Each growing season, producers must decide how and where to sell their crops. Farmers markets, grocery stores, roadside stands, and wholesale distributors are excellent established options; however, there are new opportunities to consider. Charitable donations and second-generation uses of fresh fruits and vegetables have opened more markets for local producers.
Donate to a Charitable Organization
Donating extra fruits and vegetables to a faith-based group, food pantry, or other charitable organization has always been a worthwhile cause, but it has provided little tax benefit to the donor. As of the 2020 tax year, producers working with a qualified 501(c)(3) organization can deduct an amount calculated on 25 percent of the fair market value of the donated products.
To take advantage of the provision, producers must adhere to guidelines, including that the food meets standard federal, state, and local laws and guidelines even if it is not salable because of its age, appearance, or freshness. In addition, the charitable or nonprofit organization must give the producer documentation including a description, date of donation, intended use of products, affirmation of compliance with federal donation and 501(c)(3) laws, and assurance that the organization’s records will be adequately maintained and available to the IRS upon request. This should not be an issue for most 501(c)(3) organizations.
The overall deduction per year is limited to 25 percent of a farm’s net income. Any donation beyond that amount can be carried over and claimed for 5 years from the time of donation. Producers must determine whether itemizing deductions or taking the standard deduction is most beneficial to them. It is a good idea to consult an accountant or your local Extension office to determine how the provision affects you.
Sell to Breweries, Wineries, and Distilleries
Produce grown in the state is often sought by local breweries, wineries, and distilleries. Although these businesses typically use only fruits in their processing, this is not absolute. A wide variety of products may be used, depending on the operation, location, season, and other factors. Popular Alabama crops include peaches, strawberries, blueberries, blackberries, apples, citrus, melons, plums, muscadines, and pecans. Producers should contact individual businesses to learn their particular production needs.
So just how much produce can a producer expect to sell? For beer and wine flavorings, the quantity will not be huge, but one advantage of these markets is that fruit can be used beyond its salable date at the farm or local market. The produce is not bad, of course, but rather has become unsalable to the public because of its age, appearance, or freshness. Consumers can be picky about the appearance of produce, but that does not diminish its quality. In this case, the beverage industry can sometimes still use it.
Distilled products, such as brandy and spirits, use a much greater quantity of fruit, and several distilleries are located in Alabama. Producers are generally responsible for getting their crops to the business. One method is to arrange with the distiller to drop off produce after a day at the local farmers market. Producers are generally paid in line with wholesale prices. This can be an opportunity for farms to profit from produce that will be unsalable in the near future.
Make Products Using a Commercial Food Kitchen
Another option for using unsalable produce is to make value-added products such as jams, barbecue sauce, savory sauces, fruit sauces, pickles, and frozen pie filling. The Chilton Food Innovation Center (CFIC), managed by Alabama Extension, is a shared-use food processing facility in Clanton, Alabama, that helps fruit and vegetable producers become processors without having to equip their own commercial kitchens.
The 2,000-square-foot building contains processing and packaging equipment, a small office, storage space, and sanitation supplies. Facility fees are about $40 an hour.
There are different methods for getting products made. One option is to hire a copacker to make the product for you. Another is to become a food processor yourself. This option requires more training, but it also allows for more quality control. Either way, there are startup costs. Keep in mind, though, the costs associated with production can be covered by risk diversity and additional sales, as these products can be sold at markets throughout the year.
Christy Mendoza, an Alabama Extension regional agent and food scientist, is available for consultation throughout the startup process. For more information, contact the CFIC at (205) 280-6268 or visit their website.
Revised by Christy Mendoza, Regional Extension Agent, Food Safety and Quality, and Jessie Boswell, Regional Extension Agent, Commercial Horticulture, both with Auburn University. Originally written by Kevin Burkett, Regional Extension Agent, Farm and Agribusiness Management; Robert Page, Regional Extension Agent, Farm and Agribusiness Management; Max Runge, Extension Specialist, Agronomic Crops; and Christy Mendoza, all with Auburn University
Revised June 2021, Make More of the Food You Grow, ANR-2504