Dr. Rama Kant Sharma & C.M. Sharma
Contract farming arrangement is a commitment by a farmer or a group of farmers to grow and deliver to the buyer agreed quantities of a commodity at, a predetermined price. The buyer (trader or a corporate), as always, has the additional options of either buying the commodity from the market or growing it himself on own or leased land. Therefore, at its simplest, contract farming is the creation of an additional linking mechanism through another channel of disposal of the crop. It is thus a part of the overall supply chain, which acts parallel to the standard market mechanism.
Contract farming involves agricultural production being carried out on the basis of an agreement between the buyer and farm producers. 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, e.g., supplying inputs, assisting with land preparation, providing production advice and transporting produce to its premises.
Contract farming thus can be defined as 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. Typically, the farmer agrees to provide agreed quantities of a specific agricultural product. These should meet the quality standards of the purchaser and be supplied at the time determined by the purchaser. In turn, the buyer commits to purchase the product and, in some cases, to support production through, for example, the supply of farm inputs, land preparation and the provision of technical advice.
Key benefits of Contract farming
Contract fanning has been used for agricultural production for decades but its popularity appears to have been increasing in recent years. The use of contracts has become attractive to many farmers because the arrangement can offer both an assured market and access to production support. Contract farming is also of interest to buyers, who seek supplies of products for sale further along the value chain or for processing. Processors constitute the main users of contracts, as the guaranteed supply enables them to maximise utilization of their processing capacity.
Need for Contract Farming in J&K
* Overcome inadequate linkages with markets.
* Presence of fragmented land holdings.
* Lack of capital, poor infrastructure, inadequate information dissemination, etc.
* Loss/wastage of large quantities of fruits and vegetables.
* Agri-based and food industry’s inability to acquire timely and adequate good quality agricultural produce.
* Changes in consumption habits.
* Increasing number of fast-food outlets.
* The growing role played by supermarkets.
* Continued expansion of world trade in fresh and processed products.
Major Issues/ Challenges being faced by Private Companies/Firms in Contract Farming
* Highly restrictive and regulated agricultural marketing system.
* Monopoly of the State Governments to set up of markets.
* Mandi revenues not deployed for infrastructure development.
* Price setting not transparent – both producers and consumers are often cheated.
* Processing industries cannot buy directly from the farmers.
* Non-existence of scientific and modern warehousing mechanism and infrastructure.
* Lack of established ‘Warehouse Receipt’ system.
* Farmers under pressure to sell produce immediately after harvest.
* Lack of proper retail supply chain.
* No linkages between spot & future markets.
* Lack of modern transportation and packaging facilities.
* Lack of agro processing industry and related infrastructure.
* Inadequate R&D infrastructure and initiatives.
* Inadequate facilities for grading, sorting and evaluation of the produce.
Application Areas for Contract Farming In Jammu and Kashmir
The following are the prime candidates, each of which is marked by an absence or an underdevelopment of competitive domestic markets:
* Seed multiplication for temperate areas;
* Organic foods, vegetables, fruits, and exotic produce/plants;
* Off season vegetable cultivation
* Export crops;
* Aromatics, herbal and medicinal plants;
* The same consideration rules out commodities for established mass markets, such as cereals, common fruits and vegetables, Millets etc, as candidates for contract cultivation.
SOME CONTRACT FARMING MODELS IN J&K
Jammu Oriental Fresh (JOF) Actech Agro
Jammu Oriental Fresh (JOF) is a Company of the farmer, for the farmers & by the farmers. Promoted under National Vegetable Initiative of SFAC (Small Farmers Agribusiness Consortium) & facilitated by Actech Agro. JOF has over 3000 vegetable farmers in 7 districts of Jammu Province as its members & 4000 Ha of land base. Our Farmers have adopted organic farming in over 1000 Ha of land.JOF aims at bringing benefits of latest technology innovations to its member farmer thereby promoting sustainable & natural ways of farming. JOF also works towards creating post-harvest management & Marketing infrastructure to increase crop shelf life. JOF’s marketing initiative brings farmers produce directly to consumers bypassing the chain of intermediaries. This results in lower price to consumer & higher revenue to the growers. JOF will soon introduce a variety of Fresh & Organic vegetables to the consumers of Jammu City. Promoted under National Vegetable Initiative of SFAC (Small Farmers Agribusiness Consortium) & Fasciated by Actech Agro Pvt. Ltd. JOF marketing initiative brings farmers produce directly to consumers by passing the chain of intermediaries. This results in lower price to consumer & higher revenue to the growers. JOF will soon introduce a variety of Fresh & Organic vegetables to the consumers of Jammu City.
Actech Support JOF in following areas:-
* Organic Certification
* IT Infrastructure
* Weather information Services
* Call Centre Operation
* High Quality Seed
* Poly-house design & installation
* Biogas & vermin-compost
* Marketing Support
Sarveshwer model
In Jammu & Kashmir State Sarveshwer contract farming is on growth phase. The concept of contract farming first started with the crop “Basmati-370” which is known as fragrance of Jammu and Sarveshwer company first launch its project in Suchetgarh Village, situated on Zero-line border of R.S. Pura Block. Achieving success in R.S. Pura the company started its other projects with the same concept in other parts of Jammu region like Akhnoor, Bishnah etc. Now, the trend is gaining ground in many districts like Bhaderwah, Srinagar, Rajouri etc. where they have started contract of several crops like Rajmah, Walnuts and Anardana etc. respectively and are trying to cover more crops under contract. Till date they are working with full passion. According to Sarveshwer Company till date more than 10,000 farmers are working under contract and they are earning benefits out of it and more than 12,000 hectare of land is under contract. The contract farming works on several models like Bi-Pirate, Tri-Pirate and Qui-Piarte, but in Jammu the contract farming works on Bi-Pirate model. According to this model there is involvement of farmers and company and besides that company does provide certain incentives to farmers like pesticides, insecticides, and the facility of packaging and loading to the farmers. These incentives have solved certain problems of farmers which they used to face like the problem of marketing etc. Under contract farming, there is a good scope for Basmati rice, which is grown on over 35,000 hectares of land in the state and has a production of over 88,000 metric tonnes, besides rajmash, pulses, saffron, peas and potato which are cultivated in temperate areas during the Kharif season.
Benefits small farmers from Contract Farming in J&K
Small farmers are generally capital starved and cannot make major investment in land improvement and modern inputs. The Contract farming can fill up this gap by providing the farmers with quality inputs, technical guidance and management skills. Although the company deals only with the contract crop, the farmers’ overall management skill may improve, thereby helping him to raise the yields of both contract and non-contract crops. From the standpoint of corporate bodies, farming reduces the supply risk, while the farmers enter into contractual arrangements with companies in order to minimize price risks. The company and the farmers enter into contracts to supply or purchase a specified quantum of the commodity at agreed prices. The agreed contract may be either formal or informal and may cover supply of inputs and marketing of output. By entering into contract, the company reduces the risk of non-availability of raw material and the farmer reduces the risk of market demand and prices of his produce. The inputs and services supplied by firms may include seeds, fertilizers, pesticides, credit, farm machinery, technical advice, extension etc., or may involve only the supply of hybrid seeds and marketing of produce.
( The writers are Retd. Dy. Directors Agriculture).
