Why Contract Farming is the Solely Manner Ahead?
by Jendela Ilmu in Speech Topics 0
On account of growing commercialization, companies are now vulnerable to underneath-promoting of their products at low costs as a result of lack of market availability. This results in lesser capital formation, declining enterprise opportunities, eventual bankruptcy, poverty, unemployment and in the end, distress within the economy. This phenomenon has been witnessed particularly in agriculture.
Understanding Contract Farming
As the title suggests, contract farming refers to an association agreed upon in the discipline of agriculture, wherein the farmer sells a sure quantity of a crop to the buyer underneath the contract that states specific rules for manufacturing and advertising of the product. Nevertheless, the contracted agricultural product ought to meet specific high quality necessities and must be delivered to the customer at a certain time as per the settlement and the buyer makes a dedication to purchase it. If talked about in the contract, the customer could support manufacturing with the information of technical know-how, agricultural provides, capital influx and even land leasing in some cases.
Contract farming entails all sorts of agricultural products akin to horticultural crops, agronomic crops and livestock. This idea has been in apply within the United States ever because the 19th century and has gained recognition in nations like India, Thailand and the Republic of Korea in latest years. The contract commonly enlists terms of payment, high quality standards, expertise specs, determination of ultimate worth and dispute settlement.
Benefits of Contract Farming
The idea of contract farming was introduced to benefit each events involved in the contract, the client and the farmer. Whereas it ensures an assured sale to the farmer at profitable costs with least wastage of produce, it provides the client the advantage of procuring the required agricultural product of certain specifications at a particular time. The farmer can also be helped with monetary and technical assistance from the buying firm earlier than rising the crop. Contract farming is the one method ahead as it eliminates intermediaries from the shopping for-promoting cycle and presents a favorable worth for an excellent quality yield. It ensures proper care and prevents loss of agricultural commodities. This protected-guards the position of small-scale agriculturists who are at risk of losing business attributable to commercialization of the agribusiness. Different advantages of contract farming embrace security against meals value fluctuations, technological up-gradation, elevated income, better harvest, total shared dangers and employment generation. Contract farming solves the issue of micro-financing for farmers, thereby, selling better forward and backward market linkages.
Future with Contract Farming
If both parties strictly adjust to the specs of the contract, the parties are immensely benefited by this arrangement and can lead to a dependable lengthy-time period business relationship between each parties. The absence of an open market will help in considerably decreasing advertising and marketing and transaction costs. The standard of contract farming to operate in diverse agricultural areas positively provides it an edge over different farming practices that have been followed. With the mix of agriculture and professional administration practices, it has turn into a profitable scheme and a win-win scenario for both sides of the contract when adopted diligently. The help of an area agricultural co-operative may be obtained to manage the commitments made by the parties to contract. A carefully drafted contract might reduce the scope of conflicts. My opinion is, with contract farming making its manner into the long run, farmers will acquire a new-discovered competency and will probably be keen to take dangers with growing new crops. Sometime, if not in close to-future, farmers might be able to holding total plantations with the help and co-operation of mega corps. This can be a really perfect state of affairs from political, social and economic level of view.
Presently, contract farming has been profitable, in cattle farming, with sale of milk and has been comparatively much more advantageous than production that was individually undertaken by poultry farmers. Bulk sale and purchases result in economies in scale proportionate to the scale of the business. It would additionally encourage the entry of private companies into the agricultural sector and prove higher than the government's efforts at aiding farmers with correct training. This apply is predicted to revolutionize the farming of cotton, raising pigs and even sea food. Contract farming is the one approach forward for commercial agriculture within the prevailing times of liberalization and globalization of world economies.
By Urvashi Pokharna
Final Up to date: 12/31/2011
