In many of the fruit and vegetable meetings I’ve conducted and attended over the years, the topic that growers can’t seem to get enough of is marketing, or “How do I sell?” Learning how to grow the crop can be easy but knowing what to do with it after harvest takes a lot of research before the crop is planted. It reminds me of a grower who called to ask if I knew where he could sell his 40 acres of cabbage. He should have secured his markets before he planted 40 acres!
A produce auction is one type of wholesale marketing outlet – and I emphasize wholesale. It’s a way for growers to move an extra amount of produce that does not make its way through the retail marketing channels (selling on the farm, at a roadside stand or market or selling at a farmers market). It’s not a place to get rid of seconds or blemished produce. Retail selling gives the grower the most profit, but also entails the most work to locate those markets and to actively sell at each market throughout the week and season.
Prices paid for produce at a produce auction will be similar to those for produce sold at terminal markets, produce wholesalers or to chain store produce buyers. It’s a wholesale price and the grower has no control over the price they will get. The wholesale price the grower receives is based on supply and demand, regardless of what type of wholesale marketing method the grower chooses.
Successful fruit and vegetable growers can also participate in produce auctions, but they’re not intended for growers who are already getting the retail dollar – that would be foolhardy. On the other hand, if they have an abundance of produce that they feel could not be sold retail, they can bring their produce to auction to see what kind of wholesale price they could receive.
In summary, the produce auction is a way for existing fruit and vegetable growers to gain another wholesale market, and a way that field crop growers could get their feet wet if they wish to diversify into growing and selling fruits and vegetables.
How To Get Started Promoting the Produce Auction Concept
Before you get started, you need growers to believe in the auction concept. Auctions use auctioneers that either have a rough idea of what wholesale prices of produce are or can read a copy of the state or federal market news report for fresh fruits and vegetables (available on the web) every day. Once they know produce prices, they will generally start the auction with a high price and then come down in price until someone bids; then they will try to increase the price.
Produce prices received by growers at a produce auction can vary from day to day. They can be like a roller coaster throughout the season, starting out high, plunging low and then going up again. Growers need to expect this at auction and will have to average out the high and low prices over the season to calculate what their average price for the year would be. Many times, growers receive higher average prices at the produce auction than if they sold to a produce wholesaler or chain store produce buyer, especially when the auction buyer knows that a certain grower sells high quality produce.
Growers can declare a “price floor” before the auction starts – the minimum price that the grower is willing to receive for the produce at the auction. If the bidding price falls below the grower’s floor, the grower has the right to refuse to sell and can take the produce home. The price floor means a grower won’t be forced to take a very low price, but on the other hand, if the grower sets the price floor too high, they will easily forfeit a sale.
Once growers believe in the auction concept, it’s time to look for a location to have the auction.
Finding a Location for a Produce Auction
Finding a location to house a produce auction depends on finding a willing and cooperative entrepreneur that owns a building or land where a building could be built. That individual needs to be able to work with growers to ensure the success of the auction during the first year. In areas where there are many Amish growers, they are usually willing to erect a building by themselves on their own land.
If an Amish-owned building is not an option, then finding an entrepreneur willing to let growers use their facility rent-free and charge a 10% fee on whatever the produce sells for at the auction is necessary. This 10% fee can be used by the building owner to pay for bookkeeping responsibilities, such as printing invoices, collecting money from buyers and writing checks to growers. This type of person is needed to get the auction started, realizing that the auction might not bring in a lot of money during the first or second year, and willing to wait a few years before it’s able to supply a good income. Once a suitable location is found, it would be a good idea to conduct several meetings one year before the auction starts to get growers acquainted with the auction method.
One way to influence growers to believe in the auction concept is to invite someone who has been successful in starting a produce auction. Have that person speak to your group of growers. They can ask questions and get good, honest responses.
If there is a general consensus among the people about having a produce auction, then it’s time to set up a schedule of monthly meetings, preferably the year before the auction opens. The purpose of the meetings is to discuss the rules and regulations that will govern the auction.
Rules to Ensure the Success of the Auction
First, a produce auction will not succeed without loyalty. Growers have to be loyal and bring all the produce they want to sell wholesale to the auction. They shouldn’t have buyers come to their farm to buy. Buyers would like to do that because they think the grower will sell at a lower price. But if a grower does that, there is less to be sold at the auction and they are, in essence, undermining the auction. Growers that bring all their produce to the auction will keep the price high for every grower who participates. This forces buyers to pay higher prices.
Lessons Learned From Operating a Produce Auction
I helped start and run a produce auction in Oxford, NC, from 2002 – 2005. After the close of the season in 2005, it was decided the auction would not re-open in 2006. The reasons were as follows:
We were never able to attract enough large volume growers or large volume buyers. The produce auction turned into a farmers market, which consumers loved, but it did not achieve the purpose of a produce auction, which was to unite growers and wholesale buyers.
The income generated by the produce auction was not enough to pay the building owner’s fees, which included the auctioneer fee and the membership fee paid by the building owner to belong to the Perishable Agricultural Commodities Act.
Most of the successful produce auctions currently operated in the U.S. have their roots with the Amish. The Amish serve as the nucleus of the produce auction. They’ve been growing produce for many years and have had their own produce buyers coming to their farms. Once the produce auction has been started, their buyers come to the auction and buy from all the growers there – then other non-Amish growers come and participate.