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Contract farming for inclusive market access

Year of publication 2014

Pages 227 p.

Author da Silva, Carlos A.;Rankin, Marlo;Rural Infrastructure and Agro-Industries Division

Product type Book (stand-alone)

ISBN 978-92-5-108061-0

Edition 1

Synopsis (short abstract) Recent transformations in agrifood systems have created new technical requirements and compliance costs that make it increasingly difficult for resource-poor farmers to access modern market channels. In this respect, the question of whether contract farming can be an effective institutional mechanism to address this issue stands out as one of special relevance. This book aims to typify the extent to which contract farming is helping small farmers to access markets and meet stringent requirements of manufacturers, retailers, exporters and service firms, from both food and non-food sectors such as biofuels and forestry. It seeks to clarify differences in the functionality of contracts depending on commodity, market, technology, public policies and country circumstances. Conceptual issues are discussed and real-world case study appraisals from developing regions are presented. The issues raised in the case studies and the key messages synthesized in the initial chapter bring new insights and contributions to further enrich knowledge on contract farming as a tool for inclusive market access in developing countries.

Language English

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    Contract Farming (CF) is a proven, workable mechanism for the coordination of transactions in agri-food supply chains. It is also a tool to promote the access of smallholder farmers to markets. Through CF, local farmers and food processors could improve the efficiency of their operations and thus contribute to increase the share of domestic markets for fresh and processed fruits, vegetables, coconut, cocoa, meat, dairy and staple foods, and could help Pacific Islands Countries (PICs) in import substitutions and food self-sufficiency . Close collaboration between farmers and buyers under win-win Contract Farming agreements can address some of the agriculture and food security challenges in PICs, addressing many of the production and marketing problems faced by small farmers and agribusiness firms.
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    FAO’s previous contribution to the development of contract farming saw the publication in 2015 of the UNIDROIT/FAO/IFAD Legal Guide on Contract Farming, which focused on the bilateral relationship between an agricultural producer and a contractor. This Legislative Study develops that research and focuses on the regulatory frameworks for contract farming, aiming to highlight different possible approaches for different contexts. Responsible contract farming can be a powerful tool for small scale farmers in developing countries to move towards larger scalecommercial production. It can create economic wealth, contribute to supply chain efficiency through the production of higher quantities of better quality products, and contribute to achieving domestic food security objectives. Maximizing these benefits while minimizing the inherent risks of contract farming is reliant upon the forging of an enabling environment, a key part of which is the domestic regulatory framework. This Legislative Study provides guidance to domestic regulators and other interested readers on how to appraise and potentially reform domestic regulatory frameworks to achieve responsible contract farming. Recognising that different countries and contextual realties may benefit from different regulatory solutions, this Study provides several examples, supported by representative case studies, on how contract farming can be regulated, without promoting a single solution as the most appropriate. Please visit FAO’s Contract Farming Resource Centre, http://www.fao.org/in-action/contract-farming/en/, which is a regularly updated website hosting a variety of material on contract farming both from FAO and from other recognized authors.
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    In order to check and promote the positive synergies between private companies and rural households, an analysis of past and ongoing experiences of contract farming is required. It represents the main objective of this report. The objectives of this study are to: describe the effects of contract farming schemes, characterize the factors limiting or promoting these various impacts, identify key findings to promote the emergence of positive synergies. The study’ considers a long-term time scale (10 to 50 years) and pays particular attention to changes in agricultural farming, production systems, access to markets and governance patterns of value chains. The study also analyzes how crops initially introduced thanks to contract farming schemes develop “off contract” and induce new value chain. The study focuses on seven countries - Ivory Coast, Ghana, Burkina Faso, Kenya, South-Africa, Laos and Indonesia – and major commodities such as: oil palm, rubber tree, fruits and vegetables, cere als, cotton and sugar cane. It is organized into 4 sections: i) the contract schemes, ii) the effects of these schemes, iii) the factors determining the nature and intensity of these effects and iv) key findings to promote positive synergies. Case studies are briefly presented in the appendix.
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