Economic Opportunity Mailing List Archive

["Cock, James (CIAT)" <<address removed>>]

Dear All,
I have been involved in developing agriculture research and development for
more than thiry years, of which more than a third was spent in the private
sector. Having followed the exchange of views over the last couple of weeks
and read Colin Poulton's excellent summary of the status I would like to add
a few comments on contract farming. 
Contract farming, whether we like it or not, is becoming of increasing
importance, particularly in the case of perishable crops. Various
contributors have noted the risks associated with high value crops and the
relation between risk and quality. Contract farming can greatly reduce the
risks involved in producting perishable products and this is one of its
great advanatages. How many farmers have been left with rotting tomatoes and
mangos because they have no contract?
Contract farming may be formal or informal: the Colombian shrimp farmer may
not have a formal contract with the processor to clean, pack, freeze and
market his shrimps, but he knows that he can call the plant, and make
arrangements for his harvest to be received under standard terms. There is a
tacit contract or understanding in these cases which can be just as
effective as a formal contract. In fact mutual trust and understanding and
the interest in a long term relationship is normally much more important
than the contract itself.
A major factor contributing to contract farming is the supermarketization
(sorry about that word) of the developing world. All levels of society
throughout the developing world are purchasing more from supermarkets. This
is not just a middle class phenomenon, it's reaching all levels of society.
The supermarkets need to guarantee the supply of high and uniform quality
products: they are increasingly entering into contract farming to achieve
this end. In general the farmers that I know are more than happy to enter
into these contracts as they guarantee the sale of their product at a
reasonable price.
These observations indicate that contract farming is going to become more
important in the future. The question then is not as to whether it is good
or bad, but how to design contract farming so that it helps us achieve
millenium goals.
James H. Cock