A farming contract is not worth the paper it has been written on if there is no trust between farmers and buyers.
Photo: U.Meissner/giz

06.12.2012

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Contract farming agreements are forward contracts specifying the obligations of two business partners: the sellers’ (farmers’) promise to supply and the buyers’ (processors’/ traders’) promise to off-take agricultural produce as agreed.

With regard to substance, form and the process of concluding such arrangements, farming contracts are quite variable: they may be established in verbal or written form; they may be concluded by individual farmers or by farmer groups; the description of obligations may remain quite vague or be reasonably specific; the arrangements may be based on renewable seasonal negotiations or on long-term business relations; the specifications may be based on case by case negotiations or on a sub-sector code of practice. Whatever process applied or contents itemised, to ensure sustainability, successful farming contracts have to be designed in a way that promises benefits to both contract parties.
Given the diversity of produce features and geo-climatic situations, business cultures and entrepreneurial capacities, socio-economic structures and business environments, it is obvious that there is no one-size-fits-all blueprint for designing farming contracts. Furthermore, experience shows that a farming contract is not worth the paper it has been written on if there is no trust between farmers and buyers.

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