Contract farming : partnerships for growth PDF
Preview Contract farming : partnerships for growth
ISSN1010-1365 Contractfarming FAO AGRICULTURAL SERVICES BULLETIN Partnershipsforgrowth FAO Contract farming AGRICULTURAL SERVICES BULLETIN Partnershipsforgrowth 145 by CharlesEaton and AndrewW.Shepherd Food and Agriculture Organization of the United Nations Rome,2001 Reprinted2005 Thedesignationsemployedandthepresentationofmaterial inthisinformationproductdonotimplytheexpressionofany opinionwhatsoeveronthepartoftheFoodandAgriculture OrganizationoftheUnitedNationsconcerningthelegalor developmentstatusofanycountry,territory,cityorareaorof itsauthorities,orconcerningthedelimitationofitsfrontiers orboundaries. ISBN92-5-104593-3 Allrightsreserved.Reproductionanddisseminationofmaterialinthis informationproductforeducationalorothernon-commercialpurposesare authorizedwithoutanypriorwrittenpermissionfromthecopyrightholders providedthesourceisfullyacknowledged.Reproductionofmaterialinthis informationproductforresaleorothercommercialpurposesisprohibited withoutwrittenpermissionofthecopyrightholders.Applicationsforsuch permissionshouldbeaddressedtotheChief,PublishingManagementService, InformationDivision,FAO,VialedelleTermediCaracalla,00100Rome,Italy [email protected] ©FAO2001 Copyrightedmaterial Ill Preface Contractfarminghasbeeninexistenceformanyyearsasameansoforganizing thecommercialagriculturalproductionofbothlarge-scaleandsmall-scale farmers.Interestinitcontinuestoexpand,particularlyincountriesthat previouslyfollowedacentralplanningpolicyandinthosecountriesthathave liberalizedmarketingthroughtheclosingdownofmarketingboards.Changes inconsumptionhabits,suchastheincreasingnumberoffast-foodoutlets,the growingroleplayedbysupermarketsinmanycountries,andthecontinued expansionofworldtradeinfreshandprocessedproducts,havealsoprovided theimpetusforfurtherdevelopmentofthismodeofproduction. Thepurposeofthisguideisnottoreplicatepastsocio-economicstudieson thesubjectofcontractfarming.Rather,theaimistoprovideadvice:first,to managementofexistingcontractfarmingcompaniesonhowtoimprovetheir operations;second,tocompaniesthatareconsideringstartingsuchventures onthepreconditionsandmanagementactionsnecessaryforsuccess;and,last butnotleast,togovernmentofficialsseekingtopromotenewcontractfarming operationsormonitorexistingoperations.Theguidedescribesindetailthe generalmodusoperandi,internalfunctionsandmonitoringmechanismsof contractfarming.Itemphasizesthatsustainablecontractfarmingarrangements areonlypossiblewhenthevariouspartiesseethemselvesinvolvedinalong- termpartnership. Thie One ETXH-H63-NURX V Contents Preface iii Acknowledgementsandreferences jx Introduction 1 Chapter1 ADVANTAGESANDPROBLEMS OFCONTRACTFARMING Z Advantagesforfarmers 10 Problemsfacedbyfarmers 14 Advantagesforsponsors 18 Problemsfacedbysponsors 22 Chapter2 KEYPRECONDITIONS FORSUCCESSFULCONTRACTFARMING 27 Aprofitablemarket 30 Thephysicalandsocialenvironments 31 Governmentsupport 36 Inventoriesofpreconditions 40 Chapter3 TYPESOFCONTRACTFARMING 43 Thecentralizedmodel 41 Thenucleusestatemodel 50 Themultipartitemodel 50 Theinformalmodel 52 Theintermediarymodel 54 Copyrightedmaterial VI Contents, continued Chapter4 CONTRACTSANDTHEIRSPECIFICATIONS 57 Thelegalframework 61 Theformula 62 Theformat 66 Thespecifications 68 Chapter5 MANAGINGTHEPROJECT 83 Coordinatingproduction 86 Managingtheagronomy 94 Farmer-managementrelations 100 Chapter6 MONITORINGPERFORMANCE 105 Monitoringgualityandyields 108 Monitoringhumanresources 115 Protectingtheenvironment 117 Annexes 119 Glossary 149 Referencesandfurtherreading 153 Copyrightedmaterial 3 vii Figures 1 Acontractfarmingframework 4 2 Thecentralizedmodel 49 3 Themultipartitemodel -Ajoint-venturecontractfarmingprojectinChina 51 Boxes 1 Technologytransferbydiffusion 1 2 Effectofassuredmarkets-TomatoproductioninIndia 14 3 Analysingthephysicalandsocialenvironment 33 4 Cultureversuscommercialism 35 5 Sugar-caneproductionbycontractfarminginThailand 48 6 Individualdevelopers-Theinformalmodel 53 7 IntermediariesinThailand 55 8 “ActsofGod”clausesincontracts 63 9 Landtenureforcontractfarming 65 10 Transientverbalcontracts 67 11 Anexampleofgradingspecifications forfreshtobaccoleaf 70 12 TheroleoffarmergroupsinColombia 90 13 Growers’AssociationinKenya 91 14 ManagementandtechnologytransferinIndia 96 15 MonitoringmilkproductioninCroatia 110 Copyrightedmaterial VIII T1ables la Exampleofaninventoryofpreconditions forcontractfarming-Socio-politicalassessment 41 b Exampleofaninventoryofpreconditions forcontractfarming-Physicalandsocialassessment 42 2 Characteristicsofcontractfarmingstructures 56 3 Characteristicsofcontractformulas 64 4 Pricingandgradingstructureofcassava undercontractinThailand 76 5 Acroppingscheduleforflue-curedtobacco undercontract 99 6 Productionandpostharvestmatrixforexportpapaya undercontract 114 Annexes 1 Sponsor-farmeradvancepolicies 121 2 Agreementforcontractfarmingofmaize 124 3 Tobaccocontract-Greece 126 4 Exportpapayaagreement 131 5 Swineraisingcontract-Thailand 132 6 Jobdescriptionforfieldextensionofficers 138 7 Calculatedyieldindicators(CYI) 140 8 Farmerperformancerecord 143 9 Qualityconstraints-Anillustrationofperceptions 146 Copyrightedmaterial Acknowledgements and references TheassistanceofCynthiaDonovan,JonLindsay,MarcoPrencipe,Richard Roberts,MortonSatin,ElizabethScott,IanTankard,andMitchellWilliamson inthepreparationofthispublicationisgratefullyacknowledged.Supanun Boontoay,AruneePinprayong,PrayongSaiprasertandChotirojWongwan providedconsiderableassistancetotheseniorauthorduringaresearchvisitto Thailand.ThehelpprovidedbytheBritishAmericanTobaccoCompanyand theNestleCorporationinMalaysia,theFrito-LayandBetagrocompaniesin Thailand,andtheLaksonCompanyinPakistan,whichfreelyprovided productiondataandoperationaldetailsoftheirsmallholderfarmingoperations, isacknowledgedwithgratitude. UnpublishedcasestudiescommissionedbyFAOwerecarriedoutbyLuz BeraniaDiazinColombia,KelvinCraiginGuyana,TajamulHaqueinIndia, PatrickKambewainMalawi,SandraKokoricinCroatia.EnriquetaTorresin thePhilippines,andTomReubenWambuainKenya.AntonyEllman,Steven JaffeeandAndrewTallachkindlyreviewedanadvanceddraftofthispublication andmademanyvaluablecomments.However,responsibilityforerrorsand omissionsandtheinterpretationofthetopicremainsthatoftheauthors. Aconsiderabledebtisowedtotheemployeesandfarmersofcontractfarming venturesinmanycountrieswhohavecontributedtothesubjectofcrop agreementsandmanagement-farmerrelationships.Bysharingtheirknowledge andexperiencestheyprovidedtheinspirationandinterestthatmadethis publicationpossible. Wherereferencesaremadeinthetexttospecificcontractfarming experiences,thesourceisusuallyacknowledgedasafootnote.Whereno acknowledgementisgiven,thesourceiseitheroneoftheunpublishedcase studiesmentionedaboveortheunpublishedexperiencesoftheauthors,in particularthoseofCharlesEaton. Copyrightedmaterial Contractfarming 1 Introduction Inanageofmarketliberalization,globalizationandexpandingagribusiness, thereisadangerthatsmall-scalefarmerswillfinddifficultyinfullyparticipating inthemarketeconomy.Inmanycountriessuchfarmerscouldbecome marginalizedaslargerfarmsbecomeincreasinglynecessaryforaprofitable operation.Aconsequenceofthiswillbeacontinuationofthedriftofpopulations tourbanareasthatisbeingwitnessedalmosteverywhere. Attemptsbygovernmentsanddevelopmentagenciestoarrestthisdrifthave tendedtoemphasizetheidentificationof“incomegeneration”activitiesfor ruralpeople.Unfortunatelythereisrelativelylittleevidencethatsuchattempts havebornefruit.Thisislargelybecausethenecessarybackwardandforward marketlinkagesarerarelyinplace,i.e.ruralfarmersandsmall-scale entrepreneurslackbothreliableandcost-efficientinputssuchasextension advice,mechanizationservices,seeds,fertilizersandcredit,andguaranteed andprofitablemarketsfortheiroutput.Well-organizedcontractfarmingdoes, however,providesuchlinkages,andwouldappeartoofferanimportantway inwhichsmallerproducerscanfarminacommercialmanner.Similarly,italso providesinvestorswiththeopportunitytoguaranteeareliablesourceofsupply, fromtheperspectivesofbothquantityandquality. Thecontractingofcropshasexistedfromtimeimmemorial.Inancient Greecethepracticewaswidespread,withspecifiedpercentagesofparticular cropsbeingameansofpayingtithes,rentsanddebts.1Duringthefirstcentury, Chinaalsorecordedvariousformsofsharecropping.IntheUnitedStatesas recentlyastheendofthenineteenthcentury,sharecroppingagreementsallowed forbetweenone-thirdandone-halfofthecroptobedeductedforrentpayment tothelandowner.Thesepracticeswere,ofcourse,aformofserfdomand usuallypromotedpermanentfarmerindebtedness.Inthefirstdecadesofthe twentiethcentury,formalfarmer-corporateagreementswereestablishedin 'Thissystemwasknownashektemoroior“sixthpartners". Copyrightedmaterial
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