This paper demonstrates how contract farming functions as an economic institution and explores the causes of the observed variation in the scale of outgrower production in Latin America. We outline how market imperfections and transaction costs influence the decision of agroprocessing firms to contract-out, vertically integrate, or use spot markets [...]
Organization: Stanford University, Stanford, CA, USA
Structuring contracts to share risk in light of incentiove problems is the central premise of contract theory , yet the risk sharing implications have rarely been thoroughly tested using micro-leve contract data. In this article we test the major implication of a principal-agent model of contracts using detailed data on [...]
Organization: Simon Fraser University, Montana State University
The marriage of contract farming and farmer cooperation has the potential for increasing access to new market opportunities and services required to support smallholder intensification. Cooperation often works best where farmer groups are contractually linked to input and output markets. However, there are some constraints to the development of [...]
Organization: Overseas Development Institute
In this paper, the restructuring of the seed and chemical industries is discussed. Impacts on the herbicide and insecticide markets are detailed, along with the contractual relationships between biotechnology seed suppliers and farmers. Antitrust issues raised by the recent wave of merger and acquisition activity and intellectual property rights issues [...]
Organization: Iowa State University
It has been widely argued recently that agriculture is undergoing a process of vertical integration with allied industries. One of the worldwide ways of vertical integration in agriculture is contract farming. Contract farming is a continually evolving process. Worldwide applications of contract farming have shown that the terms of contracts [...]
Organization: Department of Agricultural Economics, Faculty of Agriculture, Uludag University, Turkey
Historically, the three fundamental stages of the supply chain, procurement, production and distribution, have been managed independently, buffered by large inventories. Increasing competitive pressures, and market globalization are forcing firms to develop supply chains that can quickly respond to customer needs. To remain competitive, these firms must reduce operating costs [...]
Organization: Georgia Institute of Technology, Atlanta
This paper explores the economic motivations of the agroindustrial firm to contract with smallholders, the economic motivations of smallholders to participate, and some of the problems which arise in the course of the venture. One thing that is very clear is that there are many reasons why a firm might [...]
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The first section provides a basic definition and description of contract farming. The second section describes several aspects of contract farming that are relevant to food security and provides evidence about the effects where it is available and plausible estimates where evidence is not available. The third section presents some [...]
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Contract farming and vertical integration in agriculture raise troubling issues. Some of those issues, including concerns about food safety, are very important to consumers. Some, including concerns about terrible conditions in processing plants, are very important to labor. Others, which focus on fraud, deception, and manipulation in the contracting arrangements, [...]
Organization: Farmers' Legal Action Group, Inc
Among the array of agribusiness activities, the one which entails the most direct and most complex relationships between large corporations and small farmers is contract farming (CF). In this system, a firm replaces or supplements company production of agricultural commodities with purchases from local farmers through contracts. The contracts specify [...]
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