FAO is collaborating with the International Institute for the Unification of Private Law (UNIDROIT) towards the development of a Legal Guide on Contract Farming.  During the week of 3–7 March and with the support from IFAD, the group of international experts responsible for the development of the Guide held meetings in Rome, both at FAO and UNIDROIT headquarters.

The practice of contracting between farmers and the buyers of their products has been more and more adopted in agrifood chains around the world. As food and agricultural systems modernize, buyer requirements regarding quality, quantities, timing of delivery and other market or production related specifications are becoming increasingly stricter. Contracts have proven to greatly facilitate matching agricultural production to these requirements. They improve coordination in agrifood chains, reduce market risks for farmers and buyers and thus can be a means to promote efficiency in agrifood supply chains.

Contracts can also be an instrument to give smallholders access to the modernizing food systems, promoting inclusiveness, as they offer a guaranteed market and often involve the pre-financing of agricultural inputs and the provision of technical assistance.

Yet, their adoption by farmers and their buyers is not free of risks.  Experience has shown that there might be problems affecting both buyers and sellers when contractual clauses are not respected or when they are designed to benefit one partner while penalizing the other. There are also legal and regulatory issues that might work against successful contractual engagements.

To protect the interests of both partners, responsible contract farming practices need to be promoted and a conducive enabling environment needs to be in place. FAO is focusing its work on these two important issues, and the Legal Guide under preparation adds to these efforts.

The Legal Guide is being drafted  by a group of renowned international legal scholars, with technical support from experts from the Rural Infrastructure and Agroindustries and the Legal Divisions of FAO. The drafting team also benefits from contributions of international organizations and representatives from farmers and private agribusiness firms. 

The Guide will provide advice and guidance for farmers and their partners on many critical issues for successful contracting. It will also be a useful resource for policy makers with roles in designing legal and regulatory frameworks. Following regional consultations in Asia, Africa and Latin America this year, it is planned to be launched by UNIDROIT and FAO in May 2015.