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