Contract Farming (in Indian Context)
Post 1 of 9
Whether Contract Farming is the right answer to the current woes confronting the nation's farmers or the corporate sector has played a smart move is one of the complex issues to answer.
As some researchers feel that there are risks involved in this arrangement
1. The lands will be used to grow only those crops which are required by the food-processing industry and not as per the suitability of the land or as required by the population at large - a case of loosing food security.
2. Farmers will have no role in decision making in this system. Corporates will tell farmers what to produce and what not to which will be leading to inevitable loss of natural seeds. It will be a transition from Agriculture to agribusiness which is not good for the country as a whole.
3. In a political economy, contract farming is one mode of capitalist penetration of agriculture for capital accumulation and exploitation of the farming sector by agribusiness companies.
Advantages advocated by some corporates:
A. For corporates
1. Contract farming will remove middlemen and hence lower will be the procurement costs for corporates.
2. Contract farming will be good for corporates to have an effective supply chain of their inputs.
B. For farmers
1. An assured income for the farmers because of the guarantee of purchase of their produce after harvest.
2. All the inputs and technological knowhow will be supplied by the corporates a great relief for farmers particular when the costs of seeds, fertilizers as well as interests costs on debts are increasing rampantly.
Keeping in view agriculture as a risky proposition in the prevailing situation, contract farming will be the answer as an economic security to the farmers. PepsiCo has already been having this arrangement with farmers of northen India for quite some time.
Contract farming seems to be an attractive alternative for the farmers in India inspite of the various risks involved in it as has been highlighted by many researchers of this field.
(Source: An article New terms of harvest by Gagandeep Kaur)
As some researchers feel that there are risks involved in this arrangement
1. The lands will be used to grow only those crops which are required by the food-processing industry and not as per the suitability of the land or as required by the population at large - a case of loosing food security.
2. Farmers will have no role in decision making in this system. Corporates will tell farmers what to produce and what not to which will be leading to inevitable loss of natural seeds. It will be a transition from Agriculture to agribusiness which is not good for the country as a whole.
3. In a political economy, contract farming is one mode of capitalist penetration of agriculture for capital accumulation and exploitation of the farming sector by agribusiness companies.
Advantages advocated by some corporates:
A. For corporates
1. Contract farming will remove middlemen and hence lower will be the procurement costs for corporates.
2. Contract farming will be good for corporates to have an effective supply chain of their inputs.
B. For farmers
1. An assured income for the farmers because of the guarantee of purchase of their produce after harvest.
2. All the inputs and technological knowhow will be supplied by the corporates a great relief for farmers particular when the costs of seeds, fertilizers as well as interests costs on debts are increasing rampantly.
Keeping in view agriculture as a risky proposition in the prevailing situation, contract farming will be the answer as an economic security to the farmers. PepsiCo has already been having this arrangement with farmers of northen India for quite some time.
Contract farming seems to be an attractive alternative for the farmers in India inspite of the various risks involved in it as has been highlighted by many researchers of this field.
(Source: An article New terms of harvest by Gagandeep Kaur)
02 Mar 2007 11:50
Post 2 of 9
Replying to [vshanker]:nice post shankar, Infact I donot have word to say anything.
![[em1]](http://img.alibaba.com/images/eng/style/icon/emoticons_smile.gif)
03 Mar 2007 02:04
Post 3 of 9
Replying to [vshanker]:
Contract farming is applied here in Turkey,too. Some tomate paste manufacturers make contracts with the farmers and undertake their yields to buy. Some times,when a new crop is needed to be promoted, they make contracts with farmers to have seeds produced for further sowings. As mentioned in your post, they provide seeds or saplings to the farmers to attract them in,but the contracts are breached generally for various reasons and either one of the parties goes to the courts..Going to the courts discourages the other farmers for the new contracts with the same or new companies..
Yarenimex
Contract farming is applied here in Turkey,too. Some tomate paste manufacturers make contracts with the farmers and undertake their yields to buy. Some times,when a new crop is needed to be promoted, they make contracts with farmers to have seeds produced for further sowings. As mentioned in your post, they provide seeds or saplings to the farmers to attract them in,but the contracts are breached generally for various reasons and either one of the parties goes to the courts..Going to the courts discourages the other farmers for the new contracts with the same or new companies..
Yarenimex
03 Mar 2007 06:08
Post 4 of 9
Replying to [yarenimex]: Yes you are right . Breach of contracts between corporates and farmers do happen. In India too, there are instances when corporates in want of potatoes of a particular sizes rejected small ones. In that situations these farmers are forced to sell their produces in the open markets. It is true that sometimes farmers produce are rejected by the corporates on the pretext of inferior quality for crop.
But all that experiences have not deterred farmers to sign new contracts with the corporates. This system of contract farming inspite of all the risks as mentioned above is going to exist in the coming years as is seen by the experts.
But all that experiences have not deterred farmers to sign new contracts with the corporates. This system of contract farming inspite of all the risks as mentioned above is going to exist in the coming years as is seen by the experts.
04 Mar 2007 06:47
Post 5 of 9
Replying to [vshanker]: Mr. Shanker, are there some government policies to protect the farmers? I read that in Europe, the government have provided allowances to farmers for certain products, such as potato starch, so their price is competitive, this way they can take up more market share.
In previous year, EU potato starch entered China market with the price which is lower than the cost. Some concerned Chinese groups were filing for anti-dumping.
Moolan
04 Mar 2007 08:46
Post 6 of 9
Replying to [Moolan99]: So far as I know, Govt of India has a policy which allows insurance compnaies to make insurances of the crops of the farmers with the idea of protecting farmers. Also some organizations do come forward to buy the farmers produce and market on their own whenever there are any such untoward situation arises betwen the corporates and the farmers.
India has no such arrangements for their farmers (i.e. heavily subsidizing their farmers) as has been in USA as I am aware of.
India has no such arrangements for their farmers (i.e. heavily subsidizing their farmers) as has been in USA as I am aware of.
04 Mar 2007 23:13
![[em19]](http://img.alibaba.com/images/eng/style/icon/emoticons_great.gif){kind=icon}
Post 8 of 9
Replying to [vshanker]:
Good post. The contract farming is inevitable. I had my role in broiler integration, a type of contract farming in poultry industry. The individual business entities are being merged to integrate into a multifunction company. This has resulted in lot of savings, financial stability, pulling the farmers out of closing the farm. The difference is the poultry companies own and spend for everything , but the agricultural contract farming will be only a purchase agreement with all inputs are of the farmers.
The government can handle food security with a strict surveillance over the crop cultivated. Also the demand and supply equilibrium will take care of any difference. The farmers will get new effective technologies, inputs and storage facilities. We are losing more than 10-20% because of faulty storage practices. The prices/supply can be controlled effectively. Of course we have enough politicians to cry foul when there is a monopoly of corporates.
Good post. The contract farming is inevitable. I had my role in broiler integration, a type of contract farming in poultry industry. The individual business entities are being merged to integrate into a multifunction company. This has resulted in lot of savings, financial stability, pulling the farmers out of closing the farm. The difference is the poultry companies own and spend for everything , but the agricultural contract farming will be only a purchase agreement with all inputs are of the farmers.
The government can handle food security with a strict surveillance over the crop cultivated. Also the demand and supply equilibrium will take care of any difference. The farmers will get new effective technologies, inputs and storage facilities. We are losing more than 10-20% because of faulty storage practices. The prices/supply can be controlled effectively. Of course we have enough politicians to cry foul when there is a monopoly of corporates.
15 Dec 2007 11:06
Post 9 of 9
Replying to [cyber chap]: Thanks. I value your appreciation as I feel you have closely observed the pros and cons of contract farming practically.
06 Jan 2008 05:06
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