1. Payment mode
Farmers participating contracting farming are paid mostly after 14 days. This very efficient as it ensures that the farmers receive the money in lump sum and therefore would be able to invest in projects more stably. It also encourages farmers to save since the money is debited into their bank accounts and hence they are able to access credit services.
2. Guaranteed market access
Most of agricultural produce is perishable and hence finding a ready market is very imperative. Contract farming enables farmers to have an assured market for a certain period hence increases farmer commitment to ensuring the produce is of good quality and amount. This aspect also enables the farmer to reduce the costs in terms of market research and increases their income.
3. Provision of input supply
In contract farming arrangements the farmers are provided with fertilizers, seedlings and chemicals by the exporters so as to increase their production. This reduces farmer costs enabling them to increase their production and income. Brokers or any other marketing channels do not offer input supply proving contract farming as the best marketing channel.
4. Skill transfer
Under contract farming the farmers have the advantage of extension services from the exporters that ensures that even after the contract is over, the farmers remain with the knowledge they learnt. Brokers on the other hand do not offer any extension advice to the farmers and hence making contract farming better.
5. Good management
Contract farming enables the farmers to work with timelines and time tables and hence ensuring the farmer is better organized in their farm operations.
As seen from the benefits above, contract farming has the ability to streamline the agricultural value chains and improve the small scale farmers position by turning their markets into commercial export markets. It is however not without challenges. Keep it locked for the success and failure factors of contract farming as a marketing channel.
Have a good week ahead.