Contract farming - linking farmers to market
Safeer pasha. M., Lecturer in Commerce & Management, Brindavan College
Marketing of agriculture commodities in India is one the major problem faced by the farmers. Moreover, farmers need both forward and backward integration in agriculture. Contract farming is a mechanism where a farmer, the producer of the agriculture produce is going to have an agreement with a company which is in the business of either direct consumption of produce for further processing or which is working on behalf of other company. The process includes an agreement where the producer will have to produce desired produce with desired quality for the contract farming company. The agreement also include the supply of some of the inputs required for the production of agriculture produce such as provision of quality seeds, pesticides, financial assistance, technical assistance etc. The responsibility on both the parties is pre agreed where the producer has to produce the required produce for company and in turn the company will take the responsibility of marketing the produce. In other words in contract farming there is an agreement between the farmers and processing/or marketing firm, service centers for agricultural marketing firm for the production and supply of specified agricultural products under a forward agreement, at a pre determined price and quality. The agreement provides purchaser to provide a degree of production support through agricultural inputs and technical guidance for the cultivation of crops. On part of the farmers the responsibility is to produce specified agricultural produce with specified quality and quantity standards which are fixed by the purchaser. Contract farming can also be called as an agreement where the producer sells his produce to the known buyer under the forward contract agreement. The buyer may be an agribusiness firm, a local processing unit or a multinational company. The contract is thereby a commitment by a seller/farmer to supply an agriculture commodity of a particular quality, at a particular time, in requisite amount and at a pre agreed price to the buyer. The system of contract should be seen as a partnership between agribusiness enterprise and farmers. The success of the contract requires a long term relationship between both the parties of the contract.