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What is Contract Farming?

Contract farming is defined as an agricultural production that is carried out based on an agreement between buyer and farmer, with established conditions for production and marketing of farm products. In simple words, contract farming refers to a varied formal and informal agreement made between producers and processors/buyers. It includes loose buying arrangements, simple purchase agreement and supervised production with input provision, with tied loans and risk coverage. In this farming process, a  farmer agrees to provide specific agricultural products that meet the standards determined by the purchaser. In return, the buyer commits to purchase and support the production by supplying farm input, land preparation and the provision of technical advice. This article discusses in detail about Contract Farming.

Objectives

Contract Farming works towards:

  • Reducing the load on the central and state level procurement systems.
  • Increasing private sector investment in agriculture.
  • Bringing the market focus of crop selection by Indian farmers.
  • Generating a steady source of income at the individual farmer level.
  • Promoting processing and value addition.
  • Generating gainful employment in rural communities.
  • Reducing migration from rural to urban areas.
  • Promoting rural self-reliance in general by pooling locally available resources and expertise to meet new challenges.