Contracts – 2025 Farm Legal Series

Marketing and production contracts can secure baseline prices, allowing you to focus on efficient production and long‑term planning in your farming operation. Agricultural producers are increasingly relying on long-term production and marketing contracts—agreements that set delivery quantities and payment formulas before production begins. The Extension Farm Legal Series outlines the legal framework and practical risks those contracts create.

Federal law (including PSA and PACA provisions) and the Minnesota Agricultural Contracts Act provide important producer protections, such as arbitration and mediation requirements, plain-language and rescission rights, and parent-company liability. But producers must still carefully evaluate quantity obligations, price-determination formulas, and payment conditions to avoid unexpected losses.

Before signing a marketing contract, producers should review the payment and delivery terms with their lender or attorney to ensure the agreement fits market realities and preserves flexibility.

The three fact sheets in this area focus on production contracts, marketing contracts, and information about contracts, notes, and guarantees. In this section of the Legal Series, you’ll discover the ins and outs of contracts.

Production contracts

A production contract is a legal agreement in which a farmer agrees to provide a service or produce a crop or livestock for a contractor, who typically owns the commodity or provides essential inputs or technical guidance for producing that crop.

Production contracts are vital for farmers as tools to mitigate uncertainty and market swings. A production contract can secure a continued market for a farm’s products, reduce risk and financial uncertainty, and bring a steady income.

When locking in a production contract, a farmer can lose the potential high market profits that come with a fluctuating market, and that is a trade-off for the security of having the production contract.

Marketing contracts

A marketing contract in farming is a formal agreement between a farmer and a buyer for a product that the farmer grows and that the buyer will purchase. The agreement is usually entered before the agricultural commodity is harvested, ready for market and sometimes even before it is planted.

Marketing contracts are vital for farmers as tools for mitigating uncertainty and market swings in farming. A marketing contract helps reduce risk by shifting some of the risk from the farmer to the buyer, provides price and income stability, and guarantees a market for the product.

Understanding contracts, notes, and guarantees

Entering into a contract involves careful consideration of several key elements. This section of the Legal Series highlights the essential components of a contract, including the subject matter, time frame, financial terms, and any payment or installment schedules.

While contracts are typically formed in good faith with the expectation of mutual benefit, it is equally important to address provisions for termination. Clearly outlining how a party may exit the agreement or what happens if a party is in default helps protect both sides and ensures transparency throughout the contractual relationship.