to concentrate in the cultivation of a specific cash crop that is in high demand by players in the food processing industry or related industry that needs steady supply of crops as raw materials.
For example, if you own a rubber plantation, you can enter into contract farming with rubber production companies in and around your location.
2. Executive Summary
Rob Leonardo® Contracting Farming, Inc. is a registered commercial farm with bias in contract farming services that will be based in the outskirt of St. Paul, Minnesota – United States. We have done our detailed market research and feasibility studies and we were able to secure a suitable farm land to start our contract farming business.
Our contract farming business is a going to be involved in fruit and vegetable growing, livestock farming, grain and oilseed production, honey production and other crop production. We have put strategies and plans in place that will help us enter into long – term contract with some of the biggest agriculture produce buyers within the first three years of officially running Rob Leonardo® Contracting Farming, Inc.
We are in the contract farming industry because we want to cut down on wastage generated by commercial farmers and to maximize profits and ensure that industries that needs raw material from farms do no run out of supplies.
Rob Leonardo® Contracting Farming, Inc. is well positioned to become one of the leading contract farming business in the United States of America, which is why we have been able to source for the best hands and farm machineries to run the farm with.
We have put adequate legal framework in place because we know it is crucial for the successful implementation and long-term sustainability of contract farming operations. It will help us employ best practices when it comes to contract farming business as required by the regulating bodies in the United States of America.
Rob Leonardo® Contracting Farming, Inc. is owned by Mr. Rob Leonardo and his immediate family members. The farm cum business will be fully financed by Rob Leonardo and his immediate family members.
Before starting Rob Leonardo® Contracting Farming, Inc., Rob Leonardo has worked with some of the leading contract farming companies in the United States of America; he has a degree (B.Sc.) in Agriculture Science from University of Minnesota.
3. Our Products and Services
Rob Leonardo® Contracting Farming, Inc. is a world class contract farming business that is committed to cultivating both organic and non – organic crops and livestock for both the United States’ market and the global market. We are in business to produce both organic and non – organic food and raw materials for people and industries in commercial quantities.
These are the areas we will concentrate on in our contract farming business. If need arises, we will definitely cultivate related crops;
- Fruit and vegetable growing
- Livestock farming
- Grain and oilseed production
- Honey production
- Other crop production
4. Our Mission and Vision Statement
- Our Vision is to be the major supplier of raw materials from farms and to become one of the top 5 contract farming business brands not just in the United States of America but also on the global stage.
- Rob Leonardo® Contracting Farming, Inc. is a world class contract farming business that is in business to cultivate in commercial quantities both organic and non – organic crops and livestock for both the United States market and the international market.
- We want to be the major supplier of cash crops and non – cash crops to leading corporations in the United States and other countries of the world.
Our Business Structure
Rob Leonardo® Contracting Farming, Inc. is a contract farming business that intends starting small in St. Paul – Minnesota, but hopes to grow big in order to compete favorably with leading contract farming business in the United States. We are aware of the importance of building a solid business structure that can support the kind of world class business we want to own.
At Rob Leonardo® Contracting Farming, Inc., we will ensure that we hire people that are qualified, hardworking, dedicated, customer centric and are ready to work to help us build a prosperous business that will benefit all the stake holders.
As a matter of fact, profit-sharing arrangement will be made available to all our senior management staff and it will be based on their performance for a period of five years or more as agreed by the management of the farm. In view of the above, Rob Leonardo® Contracting Farming, Inc. have decided to hire qualified and competent hands to occupy the following positions;
- Chief Operating Officer
- General Farm Manager
- Administrator/Accountant
- Crop Cultivation Manager/Supervisor
- Livestock Farming Manager
- Sales and Marketing Executive
- Field Employees
- Front Desk Officer
5. Job Roles and Responsibilities
Chief Operating Officer:
- Increases management’s effectiveness by recruiting, selecting, orienting, training, coaching, counseling, and disciplining managers; communicating values, strategies, and objectives; assigning accountabilities; planning, monitoring, and appraising job results; developing incentives; developing a climate for offering information and opinions; providing educational opportunities.
- Creating, communicating, and implementing the organization’s vision, mission, and overall direction – i.e. leading the development and implementation of the overall organization’s strategy.
- Responsible for fixing prices and signing business deals
- Responsible for providing direction for the business
- Responsible for signing checks and documents on behalf of the company
- Evaluates the success of the organization
General Farm Manager
- Responsible for the planning, management and coordinating all farm activities across the various sections on behalf of the organization
- Supervise other section managers (crop cultivation manager and livestock manager)
- Ensure compliance during project executions
- Providing advice on the management of farming activities across all section
- Responsible for carrying out risk assessment
- Using IT systems and software to keep track of people and progress of the growth of crops, fishes, birds and animals
- Responsible for overseeing the accounting, costing and sale of farm produce after harvest
- Represent the organization’s interest at various stakeholders’ meetings
- Ensures that farming goals desired result are achieved, the most efficient resources (manpower, equipment, tools and chemicals et al) are utilized and different interests involved are satisfied. Responsible for preparing financial reports, budgets, and financial statements for the organization
- Responsible for overseeing the smooth running of HR and administrative tasks for the organization
- Handles all financial transactions for the company
- Defining job positions for recruitment and managing interviewing process
- Carrying out induction for new team members
- Responsible for training, evaluation and assessment of employees
- Oversee the smooth running of the daily farming activities across the various farming sections.
Administrator/Accountant
- Responsible for overseeing the smooth running of HR and administrative tasks for the organization
- Defining job positions for recruitment and managing interviewing process
- Responsible for training, evaluation and assessment of employees
- Responsible for preparing financial reports, budgets, and financial statements for the organization
- Responsible for financial forecasting and risks analysis.
- Responsible for developing and managing financial systems and policies
- Responsible for administering payrolls
- Ensuring compliance with taxation legislation
- Handles all financial transactions for the company
- Serves as internal auditor for the company
Crop Cultivation Manager/Supervisor
- Responsible for managing the crop cultivation section of the contract farming business
- Supervises other workers within the department
- Work closely with the General Manager to achieve the organizations’ goals and objectives
Livestock Farming Manager/Supervisor
- Responsible for managing the livestock farming section of the contract farming business
- Supervises other workers within the department
- Work closely with the General Manager to achieve the organizations’ goals and objectives
Sales and Marketing Officer
- Identify, prioritize, and reach out to new partners, and business opportunities et al
- Identifies development opportunities; follows up on development leads and contacts
- Writing winning proposal documents, negotiate fees and rates in line with company policy
- Responsible for handling business research, market surveys and feasibility studies for clients
- Responsible for supervising implementation, advocate for the customer’s needs, and communicate with clients
- Document all customer contact and information
- Represent the company in strategic meetings
- Help increase sales and growth for the organization
Field Workers/Contract Staff
- Responsible for preparing farm lands for crop cultivation
- Responsible for watering the crops
- Weeding the farm land
- Handles farm implements and machines as instructed by the section manager/supervisor
- Assist in handling the harvest of crops
- Carries out task in line with the stated job description
- Assist in transport working tools and equipment from the farm and back to the designated store room
- Handles any other duties as assigned by the line manager
Client Service Executive/Front Desk Officer
- Welcomes guests and clients to the farm by greeting them in person or on the telephone; answering or directing inquiries.
- Ensures that all contacts with clients (e-mail, walk-In center, SMS or phone) provides the client with a personalized customer service experience of the highest level
- Through interaction with clients on the phone, uses every opportunity to build client’s interest in the company’s products and services
- Consistently stays abreast of any new information on the company’s products, promotional campaigns etc. to ensure accurate and helpful information is supplied to clients
- Receives parcels/documents for Rob Leonardo® Contracting Farming, Inc.
- Distribute mails in Rob Leonardo® Contracting Farming, Inc.
- Handles any other duties as assigned by the line manager.
6. SWOT Analysis
Rob Leonardo® Contracting Farming, Inc. do not intend to launch out with trial and error hence the need to conduct a proper SWOT analysis. We know that if we get it right from the onset, we would have succeeded in creating the foundation that will help us build a standard contract farming business that will favorably compete with leading contract farming businesses in the United States of America and in the rest part of the world.
We are quite aware that there are several contract farms in St. Paul – Minnesota, which is why we are following the due process of establishing a business. We know that if a proper SWOT analysis is conducted for our business, we will be able to position our business to maximize our strength, leverage on the opportunities that will be available to us, mitigate our risks and be equipped to confront our threats.
Rob Leonardo® Contracting Farming, Inc. employed the services of an expert HR and Business Analyst with bias in the contract farming industry to help us conduct a thorough SWOT analysis and to help us create a Business model that will help us achieve our business goals and objectives.
Here is a summary from the result of the SWOT analysis that was conducted on behalf of Rob Leonardo® Contracting Farming, Inc.;
- Strength:
Our strength as a contract farming business is the fact that we have healthy relationships with loads of major players across different industries and agriculture merchants who deal in organic and non – organic crops and livestock in the United States.
We have some of the latest commercial farming machines, tools and equipment that will help us cultivate crops in commercial quantities with less stress. Aside from our relationship (network) and equipment, we can confidently boast that we have some the most experienced hands in St. Paul – Minnesota in our payroll.
- Weakness:
Our weakness could be that we are a new contract farming business in the United States, and perhaps the fact that we decided to diversify our contract farming business activities could count against us initially. We are aware of this and from our projection, we will overcome this weakness with time and turn it to a major advantage for the business.
- Opportunities:
The opportunities that are available to us cannot be quantified, we know that there are loads of individuals who consume both organic and non – organic produce and there are loads of companies across various industries that rely heavily on supply of raw materials from contract farmers both in the United States of America. We will ensure that we maximize the opportunities available to contract farming business owners.
- Threat:
Some of the threats and challenges that we are likely going to face when we start our own contract farming business are global economic downturn that can impact negatively on industrial spending (a company sometimes may fail to buy products at the agreed prices or agreed quantities, etc.); bad weather cum natural disasters, unfavorable government policies and the arrival of a competitor (a commercial farm that cultivates same crops) within same location.
Other threats that we will likely face are;
- Land availability constraints
- Social and cultural constraints
- Business partner discontent
- Extra-contractual marketing
- Input diversion
7. MARKET ANALYSIS
- Market Trends
If you are conversant with happenings in the contract farming industry, you will agree that contract farming has been used for agricultural production for decades but its popularity appears to have been increasing in recent years. The use of contracts has become attractive to many farmers because the arrangement can offer both an assured market and access to production support.
Contract farming is also of interest to buyers, who seek supplies of products for sale further along the value chain or for processing. Processors constitute the main users of contracts, as the guaranteed supply enables them to maximize utilization of their processing capacity.
Contracts with farmers can also reduce risk from disease or weather and facilitate certification, which is being increasingly demanded by advanced markets. There are also potential benefits for national economies as contract farming leads to economies of scale
Lastly, even though contract farming must first and foremost be considered as a commercial proposition, it has also come to be viewed as an effective approach to help solve many of the market access and input supply problems faced by small farmers.
A guide published by GIZ in 2013 seeks to advise on ways in which contract farming can be developed to maximize such benefits for smallholders in developing countries. Effective linkages between companies and thousands of farmers often require the involvement of formal farmer associations or cooperatives or, at least, informal farmer groups. However, empirical evidence of the best way of achieving this is not yet available.
8. Our Target Market
The end consumer of farm produce from contract farmers and also those who benefits from the business value chain is all encompassing; it is far–reaching. In view of that, we have positioned our contract farming business to service (supply) to key players all across St. Paul – Minnesota and other key cities all over the United States of America.
We have conducted our market research and we have ideas of what our target market would be expecting from us. We are in business to enter in farming contract with;
- Supermarkets
- Grocery Stores
- Hotels
- Restaurants
- Outdoor caterers
- Companies in the Food processing industry
- Companies in the Diary product production industry
- Players across different industries that rely on raw materials from farms
Our Competitive Advantage
Rob Leonardo® Contracting Farming, Inc. is fully aware that there are competitions when it comes to contract farming, which is why we decided to carry out thorough research so as to know how to take advantage of the available market in the United States and in other parts of the world.
We have done our homework and we have been able to highlight some factors that will give us competitive advantage in the marketplace; some of the factors are effective and reliable mechanized organic and non–organic farming processes that can help us enter in profitable contract agreement and supply our farm produce at competitive prices, good network and excellent relationship management.
We are fully aware that with contract farming disagreements are inevitable hence we have in–house lawyers (partners) that will always help us craft all our contracts in a favorable way and make provision for arbitration by someone acceptable to both the company and the farmers.
Lastly, our employees will be well taken care of, and their welfare package will be among the best within our category in the industry meaning that they will be more than willing to build the business with us and help deliver our set goals and objectives.
9. SALES AND MARKETING STRATEGY
- Sources of Income
Rob Leonardo® Contracting Farming, Inc. is in the contract farming business for the purpose of maximizing profits hence we have decided to explore all the available opportunities within the industry to achieve our corporate goals and objectives.
Below are the sources we intend exploring to generate income for Rob Leonardo® Contracting Farming, Inc.;
- Fruit and vegetable growing
- Livestock farming
- Grain and oilseed production
- Honey production
- Other crop production
10. Sales Forecast
We conducted a thorough market survey and feasibility studies and we are able to discover that the sales generated by a contract farming business depends on the size of the farm, the nature of the contract farming business (whether cattle rearing, poultry farming, fish farming and crops cultivation et al) and the buying capacity of the company (contractor).
We have perfected or sales and marketing strategies and we are set to hit the ground running and we are quite optimistic that we will meet or even surpass our set sales target of generating enough income/profits from the first year.
We have been able to examine the agriculture industry cum contract farming line business, we have analyzed our chances in the industry and we have been able to come up with the following sales forecast. Below are the projections that we were able to come up with for the first three years of running Rob Leonardo® Contracting Farming, Inc.;
- First Fiscal Year (FY1): $350,000
- Second Fiscal Year (FY2): $800,000
- Third Fiscal Year (FY3): $1.5 million
N.B: This projection was done based on what is obtainable in the industry and with the assumption that there won’t be any major economic meltdown that can impact negatively on household spending, bad weather cum natural disasters, and unfavorable government policies. Please note that the above projection might be lower and at the same time it might be higher.
- Marketing Strategy and Sales Strategy
We are quite aware that the reason why some contract farming businesses hardly make good profits is their inability to enter into contract agreement with reliable and long – term customers
Our sales and marketing team will be recruited base on their vast experience in the industry and they will be trained on a regular basis so as to be well equipped to meet their targets and the overall goal of the organization. We want to build a standard and world – class contract farming business that will leverage on word of mouth advertisement from satisfied clients.
We have perfected our sale and marketing strategies first by networking with agriculture merchants and businesses that rely on steady supply of organic and non – organic crops and livestock. In summary, Rob Leonardo® Contracting Farming, Inc. will adopt the following strategies in marketing our contract farming business produce;
- Introduce our business by sending introductory letters alongside our brochure to stake holders in the agriculture industry, key players across various industries that rely on farm produce, farm produce merchants, hotels and restaurants and groceries stores et al.
- Advertise our business in agriculture and food related magazines and websites
- List our contract farming business on yellow pages ads
- Attend related industrial, agriculture and food expos, seminars, and business fairs et al
- Leverage on the internet to promote our business
- Engage in direct marketing
- Encourage the use of Word of mouth marketing (referrals)
11. Publicity and Advertising Strategy
Any business that wants to grow beyond the corner of the street or the city they are operating from must be ready to utilize every available means to promote the business. We intend growing our business which is why we have perfected plans to build our brand via every available means.
Below are the platforms you can leverage on to boost our contract farming business brand and to promote and advertise our business;
- Place adverts on both print (newspapers and magazines) and electronic media platforms
- Sponsor relevant community based events/programs
- Leverage on the internet and social media platforms like; Instagram, Facebook, twitter, YouTube, Google + et al to promote our business
- List our contract farming business in local directories/yellow pages
- Advertise our contract farming business in our official website and employ strategies that will help us pull traffic to the site.
- Ensure that all our staff members wear our branded shirts and all our vehicles and trucks are well branded with our company logo et al.
12. Our Pricing Strategy
Some of the factors that will help you supply your farm produce at the right price that will guarantee that you make profits is dependent on your strategy while some of the factors are beyond your control. For example, if the climatic condition is unfavorable and if there are natural disasters in the location where you have your commercial farm, then it will directly affect the prices of your farm produce.
Over and above, if you want to get the right pricing for your farm produce, then you should ensure that you choose a good location, choose good breed/seeds that will guarantee bountiful harvest, cut the cost of running your farm to the barest minimum and of course try as much as possible to attract buyers to your farm.
In view of that, our prices will conform to what is obtainable in the industry but will ensure that within the first 6 to 12 months our farm produce are supplied a little bit below the average price in the United States of America. We have put in place business strategies that will help us run on low profits for a period of 6 months; it is a way of encouraging people to buy into our contract farming business.
- Payment Options
The payment policy adopted by Rob Leonardo® Contracting Farming, Inc. is all inclusive because we are quite aware that different customers prefer different payment options as it suits them but at the same time, we will ensure that we abide by the financial rules and regulation of the United States of America.
Here are the payment options that Rob Leonardo® Contracting Farming, Inc. will make available to her clients;
- Payment via bank transfer
- Payment with cash
- Payment via online bank transfer
- Payment via check
- Payment via mobile money transfer
- Payment via bank draft
In view of the above, we have chosen banking platforms that will enable our clients make payment for our farm produce without any stress on their part. Our bank account numbers will be made available on our website.
13. Startup Expenditure (Budget)
When it comes to calculating the cost of starting a contract farming business, there are some key factors that should serve as a guide. Factor such as the capacity of the farm and the organic crops and livestock you want to cultivate. In setting up any business, the amount or cost will depend on the approach and scale you want to undertake. Below are some of the basic areas we will spend our startup capital in setting up our contract farming business;
- The total fee for incorporating the business in United States of America – $750.
- The total cost for payment of insurance policy covers (general liability, workers’ compensation and property casualty) coverage at a total premium – $9,400
- The amount needed to acquire/lease a farm land – $50,000
- The amount required for preparing the farm land – $70,000
- The cost for acquiring the required working tools and equipment/machines/fencing et al – $30,000
- The amount required for purchase of the first set of seedlings and livestock et al – $50,000
- Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $80,000
- The cost of launching an official website – $600
- The amount required for payment of workers for a period of 3 months – $100,000
- Additional Expenditure (Business cards, Signage, Adverts and Promotions et al) – $2,000
Going by the report from detailed research and feasibility studies conducted, we will need an average of three hundred and fifty thousand dollars ($350,000) to start a standard contract farming business in the United States of America. These are some of the equipment that we would need to launch our farm,
- Tractor
- Soil cultivator
- Plough
- Harrow (e.g. Spike harrow, Drag harrow, Disk harrow)
- Stone/Rock/Debris removal implement (e.g. Destoner, Rock windrower/rock rake, Stone picker/picker)
- Broadcast seeder (alternatively: broadcast spreader, fertilizer spreader, or Air seeder)
- Planter
- Plastic mulch layer
- Transplanter
- Sprinkler system irrigation
- Mower
- Sickle
- Wheel Barrow
- Distribution Truck
The nature of contract farming business does not require an office space, and most people that run contract farming business operate directly from their farms. But we have decided to open a small liaison office; a place where administrative jobs will be carried out on behalf of the business.
Generating Funds/Startup Capital for Rob Leonardo® Contracting Farming, Inc.
Rob Leonardo® Contracting Farming, Inc. is owned and managed by Rob Leonardo and his immediate family members. They decided to restrict the sourcing of the startup capital for the business to just three major sources. These are the areas where we intend sourcing for fund for Rob Leonardo® Contracting Farming, Inc.;
- Generate part of the startup capital from personal savings and sale of his stocks
- Generate part of the startup capital from friends and other extended family members
- Generate a larger chunk of the startup capital from the bank (loan facility).
N.B: We have been able to generate about $100,000 (Personal savings $80,000 and soft loan from family members $20,000) and we are at the final stages of obtaining a loan facility of $250,000 from our bank. All the papers and documents have been duly signed and submitted, the loan has been approved and any moment from now our account will be credited.
14. Sustainability and Expansion Strategy
The future of a business lies in the number of loyal customers that they have, the capacity and competence of their employees, their investment strategy and business structure. If all of these factors are missing from a business, then it won’t be too long before the business closes shop.
One of our major goals of starting Rob Leonardo® Contracting Farming, Inc. is to build a business that will survive off its own cash flow without injecting finance from external sources once the business is officially running. We know that one of the ways of gaining approval and winning customers over is to supply our farm produce a little bit cheaper than what is obtainable in the market and we are prepared to survive on lower profit margin for a while.
Rob Leonardo® Contracting Farming, Inc. will make sure that the right foundation, structures and processes are put in place to ensure that our staff welfare are well taken of. Our organization’s corporate culture is designed to drive our business to greater heights and training and re – training of our workforce is at the top burner of our business strategy.
We know that if that is put in place, we will be able to successfully hire and retain the best hands we can get in the industry; they will be more committed to help us build the business of our dreams.
Check List/Milestone
- Business Name Availability Check: Completed
- Business Incorporation: Completed
- Opening of Corporate Bank Accounts : Completed
- Opening Online Payment Platforms: Completed
- Application and Obtaining Tax Payer’s ID: In Progress
- Application for business license and permit: Completed
- Purchase of Insurance for the Business: Completed
- Leasing of farm land and preparing the farm land in St. Paul – Minnesota: Completed
- Conducting Feasibility Studies: Completed
- Start – up Capital Generation: Completed
- writing of business plan: Completed
- Drafting of Employee’s Handbook: Completed
- Design of The Company’s Logo: Completed
- Printing of Packaging and Promotional Materials: Completed
- Recruitment of employees: In Progress
- Building/construction of cages and fence et al: In Progress
- Purchase of the needed working farm cultivating tools, machines and equipment: Completed
- Creating Official Website for the Company: In Progress
- Creating Awareness for the business (Business PR): In Progress
- Farm land Treatment, Health and Safety Arrangement: In Progress
- Establishing business relationship with vendors and key players across different industries that depend on farm produces as raw materials: Completed