Addressing the issue of lateral selling, the FAO publication[16] advocates a combination of favourable incentives and explicit sanctions for farmers. He also notes that in some circumstances, the cost of completely avoiding breach of contract can be much higher than losses due to lateral selling, and that companies can therefore learn to live with lateral selling. It depends on the size of the company and the amount invested in farmers. The publication draws in detail on the case studies and reaffirms the importance of an appropriate environment. However, it also concludes that the absence of such an environment does not necessarily constitute a binding restriction on contract farming in certain cases, in particular where flexibility and non-contractual clauses can be used. While an enabling environment is important, editors caution against government incentives and subsidies to promote inclusion, as they can give a misleading impression of profitability and compromise sustainability. They also note that the cost to the company of pursuing an inclusive strategy is rarely taken into account by proponents of the concept. As with any contract, there are a number of risks associated with contract farming. The most common problems include farmers selling to a buyer other than the one with whom they have contracted (known as parallel selling, non-contractual marketing or „pole vaulting“ in the Philippines) or the use of inputs provided by the company for purposes other than those intended.
On the other hand, it happens that a company does not buy products at the agreed prices or in the agreed quantities or arbitrarily reduces the quality of production. Farmers are being hit hard by this measure. In some places, there is already contact agriculture. When msp was 1750, peasants sold 1000 to entrepreneurs, from whom they took money at the time of a crisis. From now on, the 2020 law on contract cultivation will replace the 2018 law. While retaining the 2018 law as a basis, some states had enacted their own contract farming laws. Now, even such laws will be null and void. „Agreement means the contractual cultivation agreement between the purchaser who proposes to purchase the product and the producer who agrees to produce the crop under which the production and marketing of an agricultural product takes place in accordance with the conditions set out in the agreement,“ states clause 2 B of the Bill (now Act). What is even more surprising is that the law links the contract price to the market price, which is the antithesis of the CF philosopher. If the agency has to rely on market prices that may not be discovered effectively, why would they choose CF? Haryana had linked the contract price to the MSP under its amended apMC law, which was considered an undesirable step, as the contract price cannot necessarily be linked to another price, as costs and yields can also be reasons for farmers to enter into agricultural contracts, not just the price. Contract farming is nothing new in India. During British rule, cash crops such as indigo, opium, tobacco and cotton came from the CF system.
After independence, cystic fibrosis was practiced in the commercial production of seeds and sugar cane (from the 1960s), milk (from the 1970s), tomatoes and poplars (from the 1980s). In 1988, despite opposition, India allowed PepsiCo to source and process certain horticultural crops in Punjab through a joint venture with a state-owned Punjab Agro Industries Corporation. This commitment was then extended to tomato production under the CF system. For the first time, the CF Promotion and Facilitation Council is considered, under the Model Law, as a guide and arbitrator that would popularize CF crops in domestic and export markets as a brand for contract-grown products. It is difficult to imagine how a regulator can promote this mechanism when its primary task should be conflict resolution and oversight of CF projects. This is not desirable. Why should a government-funded entity promote markets for private organizations? Eaton and Shepherd[2] identify five different models of contract farming. Under the centralized model, a company supports smallholder production, buys the crop, and then processes it, tightly controlling quality. This model is used for crops such as tobacco, cotton, sugar cane, banana, tea and rubber. As part of the Nucleus Estate model, the Company also manages a plantation to complement smallholder production and provide minimal throughput to the processing plant. This approach is mainly used for tree crops such as oil palms and rubber.
The tiered model typically involves a partnership between government agencies, private companies, and farmers. At a lower level of sophistication, the intermediate model may involve outsourcing by companies to intermediaries that have their own (informal) agreements with farmers. Finally, the informal model includes small and medium-sized enterprises that enter into simple seasonal contracts with farmers. Although these are usually only seasonal agreements, they are often repeated every year and usually depend on the proximity of the buyer to the seller for their success. In fact, it was Captain Amarinder Singh, during his first term as Prime Minister of Punjab in 2002, who introduced contract farming to wean farmers off the wheat-rice cycle. 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] The CSA Board of Directors Fund is established by the CF Sponsor by law at 0.3% of the value of the Contract Products as a relief fee, limited to 0.5% of the value of the Contract Products. These fees may first be waived to encourage the CF as an incentive. This brings the market fee back in a different form, although the argument was that FC agencies do not have to pay the market fee because they do not use Mandi`s facilities. The APLCFS Act model uses the concept of family farms, which is not relevant in the Indian context, as if 86% of farms are marginal or small (less than 2 hac) and have produced commercially, how can they be compared to family farms in the United States or Europe, where the proportion of these farms is much smaller, even if their average size is larger? The law cites the operational inefficiency of small businesses („size of handkerchiefs“) as the reason for promoting the CF. It is difficult to understand how the scope of the farm can change due to FIBRO, since the only way to achieve a certain scale under FIBRO is to have collective contracts that the law does not even mention. The fact that group contracts in India are already in place in Gujarat for crops such as potatoes has been conveniently ignored. In contract farming, agricultural production is carried out on the basis of an agreement between the buyer and the agricultural producers. Sometimes it is for the buyer to indicate the quality and price required, with the farmer agreeing to deliver at a later date. Most often, however, contracts set the conditions for the production of agricultural products and their delivery to the buyer`s premises. [1] The farmer undertakes to supply the agreed quantities of a plant or animal product on the basis of the buyer`s quality standards and delivery requirements. In return, the buyer, usually a company, agrees to purchase the product, often at a pre-determined price.
The company also often agrees to support the farmer, e.B. by providing operating resources, assisting with land preparation, consulting in production and transporting products to his premises. The term „emigration regime“ is sometimes used as a synonym for contract farming, most often in eastern and southern Africa. Contract cultivation can be used for many agricultural products, although it is less common in developing countries for staple foods such as rice and maize. .