Managing Agribusiness
ISSN 000-000
Contract farming
Partnerships for growth
FAO AGRICULTURAL SERVICES BULLETIN
145
Inside front cover
Contract farming
Partnerships for growth
FAO AGRICULTURAL SERVICES BULLETIN
145
A guide
by Charles Eaton and Andrew W. Shepherd
Rome, 2001
© FAO 2001
iii
Preface
Contract farming has been in existence for many years as a means of organizing the commercial agricultural production of both large-scale and small-scale farmers. Interest in it continues to expand, particularly in countries that previously followed a central planning policy and in those countries that have liberalized marketing through the closing down of marketing boards. Changes in consumption habits, such as the increasing number of fast-food outlets, the growing role played by supermarkets in many countries, and the continued expansion of world trade in fresh and processed products, have also provided the impetus for further development of this mode of production. The purpose of this guide is not to replicate past socio-economic studies on the subject of contract farming. Rather, the aim is to provide advice: first, to management of existing contract farming companies on how to improve their operations; second, to companies that are considering starting such ventures on the preconditions and management actions necessary for success; and, last but not least, to government officials seeking to promote new contract farming operations or monitor existing operations. The guide describes in detail the general modus operandi, internal functions and monitoring mechanisms of contract farming. It emphasizes that sustainable contract farming arrangements are only possible when the various parties see themselves involved in a longterm partnership.
v
Contents
Preface Acknowledgements and references Introduction Chapter 1 ADVANTAGES AND PROBLEMS OF CONTRACT FARMING Advantages for farmers Problems faced by farmers Advantages for sponsors Problems
Contract farming
Partnerships for growth
FAO AGRICULTURAL SERVICES BULLETIN
145
Inside front cover
Contract farming
Partnerships for growth
FAO AGRICULTURAL SERVICES BULLETIN
145
A guide
by Charles Eaton and Andrew W. Shepherd
Rome, 2001
© FAO 2001
iii
Preface
Contract farming has been in existence for many years as a means of organizing the commercial agricultural production of both large-scale and small-scale farmers. Interest in it continues to expand, particularly in countries that previously followed a central planning policy and in those countries that have liberalized marketing through the closing down of marketing boards. Changes in consumption habits, such as the increasing number of fast-food outlets, the growing role played by supermarkets in many countries, and the continued expansion of world trade in fresh and processed products, have also provided the impetus for further development of this mode of production. The purpose of this guide is not to replicate past socio-economic studies on the subject of contract farming. Rather, the aim is to provide advice: first, to management of existing contract farming companies on how to improve their operations; second, to companies that are considering starting such ventures on the preconditions and management actions necessary for success; and, last but not least, to government officials seeking to promote new contract farming operations or monitor existing operations. The guide describes in detail the general modus operandi, internal functions and monitoring mechanisms of contract farming. It emphasizes that sustainable contract farming arrangements are only possible when the various parties see themselves involved in a longterm partnership.
v
Contents
Preface Acknowledgements and references Introduction Chapter 1 ADVANTAGES AND PROBLEMS OF CONTRACT FARMING Advantages for farmers Problems faced by farmers Advantages for sponsors Problems