What Is a Farming Agreement
The contractor usually orders advance services and sells products in consultation with the farmer and is usually paid twice a year retrospectively. The farmer remains the rights holder and applicant for a single payment per holding, with the SFP income usually transferred to the contractual account for the holding. As mentioned earlier, our definition of contract farming covers a wide range of contractual arrangements, while previous studies have generally focused on large export-oriented contractual systems. Do farmers benefit less from participation in more informal, governmental or national contractual arrangements? While this is a reasonable assumption, it does not have to be. Large buyers can have monopsonist power and keep farmers in operating contracts; Not all major buyers offer inputs; and smaller domestic buyers can be trusted more. Our data does not allow a detailed analysis of the importance of these factors for contract results. But we can support participation in more formal contractual arrangements by taking into account information about the type of buyer – and whether farmers receive inputs from those buyers. We find that farmers do not necessarily benefit more from contract farming when they enter into contracts with buyers such as wholesalers or processors, even if they receive inputs from these buyers (see also Annex if, Tables S7 to S10 and robustness tests in Annex SI). We find no strong evidence that contract farming has ripple effects on non-participating farm households in the same communities. This is somewhat surprising, as our results suggest that contract farming is increasing the demand for contract workers. It is to be expected that these labour market effects will result in higher incomes for non-participating households. A better understanding of local and sectoral impacts is important from a policy perspective, but it is currently very difficult due to data limitations.
For example, the data used here do not sufficiently cover non-agricultural households. We also lack information about who in the villages is actually employed (or otherwise influenced) by contract farmers. In the future, researchers and donors may wish to design surveys that better capture potential impacts and network effects to allow for more detailed analysis. Many studies have been conducted on contracted agricultural enterprises, and many are listed in the Food and Agriculture Organization of the United Nations (FAO) Contract Agricultural Resource Centre. [1] The Asian Development Bank Institute (ADBI) in Tokyo conducted a series of case studies in selected Asian countries to assess the conditions of the benefits of marginal rice farmers. In the Lao People`s Democratic Republic, research has suggested that contract farmers make significantly higher profits than contract farmers. This has facilitated the transition of subsistence farmers to commercial agriculture and has offered the opportunity to reduce rural poverty. [14] A study in Cambodia on organic rice for export assessed the impact of contract farming on farmers` performance. This suggested that younger, better-educated farmers with larger, less wealthy families were more likely to join the contract.
However, farmers with access to good road communication have often left the contract, suggesting that contract farming has helped them become independent farmers. [15] Smallholder farmers in developing countries are often trapped in a vicious cycle of low-intensity subsistence farming, low yields and insufficient profits for meaningful investments. These factors contribute to high levels of poverty in many rural areas (1⇓–3). More than 10 years of using a contracted cultivation contract have allowed Bawdsey Estate to first consolidate its agriculture and then develop a more diversified and potentially financially profitable crop. “Cross-compliance can become an issue when, for example, the farmer is responsible for the ELS work and the contractor for the rest. It must be clear who does what. where LD is a dummy variable that indicates whether (at least 1 household member) of household j and geographic region k hires workers for a longer period. As in equation 1, C is a dummy variable indicating whether (at least 1 member of the household of) the household j participates in contract farming, HH is a vector of household characteristics j, δ represents geographical fixed effects, and ε is an error term with a zero mean. Prowse (2012) provides an accessible and comprehensive overview of current contract farming issues in developing countries. [17] Several studies convey a positive message about the inclusion of smallholder farmers and the benefits they derive from their participation.
In a study published in 2014, for example, Wang, Wang and Delgado review a large number of empirical studies on contract farming. They conclude that contract farming has had a significant impact on improving farm efficiency and productivity and farmers` incomes. [18] In a synthetic review of econometric studies, Minot and Ronchi (2015) suggest that participants` incomes increase by 25-75%. [19] A more moderate approach is taken in the systematic review of contract farming by Ton et al. (2017). Although their study notes that contract farming can significantly increase farmers` incomes, Ton et al. argue that such figures must take into account the publication and bias of survivors. In other words, these estimates need to be revised downwards to accept that studies that show negative or no “impact” are less likely to be published and that calculating the impact of contract farming may overlook systems that do not improve and reduce the incomes of smallholder farmers and are therefore not available for evaluation. [20] “Initially, grains and sugar beet were grown under the agreement, which extended to carrots, parsnips and onions as the relationship with the entrepreneur developed. A contract is a legal agreement between a farm manager (entrepreneur) and another person or company (entrepreneur) for the production of a certain type, quantity and quality of agricultural products. The Economic Research Service classifies contracts as marketing or production.
Even contracts that appear to be legally successful can face other difficulties. For example, family relationships may be threatened. Work for contracts is often done by women, but contracts are invariably in the name of the man who also receives payment. Men attend meetings and trainings, but women often do not receive education. Land used by women for food crops or commercial production can be taken back for contract production. [6] This can have an impact not only on food production, but also on the status of women. Contracts can collapse due to mismanagement on the part of the company or unrealistic expectations about farmers` capacity or achievable yields. This was a particular problem in attempts to promote contract cultivation for biofuel crops. [11] We contribute to the literature on contract culture by providing evidence that can be generalized beyond a specific contractual scheme, type of contract, culture, region or country. Our analysis is based on survey data provided by the Consultative Group on Aid to the Poor (CGAP) (34⇓⇓⇓⇓–39). CGAP`s smallholder surveys cover a wide range of livelihood and agriculture issues and were conducted among farmers and their households in 6 countries, namely Bangladesh, Côte d`Ivoire, Mozambique, Nigeria, Tanzania and Uganda. The data are nationally representative of smallholder farmers in the above-mentioned countries (40, 41).
One wonders why research teams conduct their own surveys when large nationally representative datasets from organizations such as the World Bank are available. Although these data are readily available, they often do not cover topics such as contract farming. And even if they are covered, participation rates vary from country to country, and there may be too few cases of participation to allow for meaningful analysis. Similarly, secondary datasets rarely cover all topics of interest, which is also true for this study. In the future, we hope that broader surveys will contain more information on value chains and contract farming. In the medium term, small surveys conducted by small institutions will remain the only way to better understand impacts and pathways of impact. While contract farming should primarily be seen as a commercial offering, it is also seen as an effective approach to addressing many of the market access and input supply problems faced by smallholder farmers. [4] A guide published by GIZ in 2013 aims to provide information on how contract farming can be developed to maximise this benefit for smallholder farmers in developing countries. [5] Effective links between businesses and thousands of farmers often require the participation of formal farmers` associations or cooperatives, or at least informal farmers` groups. However, empirical evidence of how best to achieve this is not yet available. [6] The existence of an adequate legal framework is therefore crucial for the successful implementation and long-term viability of contractual agricultural activities.
A legal system is essential to help farmers and their buyers negotiate and draft contracts. It is also important to protect them from risks that may arise during the performance of the contract, such as. B abuse of power by the strongest negotiating party or breach of contract. Strengthening farmers` organisations to improve their negotiating skills can dispel the risk of further misunderstandings. [7] Various countries have adopted policies and laws to ensure fair contracting practices and provide remedies for dispute resolution. [8] A “Legal Guide on Contract Farming” was developed in 2013-2015 by the International Institute for the Unification of Private Law (UNIDROIT) in collaboration with the faO. [9] [10] Fees and splits vary considerably from agreement to agreement, reflecting the risk for each party. A typical combinable harvest farm on Level 3 land would see both contractors and landowners an upfront fee in the range of £80 to £120/acre and two stages of the excess share. .
