What You’ll Learn About Here

  • The Value of Direct Farm Marketing
  • The Responsibilities of Direct Farm Marketing
  • The Benefits of Direct Farm Marketing
  • The Risks of Direct Farm Marketing
  • General Assumptions About the Law and Legal Arrangements
  • Phone Calls to Make Before You Begin Direct Farm Marketing
  • How to Find an Attorney

Considering the Benefits and Risks

Before examining the various forms of direct farm marketing, it is important to consider the role of law as it relates to agriculture.

This chapter serves two purposes. The first is to consider some of the risks and benefits producers need to consider when thinking about becoming involved in direct marketing. The second is to introduce you to how law relates to direct farm marketing and to share some insights about how the law works so you can understand how to best use legal advice in your operation.

How the Law Can Impact Direct Farm Marketing
There are a variety of ways in which common forms of direct farm marketing may raise legal issues. These include:

  • Marketing directly to consumers may raise issues of customer  satisfaction and liability,
  • Selling processed food items may raise food safety concerns,
  • Dealing in specialty products, such as meat or eggs, may implicate special licensing or inspection requirements,
  • Operating a retail food business on your farm may raise issues concerning the application of local zoning laws and the need to have a business license,
  • Employing workers on the farm to raise labor intensive crops, may make complying with labor and safety rules important,
  • Forming unique marketing relations, such as subscription sales  or home deliveries, may raise questions about payment and  business relations, and
  • Providing non-food related products or services, such as recreation or other “on-farm” experiences, may raise issues of     insurance liability and land use regulations.

Considering the Value of Direct Farm Marketing

Direct farm marketing has great potential, for farmers, consumers,  communities, and society.  This is why an increasing number of farmers and consumers are excited about these relations.  From the standpoint of farmers the value includes such things as: access to higher prices, direct contact with consumers, and opportunities to diversify a farming operation.  From the standpoint of consumers the value of direct farm marketing includes: having contact with the people who produce your food, obtaining fresher higher quality food, increasing confidence or knowledge about how it was raised, having the opportunity to get food raised how you want it, and helping support the local farming economy.  From the standpoint of communities and society, direct farm marketing has many values: it increases local economic activity, it improves the food choices and selection available to people, it can help maintain the number of farmers in an area and help preserve farmland from conversion to urban uses, and it can improve the access of low income citizens to fresh wholesome food. The increasing attention to direct farm marketing demonstrates that it responds to other important concerns in society.  Concern over food safety, the industrialization of food production and the decline in local farming, the loss of family farmers, the pressure on farmland near urban edges, and a growing interest in “clean food” with an emphasis on taste, are all forces contributing to increasing the opportunities for direct farm marketing.

Considering the Responsibilities of Direct Farm Marketing

Many of the legal issues associated with direct farm marketing relate to the “additional” functions being assumed by producers.  When a farmer sells commodities in the traditional marketplace the main concerns are producing the crop, selling it for a good price, and then getting paid.  When you become involved in direct farm marketing you have these same concerns but many others as well.  By taking on the function of marketing you increase other responsibilities.

First, you will have to prepare your product in a form that can be sold.  For most fruits and vegetables this is not a problem but for other products it may require further preparation or processing.

Second, you will have to find your consumers either by going to them or by bringing them to your product.  This means you will have to choose among the various forms of direct marketing available in your area and decide which works best for your farm.

Third, you will have to choose a location for your marketing efforts.  This will usually involve either a site on your farm or require taking your products to market outlets organized by others, such as farmers markets.

Fourth, you may have to advertise your products or operation to attract customers.  You will have to label your food and set a price for it so people know how much to pay.  When farmers sell traditional commodities they do not have to worry about advertising, setting prices, or in most cases, worrying whether someone will buy it.

Fifth, you will have to deal with individual customers.  Rather than selling all or a large portion of your crop in one transaction, in direct farm marketing you will sell your crops in hundreds and even thousands of individual, relatively small transactions.  This involves personal effort in dealing with hundreds of people and it will mean collecting the sales proceeds in numerous transactions.

Sixth, since you are selling food for human consumption you will need to address customer satisfaction and perhaps deal with a few customers who are not satisfied.  Food quality and attention to the health and safety aspects of the products you sell will be essential.

This list of responsibilities gives you an idea of what may be involved in direct farm marketing.  For each of these different steps there may be state or local regulations which may affect your decisions.  In situations where you deal directly with consumers or where people come to your farm, other legal concerns relating to such things as liability in case of accidents, will also apply.  By being a direct farm marketer you become more than just a farmer, you may also become a retailer, an employer, a business manager, and even a food processor.

Considering the Benefits of Direct Farm Marketing

Deciding to begin direct farm marketing has to be based on a consideration of the benefits to be gained and the costs or risks to be encountered.  When thinking about the benefits of direct farm marketing, they can be classified in two main categories – monetary or financial, and non-monetary or personal.

Direct farm marketing offers a variety of possible monetary benefits, including:

  • higher prices, because you are selling at retail not wholesale prices,
  • more net income, because you retain the portion normally absorbed by intermediaries such as wholesalers,
  • more stable and dependable sales, if your direct farm marketing outlet has a steady flow of customers,
  • increased marketing opportunities, because you can still sell your products in the traditional wholesale market,
  • marketing higher value products, such as meat and processed foods, is often possible in different forms of direct farm marketing,
  • selling “non-food” products or services, such as on-farm recreation, or other forms of agricultural tourism, and
  • reducing other farm costs, for example, using pick-your-own operations to reduce labor costs.

There are many personal or non-monetary benefits to direct farm marketing. Although it is harder to place a value on these, the experience of many farm families shows these more personal values are important reasons why they are involved in direct farm marketing. These include:

  • Personal satisfaction and fulfillment.  Every farmer knows how satisfying it feels to produce a good crop, but direct farm marketers experience a special feeling by producing fresh wholesome food.  They get to share the food with people who appreciate its value and who let them know how much they appreciate their efforts.
  • Building relationships with customers.  Many direct farm marketers say the friendships they have made with their customers are an important motivation keeping them involved in food production.
  • Working at home with your family.  Many direct farm marketing operations are family based with the children playing important roles in raising and selling the crops.  Many are run by women who have found that direct farm marketing has created opportunities for them to farm.
  • Maintaining autonomy or independence.   For many farmers, direct farm marketing provides a way to be free from the traditional agricultural markets and to control the shape of their farm.  Rather than producing greater quantities of commodities, often at lower prices, many farmers see direct farm marketing as a way to farm more intensively, even on a smaller scale.
  • Creating “community” around the farm.  Many direct farm marketing operations involve more than just one person working in the field.  Instead the family may be involved, and other workers or even the customers may help.  The involvement of many people – all with an interest in the success of the farm – can help create a sense of community and shared purpose, something many farmers feel is disappearing in many traditional forms of farming.
  • Running a personal business enterprise.   While farming has always been an important form of self-employment, direct farm marketing can provide important opportunities to do something different and to take control over the future of the farming operation.

Considering the Risks of Direct Farm Marketing

The decision to become involved in direct farm marketing should include identifying the risks (or costs) which might be associated, just as it involves considering the possible benefits.  The risks or costs associated with direct farm marketing will probably be of two types – those which are directly quantifiable and those which may be more difficult to measure.  Examples of monetary costs which can be identified are the price of a state license, the cost of adding a roadside stand, or the premium for a worker’s compensation insurance policy to cover employees.  An example of a risk which might be more difficult to quantify is the possible liability if a visitor to the farm is injured in an accident.  Issues of insurance and liability are discussed in Chapter Ten but here are several thoughts to keep in mind when considering the costs or risks of direct farm marketing:

  • Many of the costs which are hard to quantify can be managed, such as by taking steps to eliminate the possible causes of accidents.
  • Some costs can be limited by taking precautions, such as by purchasing insurance to help pay for any liability which might arise.
  • Some risks can be minimized or avoided all together by taking steps to limit the likelihood they will occur.  Planting dwarf trees in your PYO orchard will reduce the likelihood of  customers falling off ladders.  Organizing your operation to limit the number of employees you hire can reduce the application of some labor laws.
  • Some risks or costs can be avoided by deciding not to engage in certain forms of marketing. For example, by choosing not to make and sell processed foods you can avoid the need to comply with state and local rules for licensing food processing facilities and reduce your worries about food safety.

One way to help reduce the possible risks which you might face is to conduct a risk analysis for your direct farm marketing operation. To consider what questions might be in a risk analysis see sidebar.

General Assumptions About Law and Legal Arrangements

The purpose of this book is not to defend lawyers, sell their services, or convince you that the law always makes sense. The purpose is to educate you on how the law may impact your direct farm marketing operation. Some people do not have the highest regard for lawyers or perhaps even the law.  Many farmers – like others in society – do not consider spending money on legal advice to be the wisest use of their money.

Conducting a Risk Analysis
One valuable exercise to undertake for your farm is to complete a risk analysis for the farm or for any new venture being planned. The idea is to examine the farming enterprise and try to identify how and where risks might exist. By doing so you can consider how any risks identified can be eliminated or reduced. This exercise can help you in many ways. It can assist you in:

  • Evaluating decisions by having a better idea of potential risks,
  • Identifying and addressing potential risks, and
  • Preparing a contingency plan in case something goes wrong.

Examples of Questions to Ask in a Risk Analysis

 Physical Risks

If customers come on the property what have you done to insure their safety?

Are you aware of any hazardous conditions on your property or with your machinery, which haven’t been corrected?

Have you trained all employees in the safe operation of machinery or tools?

Do you know if your current insurance policies cover your type of direct farm marketing operation?

Financial Risks
How would you be affected if you lost your major customer?

What would happen if a specialty crop buyer failed to pay you or went out of business?

What would you do if an employee or a customer was seriously injured on the farm?

What would happen if the local farmers market closed or you were not allowed to sell there?

For many people, legal advice is something to seek only when absolutely necessary but certainly not something to be obtained on a regular basis.  Few people look forward to the prospect of going to court or being sued.  But having said that, anyone running a business – or a farm – today must recognize the impact laws and regulations may have and should understand the importance of timely legal advice.  In buying this book you have shown that you recognize the value of sound legal information to help you avoid trouble.  It is true – good legal information and timely advice can help reduce the chances legal problems will arise.

Here are some assumptions about how law works which may help you appreciate the important – but sometimes frustrating – role law may play in your situation:

First, you should assume that the other party in any business transaction (and obviously – in a lawsuit) has legal assistance.  This is why it is so important that in most business transactions – such as buying land or signing a contract – you have your own legal advice.  If you decide to muddle through on your own, or worse yet, just ignore the possible legal risks you may be making a huge mistake.

Second, if the other side has legal counsel, you should not assume you can rely on any advice or information they provide to you.  The other lawyer’s job is to represent the lawyer’s client – not you.  In fact lawyers have an ethical obligation to represent only their clients.  Only in limited circumstances and after full disclosure can lawyers represent both parties to a transaction.  This doesn’t mean that what they say is false or misleading, it just means it is not for your benefit and shouldn’t be relied on as your legal advice.

Third, a corollary to this rule is you must assume that any document, transaction, or contract prepared or written by the other party was written primarily to benefit them.  In otherwords, the parties writing legal documents or structuring deals take care of themselves first.

Fourth, the other side is probably in the more powerful position in the transaction.  Again, this does not necessarily mean a contract or document is unfair or bad for you.  Instead it just means you should not expect to get the legal benefit of the doubt.  These last two premises are so widely acknowledged that courts have rules recognizing them.  For example, in contract disputes any ambiguity in the wording of a contract is held against the person who drafted it.  If you wrote the agreement and it is not clear, the court is not going to give you the benefit of the doubt as to what it means.

Fifth, an important point to consider but one which can make legal advice difficult for non-lawyers to understand or appreciate is the following – most legal advice and transactions are based on the premise something will go wrong.  Where you see opportunities, lawyers see potential problems.  In reality, the purpose for most of the long, detailed language in legal documents, such as mortgages or loan agreements, is to plan for  what happens if you don’t pay.  Your reaction to this may be “if I didn’t think I was going to pay I would not borrow the money, and if the bank didn’t think I could pay it back they wouldn’t have lent it to me!”  This may be true, but it is the job of the lawyers to use the laws which exist to protect their clients’ interests and to create procedures to resolve disputes if something goes wrong.  Lawyers do this in part by eliminating problems before they arise and by providing for solutions in case they do.

Sixth, the final point to consider relates directly to this last idea – in most situations nothing goes wrong!   Most loans are repaid, properties are purchased, and contracts are performed without any problem.  This is great because it is what the parties wanted.   But it also means much of the legal work and most of the provisions in the documents were never used.  Does this mean the money spent on the legal advice was wasted?  No, remember the provisions were there if needed.  In this way, legal advice is much like insurance – you buy insurance but hope you never have to use it.  The same is true for legal advice – you get the advice but hope things don’t come to where you have to rely on it.

Hopefully, these assumptions help explain why law and the need to obtain the advice of lawyers can sometimes be frustrating.  The law is full of complex even arcane rules and of complicated procedures, which in most situations don’t even come into play.  Lawyers are always making you consider problems which might arise – just at the time when what you want to consider is the excitement of a new venture or opportunity.  This often makes lawyers seem like wet blankets on your enthusiasm.  In fact, it often seems like lawyers try to raise so many worries you wonder if it makes sense to go ahead and do what you planned!  But consider what would happen if the lawyers just shared in your optimism and didn’t take precautions to address what could go wrong.  If lawyers did that, then when disputes arise – as they unfortunately will in a share of all business and human relations – the parties will be left with a mess to clean up.  The lawyers won’t have done their jobs!  The point is – legal advice may seem expensive and even painful sometimes, and you may not like to think you need it,  but the reality is in today’s society legal advice is critical in protecting your interests.  [To consider some of the most common ways direct farm marketers can get into legal trouble see the box.]

Eight Things that Will (probably) Get You Into Legal Trouble

As you will learn from this book, there are many legal issues which direct farm marketers must consider.  Another way of thinking about this is to recognize there are many ways you can get into legal trouble.  A review of the laws and court cases in this area, reveals there are eight common ways a person can get into legal trouble in relation to direct farm marketing.  They are:

  • selling more products at your roadside stand which were produced by others than you raised yourself
  • not carrying sufficient liability insurance for your operation
  • failing to comply with labor rules when hiring employees
  • conducting a “commercial” business in an area not zoned for such use
  • allowing unsafe conditions to exist on your property when customers are allowed to visit
  • selling processed foods which have been produced at an unlicensed facility
  • failing to observe farmers market rules designed to protect the safety or quality of food
  • not complying with recordkeeping and paperwork rules for tax or labor laws

General Observations About Direct Marketing and the Law

In writing this book most of the American laws and court cases relating to direct farm marketing were examined.  While direct farm marketing has not been a major legal concern in the past – with some exceptions – the number of related statutes, government programs, and court cases has increased significantly in the last decade.  This is largely in response to growing demand for local and direct marketed farm products.

One area that has historically received notable legal attention concerns questions about how local zoning laws apply to the operation of roadside markets.  But while direct farm marketing has not typically been the subject of extensive legal attention, there is still a great deal of law relating to the subject.  The discussion in the following chapters reflects what our research found on the various issues.  Before moving to those more detailed discussions, here are several general observations about how the law relates to direct farm marketing.

First, as a general rule, the more your operation begins to look like something other than a traditional farm – for example a recreational venture with a cornfield maze – the more likely you may be to encounter an increasing number of state and local laws and regulations.

Local Resources for Local Marketing

Food Policy Councils (FPC) examine the operation of a local food system and provide ideas and recommendations for improvement through public policy changes.  They can also be a valuable source of information on local land use regulations and direct marketing opportunities relevant to specific counties or regions. For instance, the Central Oregon Food Policy Council provides county based information affecting wineries and farm stands. Drake’s Agricultural Law Center maintains a directory of state FPCs.

Second, the corollary of this rule is that the less you look like a traditional farm the less likely you are to be protected by many of the special legal rules which have been created to protect farming, such as exemptions from zoning or labor laws.

Third, the reverse of these previous rules is also generally true.  The more you look like a traditional farm, the less likely you are to be regulated in the first place and to the extent regulations may apply, there may be special exceptions which apply to your farm.

Fourth, the more you begin to resemble a large-scale or full-service retail foodstore, such as being open year-round, handling a range of processed foods, carrying many non-food items, or carrying more items produced by others than are raised on your own farm, the less likely you are to be treated as a farm – or even a roadside market.  The point is that if you become a store – rather than just selling your own produce – you will probably be treated like a store and a new set of legal issues ranging from employment law to zoning ordinance will be applicable to you.

Fifth, bringing people on to your property – such as workers, tourists, customers, and “U pickers” – will introduce many legal issues which might not be present when just your family is involved.  While the risks or potential liabilities in most of these situations are manageable – such as through insurance and training – there are potential legal challenges and costs you will face when dealing with the public.

One way to avoid possible legal problems is to ask for advice from people who should know the answers to your questions. To consider some of the people you should call before beginning a direct farm marketing business see the box.

The Six Phone Calls to Make Before You Begin Direct Farm Marketing

  • The local land use planning authorities
  • Your insurance agent
  • The state food inspection and licensing officials
  • The state labor commissioner
  • The state department of agriculture’s marketing and diversification office
  • Your attorney

Thoughts on How to Find an Attorney

Q. What if I don’t have an attorney, how do I find one who will understand my farming business?
A. If you don’t already use an attorney for your farm business you should consider locating one who you can ask for advice on important legal issues.  Sound legal advice can be a very important factor in making good business decisions – whether it is in deciding how to structure your business, planning your estate, or purchasing property.  But remember – legal advice is like any other input or service you obtain for your farm – you get what you pay for.   Since you are paying the bill you should be satisfied with what you get – this doesn’t mean the answer will always be what you want to hear but you should feel like you were well served.  The way to make this happen is to be an informed consumer and to have a good idea of your legal needs.  One purpose of this book is to help you recognize when you might need legal advice so you will know when to contact your attorney.

Even if your local lawyer has never handled your exact problem before doesn’t mean the lawyer can’t provide you with excellent representation.  All lawyers are required to be competent in the fundamental areas of legal practice.  Most of the legal topics discussed in this book are not overly complex – perhaps with the exception of insurance and food safety issues.  Most attorneys, especially those who are familiar with agricultural law will be able to deal with your legal needs on issues such as contracts, property, land use, labor and administrative law.  However, if for some reason your local attorney is unable to help you there are sources of information you can contact for advice on finding an attorney who is familiar with your area of law.

As to finding an attorney, the best place to start is close to home with the law firms in your community.  One benefit of using local attorneys is they will be familiar with your area and the economy plus you may already know them socially.  Using a local attorney also means the attorney will be convenient when you need to visit.  One problem with using local attorneys is that if you are in a smaller town, the lawyers are probably general practitioners – meaning they handle all types of legal matters.   This doesn’t mean they aren’t good attorneys, it may mean they might not have prior experience with the unique legal issues you bring to them.  But one of your tasks as the client is to help them understand your business.  You might suggest your attorneys obtain a copy of this book or even buy them a copy.

Q. Where can I obtain information about attorneys who might have experience with agricultural law?
A. There are several places you can turn for information about attorneys who have experience with the laws relating to farming and the direct marketing of food.  First, the legal profession in each state operates what is known as the state bar association, usually headquartered in the state capitol.  State bar associations maintain directories of all the attorneys licensed to practice in a state.  Some states allow attorneys to advertise themselves as being specialists in certain areas of law, if the attorneys can meet the strict requirements for such listings.  In many farm states the state bar associations have organized sections or committees of lawyers who work primarily with agricultural law.  If you contact your state bar association ask if they have an agricultural law section or if they have a list of specialists in the area of law in which you need advice.

A second important source of information about attorneys who concentrate on agricultural law is the American Agricultural Law Association (AALA). This organization was formed over 30 years ago to give attorneys, extension personnel, and others working on agricultural law the opportunity to improve their understanding of this unique area of law. For information on how to find agricultural lawyers in your state see the sidebar.

In addition to the AALA, there are several law schools which offer educational programs focusing on agricultural law. These include:

Drake University Law School in Des Moines, Iowa, has had an Agricultural Law Center since 1983.  The Center sponsors a number of educational efforts, such as publishing legal guides for farmers – like this book, and offers an annual Summer Agricultural Law Institute of specialized one-week courses on agricultural law.  For more information about the Center contact: Drake University Agricultural Law Center, 2507 University Ave., Des Moines, Iowa 50311 or call 515-271-4956.

University of Arkansas School of Law in Fayetteville, Arkansas, has had a masters of law program in agricultural law since 1981.  Each year 8 – 10 attorneys from around the U.S. and the world spend a year in Fayetteville, learning about the unique role of law in agriculture.

”The
As agriculture has become more complex and more legalized there has been a need for lawyers and other professionals working in the area to obtain the education and other information needed to stay current with legal developments. For more than thirty years many of the lawyers across America who work with agricultural law have been members of the AALA. The organization publishes a monthly newsletter, hosts an annual educational conference, and provides other benefits to members. It also has a directory of members, with information about the areas of law in which they work. For more information about the AALA visit their website here or contact: AALA, 127 Young Road, Kelso, WA 98626 or call 360-200-5699.
The University of Arkansas is also home to the USDA funded National Center for Agricultural Law Research and Information (NCALRI), which was created in 1986. The Center has a staff of full-time research attorneys who work on various issues involving agricultural law.  The Center staff includes attorneys with experience in direct farm marketing.  To contact either program, write to the University of Arkansas, School of Law, Fayetteville, Arkansas 72701 or call 501-575-7646.

Penn State – Dickinson School of Law is located in Carlisle, Pennsylvania. As part of the 1997 merger of the two institutions, state officials funded the creation of an Agricultural Law Research and Reference Center to research important issues facing farmers and the agricultural business sector.  The school is developing courses and other research and educational programs for lawyers and farmers.  The Center is a good source for information about agricultural law affecting direct farm marketing in the east.  To contact the Center, write: Agricultural Law Research and Reference Center, 329 Innovation Blvd., Suite 118, University Park, PA 16803, or phone 814-865-3723.

The Ohio State University, Agricultural and Resource Law Program, supported by Ohio State University Extension, provides access to a variety of legal resources as well as outreach programs and conferences. For further information contact: 345 Agricultural Admin Building, 2120 Fyffe Road, Columbus, OH 43210, or phone 614-247-7898.

The University of Florida, located in Gainesville, Florida, also maintains an Agricultural Law Center, which develops, implements, and maintains education and extension services on a variety of law topics important to Florida agriculture. The center can be contacted at: Department of Food and Resource Economics, University of Florida, Gainesville, FL 32611, or phone 352-392-1881 Ext. 327.

Of course, there are other sources of information about attorneys who might be able to handle your legal needs.  You can always ask your friends or other producers who they use.  You might also ask the local extension personnel for recommendations.  Regardless of how you choose to locate an attorney, please recognize how important sound legal advice can be, especially before you decide to take any action which might trigger serious consequences.

 

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