Ag Innovations: Blossom Contract

DRAFT – UNDER CONSTRUCTION

Croatian Apple growers in the Watsonville/Pajaro Valley developed the Blossom Contract

In the 18070s, Marko Rabasa, an imaginative Croatian who was brokering fruit from the Watsonville to San Francisco, needed to increase his stable fruit supply for the retail market. He looked to Sugar beet  production contracts that were being used in the area. He emulated arrangements that paid Sugar beet growers to increase their acreage. This was risky because, unlike sugar beets, apples are perishable and the contract price was inked before the market price was set.

Rabasa counted on his ability to “read” the apple trees.

When the trees had just blossomed he would assess the health, anticipated fruit load, and value of the crop and would estimate yield and the potential for spoilage. This is how he would determine how much shippable fruit would be available and he would contract with the grower  accordingly. In tandem, and as important to the grower, he fronted the growers short-term capital by paying some money up front and put the rest in an escrow account to be paid at harvest. 

This approach was unprecedented for perishable fruit. It was a rudimentary “future’s contract” that changed the business of fresh fruit marketing. The blossom contract removed risks of supply and demand for the grower. The buyer assumed those risks. The upfront money floated the grower for the production year. Consequently, with a known market and operating capital, growers were motivated to grow more apple trees. And an industry was born.

This “new focus of distribution based on demand [rather than available supply] was the equivalent to asking grocers what their customers wanted rather than simply providing what farmers had chosen to grow.” (Mekis)


Books and References

Source: Mekis, Donna and Miller, Kathyrn Mekis. Blossoms to Gold: the Croatians in the Pajaro Valley. Capitola Book Company.