Often asked: What Is Contract Farming?


What is contract farming meaning?

Contract farming can be defined as an agreement between farmers and processing and/or marketing firms for the production and supply of agricultural products under forward agreements, frequently at predetermined prices.

What is contract farming and how does it work?

Contract farming involves agricultural production being carried out on the basis of an agreement between the buyer and farm producers. Sometimes it involves the buyer specifying the quality required and the price, with the farmer agreeing to deliver at a future date.

Is contract farming good?

Well -managed contract farming is an effective way to coordinate and promote production and marketing in agriculture. Nevertheless, it is essentially an agreement between unequal parties: companies, government bodies or individual entrepreneurs on the one hand and economically weaker farmers on the other.

Why contract farming is bad?

Contract farming could entail foreign varieties being grown in India’s fields. For millions, locally grown varieties of crops have provided nutrition and sustenance for centuries. If such varieties are gone, the population will suffer from malnutrition, as is the case in many places today.

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What are the types of contract farming?

Broadly speaking, contract farming arrangements fall into one of five models:

  • The centralized model.
  • The nucleus estate model.
  • The multipartite model.
  • The informal model.
  • The intermediary model.

How can I do contract farming?

Contract farming usually involves the following basic elements-pre-agreed price, quality, quantity or acreage (minimum/maximum) and time (Manage 2003). 6. Grading House – SHG – Farmer model

  1. Marketing Contract.
  2. Production Contract.
  3. Basis Contracts.
  4. Technology License Agreements.

What is contract farming and its benefits?

It reduces the risk of production, price and marketing costs. Contract farming can open up new markets which would otherwise be unavailable to small farmers. It also ensures higher production of better quality, financial support in cash and /or kind and technical guidance to the farmers.

Is contract farming mandatory?

Currently, contract farming requires registration with the APMC in a few states. Despite this, it hasn’t taken off properly and only 15 companies have entered into contract farming for crops in Punjab, Haryana, MP, Gujarat, Maharashtra, Karnataka and Chhattisgarh. Most of these contracts are for cotton and barley.

Is contract farming profitable?

The survey results show that the average revenue of a contract farm is about 11 percent higher than an average non- contract farm. The per hectare cost of production in a contract farm is about 13 percent lower and as a result the average profit margin under contract is more than 50 percent above those without contract.

Is contract farming good for farmers?

In Andhra Pradesh, it was observed that firms largely engaged into contracts with farmers having higher landholding size and better irrigation facilities. Examples from the state showed an increase in total income earned by contract farmers as well as increase in requirement of labour and employment.

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Which states allow contract farming?

The value of output per cropped area under contract farming was highest (Rs 91,000) in Andhra Pradesh (including Telangana), followed by Karnataka (Rs 68,000), Punjab (Rs 51,500), and it was the least in Haryana at Rs 41,000 per acre.

Is contract farming banned in India?

Now the 2020 Act on contract farming will supersede the 2018 law. Keeping the 2018 law as base, some states had enacted own legislations on contract farming. Now, such laws will also stand null and void. Experts observed several similarities between the 2020 Act and Centre’s Model Act, 2018.

Which country has contract farming?

The experience of contract farming in India shows that there is a considerable saving in the consumption of inputs due to the introduction of improved technology and better extension services. Contract farming has usually allowed the farmers some form of credit to finance the use of production inputs.

What are the advantages of farmers?

Are There Good Reasons for Being a Farmer?

  • A farmer has more and better food to eat than have most people who live in cities.
  • He is healthier and lives longer.
  • He is likely to enjoy his work more than most city people do.
  • He is more likely to rear a family and thereby promote the future welfare of the nation.

Is contract farming successful in USA?

The US has not only ‘one country, one market’, it has in fact ‘one world, one market’ operative. They also have contract farming and commodity trading. The result has been that small farmers in the US have been pushed out. Today, the number of farmers has come down to around 1.5% of the population.

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