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Contract farming

Contract farming was first introduced in Taiwan in 1895 and later in India by PepsiCo in 1927 for tomato and potato cultivation. It involves an agreement between farmers and processing/marketing firms where farmers produce and supply agricultural products at predetermined prices. The objectives of contract farming include achieving consistent quality, regular supply, improved produce quality, and stabilized prices. It provides benefits to farmers such as assured markets, price stability, access to inputs and credit, while companies benefit from secured raw material supply and long-term planning ability. Common models of contract farming in India include bipartite agreements between farmers and companies, tripartite agreements including a third party, and quadpartite agreements involving four parties.

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CONTRACT FARMING Presented By RAJANI KANTH.M RMBA/2014-08.
Historical background  For the first time it was introduced in Taiwan in 1895 by Japanese government  In India it was introduced by Pepsi company for the cultivation of vegetables particularly tomato and potato in Rajasthan in 1927.  In Karnataka contract farming was started with the cultivation of gherkin in 20th century
Meaning of Contract Farming: • It is an agreement between farmers & processing and marketing firms for the production and supply of agricultural products under certain agreement, frequently at predetermined prices.
OBJECTIVE OF CONTRACT FARMING To achieve consistent quality To achieve regular supply To improve quality of produce To stabilize the agro-raw produce  price is not affected by market prices
Contract farming – triangular benefit :
Need for contract farming in India: • Production and marketing are very critical in India. • Over come inadequate linkages with market. • Lack of capital, poor infrastructure, technology transfer, etc… • To avoid post harvest losses. • Unfavorable conditions for procurement. • To avoid migrations.
TYPES OF CONTRACTS : 1. Marketing contract  Only purchase at predetermined price.  No input supply. 2. Partial contract  Provides only some inputs at predetermined price.  Purchase of produce. 3. Total contract  All the inputs at predetermined price.  Purchase of produce.
The advantages of contract farming 1. Provision of inputs and production services. 2. Access to credit 3. Introduction of appropriate technology 4. Skill transfer 5. Guaranteed and fixed pricing structures and 6. Access to reliable markets.
Benefits to the Farmer:  Assured markets & returns  Risk elimination due to price fluctuation  Timely transport  Reduces exploitation from middlemen  Reduces lending from private money lenders  Adequate input supply  Employment generation
Benefits to the Company:  Uninterrupted & Regular Flow of Raw Material  Protection From Fluctuation In Market Pricing.  Long Term Planning Made Possible.  Builds Long Term Commitment  Dedicated Supplier Base  Generates Goodwill For the Organization
IMPACT CONTRACT FARMING PRODUCTIVITY OF RICE AND WHEAT
Models of contract farming in India : Three models of contract farming 1. Bipartite Agreement model 2. Tri-partite Agreement model 3. Quad-partite Agreement model
Bipartite Agreement model:
Tri-Partite Agreement Model:
Quad-Partite Agreement Model :
Status of contract farming in India : • Nearly Five lakh hectares is under contract farming India • More than 600 national and multinational companies are in contract farming
State wise under contract farming:
PARTIAL LIST OF COMPANIES ESTABLISHED CONTRACT FARMING IN INDIA : • HUL • ITC • SUGUNA POULTRY • VENKATESHWARA HATCHERIES • PEPSICO • RALLIS • NESTLE
CONCLUSION: • India, given the diverse agro climatic zones, can be a competitive producer of a large number of crops. • There is a Need to convert our factor price advantage into sustainable competitive advantage.
Contract farming