CONTRACT FARMING

Presented By

RAJANI KANTH.M

RMBA/2014-08.

Historical background

For the first time it was introduced in Taiwan in 1895 by Japanese government

In India it was introduced by Pepsi company for the cultivation of vegetables

particularly tomato and potato in Rajasthan in 1927.

In Karnataka contract farming was started with the cultivation of gherkin in

20th century

Meaning of Contract Farming:

• It is an agreement between

farmers & processing and

marketing firms for the production

and supply of agricultural products

under certain agreement,

frequently at predetermined

prices.

OBJECTIVE OF CONTRACT FARMING

To achieve consistent quality

To achieve regular supply

To improve quality of produce

To stabilize the agro-rawproduce

price is not affected by marketprices

Contract farming – triangular benefit :

Need for contract farming in India:

• Production and marketing are very critical in India.

• Over come inadequate linkages with market.

• Lack of capital, poor infrastructure, technology transfer, etc…

• To avoid post harvest losses.

• Unfavorable conditions for procurement.

• To avoid migrations.

TYPES OF CONTRACTS :

1. Marketing contract

Only purchase at predetermined price.

No input supply.

2. Partial contract

Provides only some inputs at predetermined price.

Purchase of produce.

3. Total contract

All the inputs at predetermined price.

Purchase of produce.

The advantages of contract farming

1. Provision of inputs and production services.

2. Access to credit

3. Introduction of appropriate technology

4. Skill transfer

5. Guaranteed and fixed pricing structures and

6. Access to reliable markets.

Benefits to the Farmer:

Assured markets & returns

Risk elimination due to price fluctuation

Timely transport

Reduces exploitation from middlemen

Reduces lending from private money lenders

Adequate input supply

Employment generation

Benefits to the Company:

Uninterrupted & Regular Flow of Raw Material

Protection From Fluctuation In Market Pricing.

Long Term Planning Made Possible.

Builds Long Term Commitment

Dedicated Supplier Base

Generates Goodwill For the Organization

IMPACT CONTRACT FARMING PRODUCTIVITY OF RICE AND WHEAT

Models of contract farming in India :

Three models of contract farming

1. Bipartite Agreement model

2. Tri-partite Agreement model

3. Quad-partite Agreement model

Bipartite Agreement model:

Tri-Partite Agreement Model:

Quad-Partite Agreement Model :

Status of contract farming in India :

• Nearly Five lakh hectares is under contract farming India

• More than 600 national and multinational companies are in

contract farming

State wise under contract farming:

PARTIAL LIST OF COMPANIES ESTABLISHED CONTRACT FARMING IN INDIA :

• HUL

• ITC

• SUGUNA POULTRY

• VENKATESHWARA HATCHERIES

• PEPSICO

• RALLIS

• NESTLE

CONCLUSION:

• India, given the diverse agro climatic zones, can be a competitive producer

of a large number of crops.

• There is a Need to convert our factor price advantage into sustainable

competitive advantage.