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AJP Standards for Buyers & Contracts

AJP Standards for Buyers & Contracts

AJP standards for buyers #

As with the standards for relations between employers and employees, FJC standards exclude unethical trading practices. Farmers who are used to selling direct may not have experienced the harsh conditions of wholesale buyers who play hard ball with farmers. Fortunately, buyers for food coops, independent markets, and farmer-worker controlled brokers rarely exhibit the behaviors of corporate processors or the big integrators (see the documentary Under Contract).

The AJP standards stipulate that “contracts between farmers and buyers will be fair, transparent, and equitable.” In practice, this means that farmers must enjoy freedom of association, that is, the right to join with other farmers to better negotiate with buyers without fear of retaliation. If farmers choose someone to represent them in negotiations with a buyer, the buyer must negotiate in good faith with that representative. Buyers must not pit farmers against one another to drive down prices or use discriminatory ranking systems.

In all too many markets, farmers are faced with “take it or leave it” prices. To qualify for Food Justice Certification, buyers must agree to an open and transparent process of negotiation with farmers. This does not mean that farmer and buyer must re-negotiate every separate transaction. However, if the farmer asks to discuss a particular price, the buyer must agree to an equitable and transparent process of negotiation. Buyers will not use binding arbitration clauses in contracts with farmers since binding arbitration prevents farmers from having access to the courts even when a buyer may have violated state or federal law. If either farmer or buyer takes a case to court over violation of some law, the party that is found to be in violation of the law is responsible for court costs and attorney fees.

Farmers should be paid fair prices for their products, that is, prices that fully cover the costs of production, including at least living wages and basic benefits for the farmer and all employees and at least a small margin for investment in the farm and for profit. In return, FJC farms will be transparent with buyers about production costs in negotiating fair prices.

Contracts between buyers and farmers may be verbal or written. In the produce business, the custom has been for contracts to be verbal, even for very large dollar values. Farmers are well advised to get agreements with buyers down on paper. However, even when a contract is verbal, there should be a clear conflict resolution process through which farmers and buyers can submit complaints and appeals to address concerns about prices, quality requirements or other aspects of the deal without fear of retaliation. Any change in a contract must be negotiated and agreed to by both parties.

Contracts, whether written or verbal, should include terms for: price setting, quality, quantity, shipping schedule, equity-sharing, other benefits, standards, conflict resolution, and any pre-finance/credit arrangements. The farmer also must be first in line to recover payments due from the buyer should the buyer go out of business. Both parties should agree on these terms before the harvest season or delivery dates.

Farmers must have access upon request to buyers’ contract files on them and must be free to discuss the contract terms with others including other farmers, family members, and legal advisors. After signing a contract, both sides have up to three business days to change their minds and cancel the deal without penalty.

Relationships between buyers and farmers should be long-term and stable, with mutual respect for the needs of both parties.

Upon request, buyers must provide farmers with a copy of the contract defining the farmer’s roles, payments, benefits, and equity-sharing arrangements. The contract information must be easy to read and understand and must clearly disclose all major material risks to the farmer.

Buyers must provide farmers with information on the total quantity delivered and the total money paid to the farmer.

If a FJC farmer considers the offered price unfair, the buyer must provide full transparency of their costs and pricing formulas. Reciprocally, farmers must be willing to share information about their production costs if the buyer questions the fairness of a price. FJC farmers can expect full and accurate information about pricing and costs from buyers.

If a buyer cannot afford to pay the price a farmer considers fair, the buyer must be willing to document and justify the inability to pay, including full disclosure of financial records such as the most recent profit and loss statement. The buyer then must implement a plan with a timeline for improvement to reach a fair price. If extreme market volatility is occurring so that market prices fall below the farmer’s costs of production, buyers will negotiate minimum fair pricing.

If a contract requires that a farmer make capital investments and the buyer terminates the contract, the farmer can collect damages related to those capital investment, as long as the farmer is not guilty of breach of the contract prior to its termination. If a buyer cancels a production contract before a certified farmer’s mortgage to engage in that contract is paid in full, the buyer must reimburse the certified farmer for the remainder of his investment. This includes any buyer-required capital improvements or upgrades since the initial mortgage was obtained.

Buyers are prohibited from excessive docking for low quality and other deductions from payment to farmers. Farmers have the right to conflict resolution to discuss quality standards and how they are enforced.

Neither farmer or buyer will discriminate against the other in setting agreements, contracts, pricing, benefits, or any other capacity, on the basis of race, creed, color, national or ethnic origin, nationality, gender, gender identity, age, handicap or disability, union or political activity, immigration or citizenship status, marital status, or sexual orientation.

Wherever possible, buyers will deal directly with farmers or groups of farmers, rather than buying through intermediaries. If farmers choose to use brokers or intermediaries, FJC buyers still have full legal responsibility for meeting FJC standards for negotiations, transparency, and fairness, and agree to full verification of all transactions.

If a buyer terminates a contract with a farmer, it must be for just cause.

FJC farmers have the right to save seed and re-use that seed on their farm.

FJC buyers will have a sourcing policy that favors FJC farms. Both FJC farmers and buyers must commit to continual improvement in their dealings. Buyers can fulfill this requirement by increasing the amount of product they buy from FJC farms. Buyers and farmers must select from the FJC additional voluntary standards or develop specific practices that align with the principles of fair trade and show progress from year to year. It is not enough to just barely meet FJC standards and then remain stationary.

A buyer may pay for a farmer’s Food Justice Certification, but then if the farmer wants to use the certification for other markets, the farmer must make an agreement with the buyer who has paid the certification fees.

If a farm qualifies for FJC, FJC buyers can expect that the farmer will keep certification up to date.

Both buyers and farmers must maintain good community relations. There are many ways to do this. Here are a few examples:

  1. Developing a policy of hiring and training local people
  2. Purchasing from local and regional suppliers of products and services
  3. Providing resources to promote fair labor practices and living wages throughout the community.
  4. Supporting local schools through tours or classes for students, health and social services, cultural events, language classes, translation services.

Further resources #

This checklist is designed as a tool to help farmers and buyers run through the AJP fair pricing standards (on the left) to see if they are already in compliance and to identify the areas they may need to work on prior to seeking certification to the AJP standards. This is based on the standards regarding farmer responsibilities to certified buyers and buyer responsibilities to farmers. Examples of the types of documentation that are likely to demonstrate compliance with the standards are listed on the right; however, adequacy of documentation is ultimately up to the certifier (who may request additional documentation). Standards are also verified during audit interviews with farmers and buyers.