4 min read
Local produce at a farmers market.

With each growing season, producers must decide how and where to sell their crops. Farmers markets, grocery stores, roadside stands, and wholesale distribution are excellent established options. But there are new and trending opportunities to consider. Charitable donations as well as second-generation uses of fresh fruits and vegetables have opened more markets for local producers.

Figure 1. Extra fruits and vegetables donated to charitable organizations may be tax deductible. Producers must follow certain guidelines to take advantage of the tax benefits.

Figure 1. Extra fruits and vegetables donated to charitable organizations may be tax deductible. Producers must follow certain guidelines to take advantage of the tax benefits.

Charitable Donation

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 2016 tax year, producers working with a qualified 501(c)(3) organization may deduct an amount calculated on 25 percent of the fair market value of the donated products.

To take advantage of the provision, producers must follow these guidelines:

  • The food must meet typical federal, state, and local laws and guidelines, even though it may not be sellable because of age, appearance, freshness, etc.
  • A producer must acquire a statement from the charitable organization giving a description, date of donation, intended use of products, compliancy with federal donation and 501(c)(3) laws and indication that the organization’s book will be adequately maintained and available to the IRS upon request. This should not be an issue for most 501(c)(3) organizations.

Here is how the deduction calculation works, using a $10.00 basket of peaches as an example.

$10.00 (price of peaches) x 25% = $2.50 (amount used as basis of deduction). This $2.50 figure is then applied to two different calculations:

  • The basis of the donated food times two $2.50 x 2 = $5.00
  • One-half of the food’s expected profit margin plus the basis of the donated food $10.00 – $2.50 = $7.50 (profit margin) x .50 = $3.75 (half the profit margin) + $2.50 = $6.25
Figure 2. Donating fruits and vegetables to charitable organizations is a worthwhile opportunity for producers to distribute their crop yields.

Figure 2. Donating fruits and vegetables to charitable organizations is a worthwhile opportunity for producers to distribute their crop yields.

The lesser amount of the two calculations is the dollar figure you can deduct. So, in this example, $5.00 is the amount you can deduct on the $10.00 basket of peaches.

The overall deduction per year is limited to 15 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 need to determine if itemizing deductions or taking the standard deduction is most beneficial to them.

We recommend consulting an accountant or your local Extension office to determine how the provision affects you.

Breweries, Wineries, and Distilleries

Produce sourced within the state is often sought by local breweries, wineries, and distilleries. These businesses typically use only fruits in their processing, but this is not absolute. A wide variety of products may be used, depending on the operation, location, seasonality, and other factors. Popular Alabama crops include peaches, strawberries, blueberries, blackberries, apples, citrus, melons, plums, muscadines, and pecans. Producers are encouraged to contact individual businesses to learn their particular production needs (table 1).

Figure 3. Muscadine grapes are among the Alabama-grown crops popular with breweries, wineries, and distilleries.

Figure 3. Muscadine grapes are among the Alabama-grown crops popular with breweries, wineries, and distilleries.

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 sellable date at the farm or local market. We are not talking bad produce, of course, but rather produce that has become unsalable to the public because of age, appearance, or freshness. In this case, the beverage industry can sometimes still salvage and use it.

Distilled products such as brandy and spirits use a much greater quantity of fruit. Several distilleries are located
in Alabama. Producers are generally responsible for getting their crop to the business. An idea is to arrange with the distiller to drop off produce after a day at the local farmers market. Producers generally are paid in line with wholesale prices. This can be an opportunity for farms, especially, to profit from produce that will be unsalable in the near future.

Commercial Food Kitchen

Chilton Food Innovation Center (CFIC) is a shared-use food processing facility in Clanton, Alabama. It was developed to help fruit and vegetable producers become processors without the cost of equipping their own commercial kitchen.

Value-added products are created here that extend the shelf life of fruits and vegetables and add profit to producers’ bottom line. Examples of value-added products include jams, barbecue sauce, savory sauces, fruit sauces, pickles, and frozen pie filling.

Figure 4. Christy Mendoza is available for consultations throughout the startup process. She is an Extension regional agent and food scientist.

Figure 4. Christy Mendoza is available for consultations throughout the startup process. She is an Extension regional agent and food scientist.

Managed by Alabama Extension, the 2,000-square-foot CFIC building contains processing equipment, a small office, storage space, and packaging supplies. Facility fees equate to about $40 an hour. There are different paths to getting products made. One option is to hire a copacker to make the product.

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 for several years.

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 info@ chiltonfoodinnovationcenter.com.

Table 1. Possible Sources for Alabama-Grown Fruits and Vegetables

BusinessLocationContact
Wineries--
Perdido VineyardsBaldwin County(251) 937-9463
White Oak VineyardsCalhoun County(256) 231-7998
Hidden Meadow VineyardChilton County(205) 688-4648
Fruithurst WineryCleburne County(256) 463-1003
High Country CellarsCleburne County(256) 463-3456
Log Cabin VineyardDallas County(205) 213-5011
Maraella Winery and VineyardEtowah County(256) 494-1000
Wills Creek WineryEtowah County(256) 538-5452
Maria’s VineyardHouston County(334) 702-0679
The Winery at Pepper PlaceJefferson County(205) 250-6326
Whippoorwill VineyardsMacon County(334) 257-2711
Mad County WineryMadison County(256) 651-5669
Jules J. Berta VineyardsMarshall County(256) 891-5115
Morgan Creek VineyardsShelby County(205) 672-2053
Ozan VineyardShelby County(205) 668-6926
Vizzini Farms WineryShelby County(205) 685-0655
Bryant VineyardTalladega County(256) 493-1260
Hodges Vineyards and WineryTallapoosa County(256) 896-4036
Malthouse--
Old South Malthouse, Preston PrewettJefferson(205) 910-9660
Distilleries--
Wolf Creek DistilleryBaldwin(251) 943-4853
High Ridge SpiritsBullock(334) 474-3942
Gibson Distilling Inc.DaleN/A
Big Escambia Spirits, LLCEscambia(229) 886-3635
Chaple Distillery LLCJefferson(786) 444-8720
Redmont DistillingJeffersonstephen@redmontdistilling.com
John Emerald Distilling CompanyLee(334) 294-6505
Irons DistilleryMadison(256) 536-0100
Peaden Brothers DistilleryCrestview, Florida(850) 306-1344
Breweries--
Fairhope Brewing CompanyBaldwin(251) 279-7517
Cheaha Brewing CompanyCalhoun(256) 770-7300
Patriot Joe’s AleCalhoun(256) 405-4366
Goat Island BrewingCullman(256) 747-5556
Back Forty Beer CompanyEtowah(256) 467-4912
Folklore Brewing & MeaderyHouston(334) 702-2337
Avondale Brewing CompanyJefferson(205) 777-5456
Good People Brewing CompanyJefferson(205) 286-2337
Cahaba Brewing CompanyJefferson(205) 578-2616
TrimTab Brewing CompanyJefferson(205) 703-0536
Red Hills Brewing CompanyJefferson(205) 582-2897
Ghost Train Brewing CompanyJefferson(205) 201-5817
Singin’ River BrewingLauderdale(256) 349-2294
Red Clay Brewing CompanyLee(334) 737-5409
Below the Radar BrewhouseMadison(256) 469-6617
Blue Pants Brewery and Tap RoomMadison(256) 325-1131
Old Black Bear Brewing CompanyMadison(256) 850-4639
Yellowhammer BrewingMadison(256) 489-3510
Salty Nut BreweryMadison(256) 713-8877
Straight to Ale BrandsMadison(256) 801-9650
Rocket Republic Brewing CompanyMadison(256) 325-4677
Mad Malts BrewingMadison(256) 503-2233
Green Bus BrewingMadison(256) 990-2477
Main Channel BrewingMarshall(256) 960-5070
Railyard Brewing CompanyMontgomery(334) 262-0080
Chattahoochee Brewing CompanyRussell(334) 559-0663
Druid City BrewingTuscaloosa(205) 342-0051
Band of Brothers Brewing CompanyTuscaloosa(205) 266-5137
Black Warrior Brewing CompanyTuscaloosa(205) 248-7841

Contact us with updates or corrections to this list.

 

Download a PDF of Make More from the Produce You Grow, ANR-2405. 

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