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Friday, May 21, 2010

PROSPECT FOR CONTRACT FARMING IN NIGERIA I

Contract farming is agricultural production carried out according to an agreement between a buyer and farmers, which establishes conditions for the production and marketing of a farm product or products.[1]
Typically, the farmer agrees to provide established quantities of a specific agricultural product, meeting the quality standards and delivery schedule set by the purchaser. In turn, the buyer commits to purchase the product, often at a pre-determined price.
In some cases the buyer also commits to support production through, for example,
 supplying farm inputs,
 land preparation,
 providing technical advice and
 arranging transport of produce to the buyer’s premises.
Another term often used to refer to contract farming operations is ‘out-grower schemes”, whereby farmers are linked with a large farm or processing plant which supports
 production planning,
 input supply,
 extension advice and
 transport.
Contract farming is used for a wide variety of agricultural products.
THE RATIONALE FOR CONTRACT FARMING
Contract farming is one of the different governance mechanisms for transactions in agrifood chains.
The use of contracts (either formal or informal) has become attractive to many agricultural producers worldwide because of benefits such as the assured market and access to support services.
It is also a system of interest to buyers who are looking for assured supplies of produce for sale or for processing.
Processors are among the most important users of contracts, as they wish to assure full utilization of their plant processing capacity.
A key feature of contract farming is that it facilitates backward and forward market linkages that are the cornerstone of market-led, commercial agriculture.
Well managed contract farming is considered as an effective approach to help solve many of the market linkage and access problems for small farmers.
KEY BENEFITS OF CONTRACT FARMING
The key benefits of contract farming for farmers can be summarized as follows:
1) improved access to local markets;
2) assured markets and prices (lower risks) especially for non traditional crops;
3) assured and often higher returns;
4) enhanced farmer access to production inputs, mechanization and transport services, and extension advice
Additional key benefits for contract partners and rural development often include:
1) assured quality and timeliness in delivery of farmers’ products;
2) improved local infrastructure, such as roads and irrigation facilities in sugar outgrower areas, tea roads, dairy coolers/collection centres, etc.
3) lower transport costs, as coordinated and larger loads are planned, an especially important feature in the case of more dispersed producers..

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