Contract farming can be defined as an 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. Typically, the farmer agrees to provide agreed quantities of a specific agricultural product.Well-managed contract farming is an effective way to coordinate and promote production and marketing in agriculture.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.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.Contract farming involves agricultural production being carried out on the basis of an agreement between the buyer and farm producers. Whereby the farmer’s provide specific quality and type of farm produce, required by the buyer. In return, the buyer, usually a company, agrees to buy the product, often at a price that is established in advance.Contract farming has been used for agricultural production for decades but its popularity appears to have been increasing in recent years. Contract farming is more beneficial for large farmers in terms of production so the small earn less profit in comparison to large farmers. The use of contracts has become attractive to many farmers because the arrangement can offer both an assured market and access to production support.
Advantages of Contract Farming For Farmers:
1.provision of inputs and production services;
2.access to credit;
3.introduction of appropriate technology;
5.guaranteed and fixed pricing structures; and
6.Access to reliable markets.
Advantages Of Contract Farming For Buyer (Company/ Agri-Firm)
1.Optimally utilize their installed capacity, infrastructure and manpower, and respond to food safety and quality concerns of the consumers.
2.Working with small farmers helps overcomes land constraints
3.Make direct private investment in agricultural activities.
4.The price fixation is done by the negotiation between the producers and firms.
5.The farmers enter into contract production with an assured price under term and conditions.
Passport photo of all parties.
PAN card of all parties.
Aadhar card of all parties.
Utility bill of Electricity or Telephone.
Valid Address Proof of all the parties.
Valid Driving Licence of all the parties.
Terms and Conditions between the parties.
Other documents will be intimated through e-mail.
Contract farming involves an agreement between the producer and the buyer on terms and conditions for the production and marketing of farm products
Farming agreements are required to set out the rights and obligations of both the parties (Farmer and buyer) with regards to the production, marketing and selling of the farm produce.
It helps to decrease 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.
Yes, Contract farming agreements are legally binding on parties
There are many benefits of contract farming, the producer can increase their income through long-term and stable access to more remote and lucrative markets and a transparent pricing mechanism, as well as access to new technologies, improved inputs, technical assistance and credit facilities.