The Secret to Expanding Your Acreage? Partners
How many farms start with 100 acres and increase that number to 5,000? Probably not too many.
Those at the helm of Uesugi Farms in Gilroy, CA, tackled that task head on and expanded their operation by forming partnerships rather than acquiring farms or additional land.
Run by the father-and-son team of Joe and Pete Aiello with the help of many long-time employees, Uesugi Farms and its grower partners produce more than 20 varieties of bell peppers, chili peppers, Napa cabbage, sweet corn, strawberries, pumpkins, squash, and beans.
The various commodities are sold to retailers, foodservice distributors, wholesalers, and processors in the U.S. and worldwide, and the farm’s operations and partnerships span across areas in California, Arizona, and Mexico.
If you are thinking of expanding, even just a little, and don’t want to go the acquisition route, take note of what the Aiellos did to form partnerships and how they turned these ventures into profits.
In Uesugi Farms’ case, it made sense to form partnerships rather than acquire land because the farmland surrounding Gilroy was saturated, General Manager Pete Aiello explains.
“If we were to acquire land in other areas, we would be traveling — and farming all of it by ourselves. That is hard to do when you are spread out over many miles and growing intensive crops like vegetables,” he says.
Plus, there is less risk in forming a partnership than in purchasing farmland or starting a new operation, Pete adds.
Why Flexibility is Key to Alliances
Partnerships come in all shapes and sizes — at least they do if you are working with Uesugi Farms.
“We have custom growers, joint partnerships, and everything in between,” Pete explains. All partners grow under the Uesugi name, and it is the partner who determines the type of agreement to be formed, he adds.
For custom growers, Pete says those operations typically charge Uesugi a flat fee, per acre. The grower’s costs — and some profit — are covered by Uesugi Farms.
Other partnerships include growers who own 100% of their crop. In those instances, the partnering grower assumes all the risk. Pete says Uesugi Farms provides these growers with services such as harvesting, cooling, shipping, and selling. Uesugi Farms takes a commission and charges a fee for their services, while still providing the partner with a return.
The operation also has joint ventures where the partner and Uesugi Farms invest a certain percentage into the growing, harvesting, and postharvest costs. When the harvest is complete, Pete says profits are split according to each side’s percentage of investment.
“Some growers are becoming more and more hesitant to put their neck out for high-risk crops such as peppers, for example. But there are some who want to invest, and when we are entertaining a prospective partner, we ask them if they want to risk anything in the partnership,” he explains. “If they do, we ask them how much they are willing to risk. While some say they don’t want to risk anything, some say 25%, and others want a 50-50 partnership, so it is all over the board.”
Division of Responsibility
For both sides of the partnership, an obvious benefit is mitigating a degree of risk. Plus, when partner growers align themselves with Uesugi Farms, they are working with an established packer and shipper who has a good name in the industry, Pete says.
“We have a lot of channels in which to sell our product, and we think we do a good job selling it,” he says. “We will fetch top dollar for our growers. If they are growing something like peppers, which we are known for, the partnership allows some of these growers to hitch their wagon to a proven partner.”
For most of the partnerships, Pete says the grower handles production and Uesugi Farms takes care of the harvest and postharvest needs, but in some situations Uesugi contributes services on the growing side, too.
“In several cases, we secure seed and plants for [the partner],” he explains. “We will actually plant the fields for them and if the field requires plastic, we will install the plastic. It all depends on the type of partnership that was formed. Some don’t need our help with that type of thing and some do.”
Make Good Choices
The formation of any type of partnership doesn’t happen overnight, either. Part of the process involves finding growers in specific geographic regions in order to achieve harvest during a certain time of year to help increase the availability of a crop.
Several criteria also must be met, and the first is having a good reputation in the industry, Pete says. The potential partner also must have good soil, a good water supply, and have an adequate area for production in order to make it a worthwhile venture.
“The ag community is a small one and those growing your commodity, such as bell peppers, get to know you if you’re around long enough,” he says. “We only pick partner operations that are hard-working and forward thinking. When we visit [a potential partner’s] fields, we want to see that their fields are precisely managed and clean.”
Most of the grower alliances are for peppers – bell and chili – but in recent years other commodities including sweet corn, Napa cabbage, squash, and beans have been added to the list, Pete says.
To date, in California, Uesugi Farms works with seven growers in the Morgan Hill and Gilroy areas, two growers in Coachella, one in Oxnard, four in Bakersfield, and one in Phoenix, AZ. The farm also works with four growers in Mexico.
The Right Location for Production
With one of the new partnerships in Mexico, Uesugi Farms soon will be able to offer Napa cabbage year-round. Peppers are already available all year, thanks to the partnerships.
Sweet corn will be the next for year-round production with partners in Mexico, most likely in 2018. The farm now produces about 1,000 acres in California.
Pete says when the farm began growing sweet corn eight years ago, the initial idea was to use it for rotational purposes to help build soil health.
“We had been growing dry beans for processing to help the soil, but producing the beans was pretty much a guaranteed loss, financially,” he says. “We thought sweet corn also was a good rotation crop and good for the soil. The other good thing about sweet corn is it gives you a fighting chance to make some money. From a marketing standpoint, it is another item we can ship along with our peppers and cabbage to make us a more attractive stop for our customers’ trucks.”
Aiello’s Advice to his Peers
Providing customers with what they want is important to any grower, and forming partnerships with other growers to be a go-to source of a variety of crops has worked well for Uesugi Farms.
Pete has a word of advice for those considering this option: Don’t rush into anything. Like the basis of any good relationship, the element of time is involved. He says to be sure to execute a proper vetting process on a prospective partner.
He also says experience growing a particular crop shouldn’t be a deal breaker when making your decision. Pete cites as an example a new partner who will be growing peppers for Uesugi but hasn’t grown the crop previously.
“If [the grower] has experience growing the commodity that you are going to grow with him, that is a plus but is not a necessity,” he says. “Knowing he is a good grower is more important.”