[There is no point in selling yourself short.]
If the sale does in fact cause your supply to go short.
But... If not....
Do consider, this could be an additional $600-750 for the year.
That does pay for a lot of queens, maybe a dozen packages, or whatever extras you want for your bees.
I don't like the idea that you're asked to take a $150 dollar discount for the year, I'd fight for $25/gal.
This is still probably better than 'packer' pricing.
Keep it in mind if this is bulk honey that you are not out the bottling, labeling, or labor to sell at a farm market. If you are able to retail everything, then I'd probably not buckle and sell at full retail (then you'd gross your $1400+).
I could be an easy way to 'loose' some honey if its faulty in quality in any way.
I have found it is nice to have an outlet for second rate product (IE: Bakeries).
[Probably wanted the price lowered so he could resale.]
And that's a serious point to consider.
You don't need someone showing up at the local farmers market, under-cutting you.
But, if it happens, you can cut the supply (I'd not sell to him on any kind of contract).
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You know your market best.
You know the level of effort you care to put into your sales.
In the end, it has to be your decision.
But at least you should consider that could be benefits to what seems like a ridiculous situation.
The best armies in the work turn their weaknesses into strengths.
-Jeff