Contract farming has been in existence for many years as a means of organizing the commercial agricultural production of both large-scale and small-scale farmers. Interest in it continues to expand, particularly in countries that previously followed a central planning policy and in those countries that have liberalized marketing through the closing down of marketing boards. Changes in consumption habits, such as the increasing number of fast-food outlets, the growing role played by supermarkets in many countries, and the continued expansion of world trade in fresh and processed products, have also provided the impetus for further development of this mode of production.
The purpose of this guide is not to replicate past socio-economic studies on the subject of contract farming. Rather, the aim is to provide advice: first, to management of existing contract farming companies on how to improve their operations; second, to companies that are considering starting such ventures on the preconditions and management actions necessary for success; and, last but not least, to government officials seeking to promote new contract farming operations or monitor existing operations. The guide describes in detail the general modus operandi, internal functions and monitoring mechanisms of contract farming. It emphasizes that sustainable contract farming arrangements are only possible when the various parties see themselves involved in a long-term partnership.
The assistance of Cynthia Donovan, Jon Lindsay, Marco Prencipe, Richard Roberts, Morton Satin, Elizabeth Scott, Ian Tankard, and Mitchell Williamson in the preparation of this publication is gratefully acknowledged. Supanun Boontoay, Arunee Pinprayong, Prayong Saiprasert and Chotiroj Wongwan provided considerable assistance to the senior author during a research visit to Thailand. The help provided by the British American Tobacco Company and the Nestle Corporation in Malaysia, the Frito-Lay and Betagro companies in Thailand, and the Lakson Company in Pakistan, which freely provided production data and operational details of their smallholder farming operations, is acknowledged with gratitude.
Unpublished case studies commissioned by FAO were carried out by Luz Berania Díaz in Colombia, Kelvin Craig in Guyana, Tajamul Haque in India, Patrick Kambewa in Malawi, Sandra Kokoric in Croatia, Enriqueta Torres in the Philippines, and Tom Reuben Wambua in Kenya. Antony Ellman, Steven Jaffee and Andrew Tallach kindly reviewed an advanced draft of this publication and made many valuable comments. However, responsibility for errors and omissions and the interpretation of the topic remains that of the authors.
A considerable debt is owed to the employees and farmers of contract farming ventures in many countries who have contributed to the subject of crop agreements and management-farmer relationships. By sharing their knowledge and experiences they provided the inspiration and interest that made this publication possible.
Where references are made in the text to specific contract farming experiences, the source is usually acknowledged as a footnote. Where no acknowledgement is given, the source is either one of the unpublished case studies mentioned above or the unpublished experiences of the authors, in particular those of Charles Eaton.