| Contracts, formal or otherwise, are one
of the main instruments utilized to coordinate transactions
in agri-food value chains. Contracts have, in particular,
been used as a mechanism of linking farmers and processors,
reducing the uncertainties of transactions that take place
in open markets, where price, quality and quantity are largely
unpredictable. If a processor needs a regular supply of agricultural
raw materials, within a planned delivery schedule and following
strict quality standards, he or she may use contracts with
farmers to ensure that his or her procurement specifications
are better met. Farmers, on the other hand, may look for contracts
with processors as a way to guarantee a market for their output
or to facilitate access to finance and technology. Although
contracts are not free of potential disadvantages for the
contracting partners, if properly designed and enforced, they
can play a significant role in agribusiness development. FAO
has been working with contract farming issues through the
activities of its three technical groups - management, marketing
and finance. Click
here, to download FAO's publications on Contract Farming. |
