Contract Farming, a method of integrating smallholders into economies of scale, has received a good deal of both positive and negative hype over the past several decades.
In its simplest form, farmers contract with a firm, cooperative or a person to grow specific kinds of crops, for which they receive both planting materials or seeds and technical assistance. Firms, for their part, are obliged to provide inputs and technical advice, and to purchase the grown items, often at a pre-specified price.
The system is advantageous for poor farmers, who otherwise might not be able to access credit for planting materials and other inputs, and would likely have to sell their produce at a price lower than to contracted price. For the firm, the system guarantees continued input of a given quality and quantity.
On the negative side, it is argued that farmers loose flexibility of negotiation, that labor is skewed towards women and children (with men controlling the profits), and that the system invariably favors firms over farmers – among other negative attributes.
A recent IFAD study carried out in Kenya, Mozambique, and Zambia had this to say:
The report documents what many had already suspected, i.e., that credit under contract farming arrangements is one of the major (indeed, often, the only major) forms of access to production finance among smallholders. Rather more unexpectedly, it concludes that these credits are not necessarily exploitative (although the case of Mozambique suggests that they may be under certain conditions), and that farmers who access them definitely derive concrete benefits. The report findings are based on studies that were carried out in Kenya, Zambia and Mozambique
In the 1980s one of the first large, multidisciplinary studies was conducted on contract farming in Africa, and for those interested in more detail, the results of this work are given in two of the references at the end of this blog.
Contract Farming in Burundi
Due to the years of war and unrest, what contract farming did exist in Burundi came to a halt many years ago. Now, however, the Hotel Club du Lac Tanganyika is working to revive the practice, in a small and experimental way, by setting up contracting arrangements in the nearby village for vegetables and herbs used in the Hotel kitchen.
Over the next several months, I will be documenting this project in this blog, with snippets about successes and difficulties encountered, and how we have worked to improve the system in order to provide maximum profits and technical assistance to poor and isolated smallholders in the village, while making available to the Hotel kitchen the best of vegetables and herbs.
Our seeds come from Italy, Kenya, the USA and Burundi, and we are using wholly biological systems of cultivation.
Contract Farming, the Private Sector and the State: An Annotated and Comprehensive Bibliography with Particular Reference to Africa, with Prefatory Essay. IDA Working Paper: No. 62. Binghamton, New York, Clark University. 329 p.
This bibliography on contract farming in Africa starts with an overview and interpretation of the literature on the subject. The bibliography itself consists of two parts, a comprehensive bibliography including 722 entries, and an annotated bibliography, which contains a selection of titles from the comprehensive bibliography. The items in both the annotated and comprehensive bibliography have been selected to represent four basic approaches to contract farming: agribusiness, agricultural economics, agronomics, and social science. Criteria for selection have been based, in descending order, on contract farming in Africa; contract farming in other geographical regions; general pieces on contract farming; contextual pieces useful for both the study and understanding of contract farming; major policy statements relevant to the working environment of contract farming schemes. The entries represent both regular source materials and so-called fugitive materials.
Morrison, P.S. (31 May 2006) Promoting indigenous entrepreneurship through small-scale contract farming… In: Singapore Journal of Tropical Geography, p 191-206. © 2010 Department of Geography, National University of Singapore and Blackwell Publishing Asia.
Watts, M.J. 1994. Life under contract: contract farming, agrarian restructuring, and flexible accumulation. In P.D. Little & M.J. Watts, éd. Living under contract: contract farming and agrarian transformation in sub-Saharan Africa, p. 21-77. Madison, University of Wisconsin Press.
This is an executive summary of the results of a comparative study of contract farming in Africa. The project was initiated on behalf of the Africa Bureau of the US Agency for International Development (AID). First, a literature review and analysis, and inventory of the contract farming literature,e, with an emphasis on Africa. This was followed by a field research phase that examined contract farming schemes in Gambia, Senegal, Ghana, Ivory Coast, Kenya, Nigeria, and Malawi. A third phase was devoted to data analysis. This synthesis report summarizes the most significant findings of the study, particular attention being paid to their implications for USAID programmes and policies. Under what conditions does contract farming benefit local farmers and generate sufficient surplus to catalyze processes of local and regional development? The findings of the study address issues concerning income generation; food security; employment generation; regional development and multipliers; local organizations; technology transfer; the role of public and private sectors; agricultural policy; sustainability of contract farming; and a USAID strategy for contract farming.