CONTRACT FARMING Given BY:- Ravi Mehta Manpreet Singh Yatendra Singh
INTRODUCTION• Contract farming is Agricultural production carried out according to an agreement between a buyer and farmers, which establishes conditions for the production and marketing of a farm product or products.• The farmer agrees to provide established quantities of a specific agricultural product, meeting the quality standards and delivery schedule set by the purchaser. In turn, the buyer commits to purchase the product, often at a pre-determined price.
AGRICULTURE RISK MANAGEMENT : PERSPECTIVES FROM INDIA Types of Agriculture Risks• Production Risk• Price Risk• Financial Risk• Institutional Risk• Technology Risk• Personal RiskRisk Management Strategies• Crop Insurance• Minimum Support Price• Contract Farming
AGRICULTURE RISK MANAGEMENT : PERSPECTIVES FROM INDIA• Crop Insurance, Minimum Support Price are traditional mechanisms• Weaknesses Crop Insurance: Coverage is less than 15% Farmers.• Weaknesses of MSP: Only for a limited number of key crops, whereas high value horticulture, plantation crops are not covered• Contract Farming, commodity markets are relatively new approaches• Involvement in commodity markets is very negligible because of high level of illiteracy• Several models of contract farming are emerging
CONTRACT FARMING VERSUS TRADITIONAL FARMINGTypical Traditional Value Chains• Lack of Information about quality of inputs, seed varieties, etc.• Purchase of Inputs: purchased from trader on credit• Crop Production: No technical information about newtechniques, methods to enhance productivity• Sale of Produce: Mandi (Market) taxes, transportation cost, other costs• No one gives him information, about where his produce wassold, what is the specific demand in this market• The produce is on a hot and long journey to other states, cities,leading to HUGE wastage because of lack of post harvestmanagement
ADVANTAGES OF CONTRACT FARMING (TO FARMER)• Inputs can be provided (less uncertainty regarding availability, timing, credit, etc.)• services can be provided (mechanization, transportation,etc.)• technological assistance can be provided• production and management skills enhanced• market outlet is secured• income stabilization is promoted• credit access enhanced (in kind or via banks)
DISADVANTAGES OF CONTRACT FARMING (TO FARMER)• increased risk; (risk is more likely when the agribusiness venture is introducing a new crop to the area.)• unsuitable technology and crop incompatibility; ( new crop to be grown under conditions rigorously controlled by the sponsor can cause disruption to the existing farming system)• manipulation of quotas and quality specifications;(Inefficient management can lead to production exceeding original targets)• corruption;(Problems occur when staff responsible for issuing contracts and buying crops exploit their position)