Agronomist notebook: The good, bad and ugly of contract farming
SATURDAY FEBRUARY 22 2020
Most farmers sell their produce to brokers at low prices or lack market altogether due to poor planning.
To address the challenge, an increasing number of producers are going for contract farming, where they sign an agreement with a buyer for guaranteed market.
Normally, this agreement sets conditions for the production and marketing of the farm produce. And in many cases, the quality of the produce and price are pre-agreed between the farmer and the buyer.
The buyer often offers the farmer agronomic services, skills, and knowledge about various crop and animal production methods.
Some companies also provide inputs on credit to enable the farmer to produce and give them confidence of a secured market.
However, contract farming does not always work as planned as any of the parties sometimes fail to abide by the terms.
Some farmers have been disappointed by growing produce that the buyer fails to collect on time leading to quality deterioration.
Sometimes the farmer supplies the produce in good time but faces delayed payment or the buyer completely fails to pay.
And sometimes when the supply is high than the demand, the buyer fails to buy and give all sorts of excuses in terms of quality of the produce or asks to buy at reduced price.
Also, some farmers harvest their produce when the demand is high and sell to a different buyer against the contract.
ATTEND TRAINING FOR ADEQUATE SKILLS
Well, these are some of the challenges of contract farming for both the farmer and buyer.
It is, therefore, important to critically examine the merits and demerits of contract farming before committing yourself.
While contract farming tends to guarantee a ready market, most buyers keep prices very low to maximise profit. Also, in most cases, the prices are usually constant regardless of demand and supply forces.
And to make it worse, farmers have no chance to sell to the consumer especially for export produce.
For most producers, the buyer has the final say on the quality of the produce he wants, therefore, can reject farmer’s produce for any reason leading to losses.
To ensure farmers meet required standards, it is good practice for the buyer to have a demo farm where all contracted farmers should attend training for adequate skills and knowledge on production and the required quality.
Some contracts promote monoculture, for instance, most companies that export French beans specialise only in that particular crop. This in the long-term affects the soil, a risk farmers should consider.
Before signing the contract, ensure that you are dealing with reputable buyers or companies that have a good history of how well it relates with farmers.
Also consider producing crops that have a longer shelf-life and you understand what is required of you during the entire production. It’s also important to engage a legal mind before signing the contract.
All said, contract farming can help farmers increase production if both parties abide by the agreement.
Know that you are legally bound to the terms and conditions of the contract, thus, none of the parties has the freedom of changing their mind afterwards since there are procedures to be followed which may result in a court case if one fails to deliver
https://www.nation.co.ke/business/s...act-farming/2301238-5464064-hhlu5i/index.html
SATURDAY FEBRUARY 22 2020
Most farmers sell their produce to brokers at low prices or lack market altogether due to poor planning.
To address the challenge, an increasing number of producers are going for contract farming, where they sign an agreement with a buyer for guaranteed market.
Normally, this agreement sets conditions for the production and marketing of the farm produce. And in many cases, the quality of the produce and price are pre-agreed between the farmer and the buyer.
The buyer often offers the farmer agronomic services, skills, and knowledge about various crop and animal production methods.
Some companies also provide inputs on credit to enable the farmer to produce and give them confidence of a secured market.
However, contract farming does not always work as planned as any of the parties sometimes fail to abide by the terms.
Some farmers have been disappointed by growing produce that the buyer fails to collect on time leading to quality deterioration.
Sometimes the farmer supplies the produce in good time but faces delayed payment or the buyer completely fails to pay.
And sometimes when the supply is high than the demand, the buyer fails to buy and give all sorts of excuses in terms of quality of the produce or asks to buy at reduced price.
Also, some farmers harvest their produce when the demand is high and sell to a different buyer against the contract.
ATTEND TRAINING FOR ADEQUATE SKILLS
Well, these are some of the challenges of contract farming for both the farmer and buyer.
It is, therefore, important to critically examine the merits and demerits of contract farming before committing yourself.
While contract farming tends to guarantee a ready market, most buyers keep prices very low to maximise profit. Also, in most cases, the prices are usually constant regardless of demand and supply forces.
And to make it worse, farmers have no chance to sell to the consumer especially for export produce.
For most producers, the buyer has the final say on the quality of the produce he wants, therefore, can reject farmer’s produce for any reason leading to losses.
To ensure farmers meet required standards, it is good practice for the buyer to have a demo farm where all contracted farmers should attend training for adequate skills and knowledge on production and the required quality.
Some contracts promote monoculture, for instance, most companies that export French beans specialise only in that particular crop. This in the long-term affects the soil, a risk farmers should consider.
Before signing the contract, ensure that you are dealing with reputable buyers or companies that have a good history of how well it relates with farmers.
Also consider producing crops that have a longer shelf-life and you understand what is required of you during the entire production. It’s also important to engage a legal mind before signing the contract.
All said, contract farming can help farmers increase production if both parties abide by the agreement.
Know that you are legally bound to the terms and conditions of the contract, thus, none of the parties has the freedom of changing their mind afterwards since there are procedures to be followed which may result in a court case if one fails to deliver
https://www.nation.co.ke/business/s...act-farming/2301238-5464064-hhlu5i/index.html