Contract farming involves agricultural production being carried out on the basis of an agreement between the buyer and farmers. Sometimes it involves the buyer specifying the quality required and the price, with the farmer agreeing to deliver at a future date. More commonly, however, contracts outline conditions for the production of farm products and for their delivery to the buyer’s premises. The farmer undertakes to supply agreed quantities of a crop or livestock product, based on the quality standards and delivery requirements of the purchaser. In return, the buyer, usually a company, agrees to buy the product, often at a price that is established in advance. The company often also agrees to support the farmer through supplying inputs, assisting with land preparation, providing production advice and transporting produce to its premises.
There are various types of contract farming models;
1. Centralized model a company provides support to smallholder production, purchases the crop, and then processes it, closely controlling its quality.
2. The Multipartite model usually involves a partnership between government bodies, private companies and farmers.
3. Intermediary model can involve subcontracting by companies to intermediaries who have their own (informal) arrangements with farmers.
4. Informal model involves small and medium enterprises who make simple contracts with farmers on a seasonal basis.
In Kenya, contract farming is majorly practiced in the vegetable and fruit sectors. USAID has been notably advocating for contract farming as a marketing channel for small holder farmers. The avocado value chain has been specifically targeted so as to improve the livelihoods of farmers in areas such as Marani and Kandara. Very many studies have been done in relation to this and most seeking to find out various objectives such as; the determinants of success and or failure of contract farming, the benefits involved in contract farming for small scale farmers and the socio economic factors that affect contract farming. Are you in or wish to get into contract farming? Leave us your questions and comments for further information. Look out for the next post for more details on some of the most sought after objectives in studying contract farming in Kenya.