Wholesale Produce Pricing & Buyer Contracts 101

Wholesale produce pricing isn't quoted the way farmers think it is. The number a buyer says on the phone and the number that lands in your bank account can differ by 20–35% once you account for FOB vs delivered, packout, shrink, and chargebacks. This guide walks the language and the contract clauses every specialty crop farmer should know before signing.

FOB vs delivered: who pays freight

FOB (Free On Board): price is at your dock. Buyer arranges and pays freight. Lower headline price but you keep your trucks.

Delivered: price is at the buyer's dock. You pay freight, and the buyer assumes you've baked it in. Higher headline number, lower net.

Rule of thumb: on a 600-mile haul, delivered should be FOB plus $4–$7/case for tomatoes or peppers, more for refrigerated reefer-only loads. If a buyer wants delivered at FOB pricing, walk.

Packout grades: what you're actually selling

USDA grades (U.S. No. 1, U.S. No. 2, etc.) are the official spec, but most wholesale buyers also have a private "buyer grade" that adds size and color tolerances. Read both. The difference between a U.S. No. 1 tomato and a buyer's "Premium" pack is usually 5–10% rejection rate, which comes out of your check.

Where to anchor your price

• USDA AMS Terminal Market Reports: free daily wholesale pricing from Atlanta, Miami, Philadelphia, New York. The honest baseline.
• USDA Specialty Crops Market News: region-specific shipping point and movement reports.
• BAU market intel: a normalized view of those feeds with regional basis and 12-month seasonality for the crops on your plan.

Quote 5–10% above the most recent shipping-point report for premium packouts; meet it for standard. Quoting below the report on volume burns the market for everyone.

Pre-season contracts vs spot

Spot is the open market: ship today, get this week's price. High ceiling, real floor risk.

Pre-season contracts lock volume and a price (or a price range) months before harvest. You give up the top of the market for a predictable floor and a committed buyer.

For most specialty crop farms in Zones 7–9, the right answer is to contract 60–75% of expected volume pre-season and run the remainder on spot. That covers fixed costs and labor while keeping upside on a good year.

8 contract clauses to read before signing

1. Volume tolerance. ±10% is standard. Tighter is a trap.
2. Quality spec. Reference USDA grade and buyer addendum.
3. Inspection & rejection. Who inspects, when, and what the cure period is. 24 hours is fair.
4. Pricing mechanism. Fixed, fixed-with-escalator, or market-minus. Each behaves very differently in a bad year.
5. Payment terms. Net 14 is the goal. Net 30+ ties up your cash.
6. Force majeure. Weather, disease, labor disruption. Both ways.
7. Chargebacks. Cap them. Uncapped chargebacks erase profit on a single bad load.
8. Termination. Cure periods before either side can walk. 7–14 days minimum.

How BAU helps

The pre-season buyer marketplace in BAU surfaces verified buyers, generates contract templates with the clauses above as defaults, and tracks pricing against your production plan. Read more about why we built it this way in our buyer strategy, or jump straight to pricing.