Contract Farming can be defined as an agreement between farmers and processing or marketing firms for the production and

supply of agricultural products under forward agreements, frequently at predetermined prices. Contract Farming is essentially an agreement between unequal parties, companies, Government bodies or individual entrepreneurs on the one hand and economically weaker farmers on the other.

1. Contract farming can be traced back to colonial period when commodities like Collin indigo were produced by the Indian farmers for the English factories. 2. The colonial period saw the introduction of cash crops such as tea, coffee, rubber etc in various parts of the country, mostly through a central expatriate- owned state surrounded by small growers. 3. Indian Tobacco Corporation introduced cultivation of Virginia tobacco in coastal Andhra Pradesh in the 1920s incorporating of a fair contract farming system and met with good farmers response. Contract farming was the strategy of choice for almost all food processing contemplated in 1980s and 1950s. Contract farming is now considered to be a corrective to market imperfections and serving a useful purpose in India in its own limited sphere. This system was accepted and use as one of the promising institutional frameworks for the delivery of price incentives, technology and other agricultural inputs(Glover 1994).

To achieve consistent quality. To achieve regular supply. To stabilize the agro produce price and not be affected by market forces. To achieve assured price on the produce.

1. In India the farmers in general face the problems of traditional technology and management practices, inadequate infrastructure and market information, lack of post-harvest management expertise, poor package of produce and inadequate capital to grow a quality crop. 2. Contract farming helps small farmers to participate in the production of high value crops like vegetables, flowers, fruits etc and benefit from market led growth. 3. Extensive areas are required by the Agro processors for an intensive cultivation to build an uniform method of cultivation that would reduce their production and transaction costs with the growers. 4. Effective & efficient monitoring of production operations, extension activities and credit delivery in a conjugal area is easy in Contract farming.

5. Contract farming will maximise the profits to the farmers and minimise risk in farming like production related risks, transfer price risk and produce risk.
6. The farmers find it easy to get under one roof inputs, technological & extension services, postharvest processing facilities and more importantly, the marketing of their produce with assured cash returns.

7. There is a tendency amongst farmers to go in for an alternate cropping systems for better monetary returns.

Recruitment & training, execution of tech. transfer. Selection of farmer & contracting. Provision of implements. Nursery & seed supplies. Provision of agri. Inputs. Harvest production.

Farmer training, harvesting & quality. Management of the quota slip system. Collection and storage of production. Quality inspection, management of info. System, management of farmer payments.

STATE
KANATAKA

CROP
SOYA BEAN

COMPANY
TINNA OILS & CHEMICALS

AREA(HA)
134800

COLEUS
GHERKINS MAHARASHTRA WHEAT VEGETABLES, CEREALS & SPICES PUNJAB BASMATI RICE, MAIZE BASMATI RICE, POTATO, TOMATO, GROUNDNUT & CHILLY TAMIL NADU MAIZE, PADDY COTTON

NATURAL REMEDIES
GLOBAL GREEN COMPANY HINDUSTAN LTD. ION EXCHANGE ENVIRONMENT LTD. SATNAM OVERSEAS, SUKJIT PEPSI CO.

150
8000 1800 19

4000 6000

BHUNI CARE Pvt .LTD APPACHI COTTON COMPANY

800 & 200 260

Provision of inputs and production services. Access to credit. Introduction of appropriate technology. Skill transfer. Guaranteed and fixed pricing structures and Access to reliable markets. .

Overcoming land constraints. Production reliability and shared risk. Quality consistency and

Promotion of farm inputs.

Increased risk. Unsuitable technology and crop incompatibility. Manipulation of quotas and quality specifications Conference on Global Competition & Competitiveness of Indian Corporate. Corruption Domination by monopolies and Indebtedness and over reliance on advances.

Land availability constraints. Social and cultural constraints. Farmer discontent. Extra-contractual marketing and Input diversion.

Regulatory and enabling role: Appropriate laws and efficient legal system. Arbitration or dispute resolution role Provision of training In technological and managerial skills. Initiation and facilitation of research activities into the products under contract. Provision of agricultural extension services. Specialized services (plant pathology clinics, research stations).

Development role Reallocation of development resources Towards promotion of contract farming by bringing together agribusiness and interested farmers or farmer groups Dissemination of market information on products for which there is a demand. Strengthening managerial skills of farmer organizations. Checking that companies are honest and sincere of intention.

Contract Farming is not a panacea to solve all related problems of agricultural production and marketing systems. But contract farming could be evaluated as a way of providing earlier access to credit, input, information technology and product markets for the small scale farming structure. Contract farming might also be seen as a way or as a part of rural development and promoted to improve agricultural performance especially in Third World Countries.

Allen, G.R. 1972. An Appraisal of Contract Farming, International Journal of Agricultural Economics (IJAE), 23, 89-98.
Arnon, I. 1981. Modernisation of Agriculture in Developing Countries: Resource, Potentials and Problems, New York, John Wiley. Beets, W. 1990. Raising and Sustaining Productivity of Small holder farming systems in the Tropics: A Handbook of Sustainable Agricultural Development, Alkmaar, Holland, AgBe Publishing.

24. Glover, D. 1983. Contract Farming and the Transnationals. (Unpublished Ph.D thesis), University of Toronto, Toronto Glover, D 1987 Increasing the Benefits to Smaller holders from Contract Farming Problems for Farmers Organisations and Policy makers, World Development, 15(4), Pp. 441-448. Glover, D. & Kusterer, K. 1994. Small Farmers, Big Business: Contract Farming and Rural Development, London, Macmillan.

Singh, Gurdev, S R Asokan and Asopa, V N 1990 Seed Industry in India: A Management Perspective, Oxford and IBH, New Delhi.IIMK IIML Conference on Global Competition & Competitiveness of Indian Corporate 647 Singh, Sukpal 2000 Contract Farming and Agricultural Diversification in the Indian Punjab: A Study of Performance and Problems, Indian Journal of Agricultural Economics, 55(3), July-September, Pp. 283294.