Contract Farming

• Contract farming can be defined

as agricultural production carried out
according to an agreement between a buyer
and farmers, which establishes conditions for
the production and marketing of a farm
product or products.
• Typically, the farmer agrees to provide agreed
quantities of a specific agricultural product.
• Contract farming is an agreement between
the producer (farmer or farmer organization)
and the buyers (exporters, processing units)
mutually agreeing upon the price, quality, and
quantity of the produce which will be
exchanged after the harvesting.
• Contract farming in ancient Greece was the
widespread practice with a specified
percentage of particular crops.
• During the first century, China also recorded
various farms of sharecropping.
• Contract farming usually involves the
following basic elements pre-agreed price,
quality, quantity or acreage
(minimum/maximum) and time
 Top Contract Farming Companies in
India
• Big India Farms. ...
• Dabur Contract Farming. ...
• Goodricke Group Ltd. ...
• Tata Coffee Ltd. ...
• Rallis India Ltd. ...
• Pacific Herbs Agro Farms Pvt Ltd. ...
• Patanjali Contract Farming. ...
• Anand Agro Group.
• The value of output per cropped area under
contract farming was highest (Rs 91,000)
in Andhra Pradesh (including Telangana),
followed by Karnataka (Rs 68,000), Punjab
(Rs 51,500), and it was the least in Haryana at
Rs 41,000 per acre.13-Jan-2021
• Benefits to farmers:
• Guaranteed and fixed pricing structure:
Generally farmers are unaware of the price
they will get from the market after harvesting.
Due to supply demand fluctuations the
agricultural products are priced beyond the
affordability of the farmers. Contracts enable
the price fixation before the season starts and
give an assured price to the farmer.
• Introduction to the technology: Involvement of
technology firms helps the farmers to adopt the
latest technology. Eventually the best quality of
produce can be grown and incomes for farmers
increase.
• Skill and knowledge transfer: Through technical
knowledge and advanced cropping schedule
given by the buyer company farmers have an
opportunity to learn something new and adopt in
their daily farming activities.
• Guaranteed buy back: The private companies
guarantee buying of the farm products after
the harvesting. Hence, farmers do not have to
find a market to sell their produce. This also
decreases the transportation cost which other
wise farmers have to bear taking the products
to market.
• Access to credit and financial services:
• India`s rural financing sector is still
unexplored. Farmers are not aware of various
financial services. Even if they are aware,
there is poor accessibility. Contracts enable
them to take the benefit of taking credit and
crop insurance
 Benefits to buyer:

• Desired quality and quantity of produce:

• The firms can get the specific and timely delivery
of products directly from the field.

• Avoiding market supply-demand fluctuation:

The market is never constant for the raw material
produced at farm. However, the demand for
processed food is increasing day by day. In such a
case, it is very much important to have a constant
supply of raw material. The contract based
farming enables the constant supply.
• Cost-efficient: The cost of procuring the farm
produce decreases while procuring it directly
from the farm gate as there is minimal
involvement of middlemen like agents who
charge the commission.

• Traceability: As the produce is grown under the

constant monitoring and observation, the
company is well aware of the ingredients used in
the form of inputs to produce them which helps
to get advantage of backward traceability.