Handbook of Herbs and Spices - Volume 3

(sharon) #1

50 Handbook of herbs and spices


Contract farming is an effective means to develop markets and to bring about


transfer of technical skills in a way that is profitable for both the sponsors and


farmers. To be successful it requires a long-term commitment from both parties.


Exploitative arrangements by managers are likely to have only a limited duration and


can jeopardise agribusiness investments. Similarly, farmers need to consider that


honouring contractual arrangements is likely to be to their long-term benefit. Contract


farming is becoming an increasingly important aspect of agribusiness, whether the


products are purchased by multinationals, smaller companies, government agencies,


farmer cooperatives or individual entrepreneurs. The approach is widely used, not


only for tree and other cash crops but, increasingly, for fruits and vegetables, poultry,


pigs, dairy produce and even prawns and fish. Contract farming of spices like chillies,


ginger, nutmeg and vanilla as well as herbs like parsley, thyme, patchouli and stevia


are wide spread, which makes the farm level quality improvement suitable to the


international standards as set by country regulations.


This kind of backward linkage is market driven and hence is very competitive and


effective. For sponsoring companies, contract farming may in many cases be more


efficient than plantation production, and will certainly be more politically acceptable.


It can give them access to land that would not otherwise be available and the opportunity


to organise a reliable supply of products of the desired quality that probably could not


be obtained from the open market. On the other hand, from the companies’ perspective,


contract farming is not without difficulties. Farmers may sell their outputs to outsiders,


even though they were produced using company-supplied inputs. Conflicts can also


arise because the rigid farming calendar required under the contract often interferes


with social and cultural obligations. The essential precondition for a contract farming


project is that there must be a market for the product that will ensure profitability of


the venture.


There is a range of other factors that affect the success of contract farming ventures.


These include the physical, social and cultural environments; the suitability of utilities


and communications; the availability of land; and the availability of needed inputs.


An essential precondition is that management must have the necessary competence


and structure to handle a project involving many small-scale farmers. Another important


requirement is government support. Contracts need to be backed up by law and by an


efficient legal system. Existing laws may have to be reviewed to ensure that they do


not constrain agribusiness and contract farming development and minimise red tape.


Some major spice /herb producing countries like India have, unfortunately, not done


much to the existing laws to bridge the gap.


In general, there are five basic models of contract farming; these are the centralised


model, the nucleus estate model, the multipartite model, the informal or individual


developer model and the intermediary model. Any crop product can theoretically be


contracted out using any of the models, though certain products are more suited to


certain approaches. Good management is a vital component of all contract farming


models. It is essential to plan, organise, coordinate and manage production, including


the identification of suitable land and farmers, the organisation of farmers into working


groups, the supply of inputs, the transfer of technology and the provision of extension


services. Above all, the quality requirement has to be clearly agreed upon and a


detailed package of agro-practices needs to be designed and monitored. There has to


be a harmonious management-farmer relationship throughout the implementation


of the project, and promoters and sponsors of contract farming need to place


particular importance on the monitoring of production. Companies should also monitor

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