The Problems of Vertical Integration

One way farmers handle risk is by contracting. Poultry producers and seed corn farmers get contracts from the Tysons and Pioneers of the world, reducing their risk. The new phenomena is the Community-Supported Agriculture contract--consumers contract with the grower to take a share of what's produced in return for dollars up front. Truck farming, growing vegetables and fruit, often is less risky than crop farming. Because the dollars per acre are much higher and the number of acres is smaller, you can justify the cost of installing irrigation equipment.

But, as always in farming, there's risk. And this post in Gristmill outlines the effects of floods on a CSA operation. (Remember, a well-established operation may have built up enough loyalty and experience that this wouldn't be a disaster.)

Jan and Tim have had to ask their CSA members to make good on their willingness to share the risk inherent in farming. They suspended their CSA deliveries for one week so that they could focus on weeding and replanting the crops that were damaged. This is not a decision they made lightly; months of planning, numerous calculations, and multiple Excel spreadsheets go into making sure that they produce enough to supply all of their demand consistently throughout the season, without the help of extension agents. There is also the risk that first-time members, experiencing a total bust year right away, will opt-out next year and miss out on the boom years. Jan and Tim plan to compensate their members later on in the season for the current delay, but like the many Midwestern farmers, they expect the impact of the floods to be felt throughout the entire season.