Responsible contract farming for more inclusive markets
FAO is working to make agrifood systems more inclusive and efficient, promoting responsible investment along the entire value chain. And one way to make markets more inclusive is through contract farming - agricultural production agreements between buyers and farmers that specify production outputs and/or marketing conditions. Such arrangements can increase agricultural productivity and improve rural livelihoods.
Support to contract farming in favour of smallholder farmers was the focus of a knowledge-sharing seminar in April 2016, organized by FAO’s Investment Centre, the Agricultural Development Economics Division and the International Fund for Agricultural Development (IFAD). The seminar featured presentations on contract farming, followed by an open discussion – with topics ranging from the effectiveness of informal agreements, risk sharing and pricing mechanisms, to enforcement tools, regulatory and legal frameworks and corporate social responsibility.
“There is a growing demand for information and technical support on planning and implementing contract farming schemes,” said Marlo Rankin, an FAO agribusiness economist.
Benefits and risks
Contract farming benefits farmers by providing them with a reliable market for their goods, reducing price uncertainties and improving their access to agricultural inputs, knowledge, services and credit. At the same time, it guarantees that buyers will have supply agricultural products that meet quality and safety standards as well as agreed volumes and delivery date. But there are risks, such as a buyer reneging on a contract or a farmer engaged in side selling. Or a contract could be designed to benefit one partner, while penalizing the other.
“Responsible contract farming practices need to be promoted in order to protect the interests of all partners, and a conducive enabling environment should be in place,” said Rankin. “We are focusing our work on these two important issues, sharing knowledge, providing technical assistance and building capacity.”
Wealth of knowledge and information
In 2012, FAO published Guiding principles for responsible contract farming operations. These guidelines are just one of the many useful resources and tools found on FAO’s Contract Farming Resource Centre website – a one-stop shop for information and guidance on contract farming. The website features a comprehensive toolkit for contract farming, including contract samples from around the world, legal briefs and presentations.
And it houses a library of relevant publications, with links to institutions involved in planning, implementing, promoting and evaluating contract farming. Since 2011, FAO has worked with IFAD and the International Institute for the Unification of Private Law (UNIDROIT) to develop guidelines and tools, including the Legal Guide to Contract Farming.
The Guide, now available on the resource centre website, targets a broad range of users involved in contract farming, providing guidance on policy design, legal research and capacity building. It is also aligned with the Principles for Responsible Investments in Agriculture and Food Systems.
Contacts
Marlo Rankin (FAO): [email protected]
Marie Claire Colaiacomo (IFAD): [email protected]