Contract Farming – Creating Shared Value

Contract farming is an agreement between the farmers and the food processing companies.

The agreement can be formal, semi-formal or even verbal. The farmer promises to provide a certain quantity of crops in a stipulated time frame. In return, the buyer assures the farmer a pre-determined price for the produce.

The contract may include loose buying arrangements, simple purchase agreements and supervised production with input provision, or tied loans and risk coverage.

In supervised production, the processing company trains the farmer in the latest farming methods. It gives farmers access to the most advanced technology and equipment.

This results in increased productivity and higher quality crop, which helps both the farmer and the company.  

Therefore, this model benefits both the farmers and the food processing companies.

Ways in Which Contract Farming Helps the Farmer

Contract farming helps the farmer by providing a solution to three main problems.

Problem 1: Wastage of Produce

The first and biggest problem the farmer faces is the wastage of produce. This is mainly due to lack of cold storage.  As a result, the country faces the problem of price surge and farmer distress.

India is the second largest producer of vegetables and fruits in the world, but approximately 40-50% of the produce goes waste – ASSOCHAM-MRSS India

How Does Contract Farming Help?

The quantity that the food processing companies will purchase from the farmer is pre-fixed in the contract. This ensures that the farmer’s produce is not wasted and reduces the problem of wastage substantially.

Problem 2: The Farmer Doesn’t Get a Fair Selling Price

The second problem is of low prices due to the distress sale of the crop and is also connected to the 1st problem. Farmers try to sell their produce to the first buyer in fear of it being wasted. These prices are often much lower than the minimum support price.

How Does Contract Farming Help?

The commitment between the farmer and the buyer ensures that the prices are fixed beforehand. Therefore, the farmers don’t have to reduce the prices either for fear of wastage or for selling in bulk.

Problem 3: Lack of Transport to Carry the Produce to the Market

The third problem that the farmer faces is the lack of adequate transport to carry the produce to the market. Most of them don’t own tractor-trailers and trucks. Also, hiring these carriers is expensive and makes a considerable dent in the farmers’ meagre earnings.

Depending upon obsolete and slow animal carriages results in long delays and wastage of produce.  As one, these are slow, and two, being small, these require multiple rounds to the market.


How Does Contract Farming Help?

Most big food processing companies either own a large fleet of transport vehicles or have the resources to hire them. This saves the farmers the hassle and cost of transporting their crop to the mandis.


How Does Contract Farming Help Food Processing Companies?

The relationship between the farmer and the food processing company is symbiotic in contract farming arrangements. The companies also benefit in many ways from this arrangement.

  1. An assured supply of raw material means that the food company can stick to its production schedules.
  2. Since the agreement is signed much before the date of the requirement, without any pressures of delaying schedules, the costs are rationalised. The farmer happily accepts the pre-determined prices as he is getting a ready buyer, much in advance and without any hassle and insecurities.
  3. Companies provide the farmers with knowledge of the latest farming methods as well as equipment & technology to improve both the quality and the quantity of the produce. This means they get superior quality raw stock and higher crop per hectare. As a consequence, the company can manufacture high-quality retail products.

At the time of independence, the produce-per-hectare was abysmally low at 0.66 tonnes per hectare for a crop like wheat, the staple in most parts of the country.In the year 2017 the yield of wheat crop stands at 3.2 tonnes per hectare, a five-fold increase on the 1947 figure.

At Jain Fram Fresh Foods Limited (JFFFL), we are deeply committed to alleviating the socio-economic condition of the farmers and taking the agriculture sector to its former glory.

Source – farmers.gov.in


Reimagining agriculture is the way we envision to make this dream a reality.

We hope to create a world where the farmer is prosperous, and there is no wastage of agricultural produce.  Also, there is an optimal use of natural resources and we all work together to nurture our planet and help preserve it for our future generations.  

The first and foremost step towards making the change is to empower the farmer. We are deeply invested in making that happen by training the farmers in Good Agricultural Practices (JAIN GAP).

Through our projects like UNNATI, we provide our contract farmers with disease-free planting material and the latest techniques and technology in farming. This significantly increases the per hectare yield and grow a high-quality crop.

We train them to use sustainable agricultural practices to reinforce our commitment to reducing the negative impact on the environment and creating a viable future for all.

Creating shared value for all involved is the driving force at JFFFL, and we work tirelessly to achieve this, with a keen eye on quality and excellence.

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