Contract Farming is an agreement between farmers and cooperative firms for the supply and production of agriculture goods, under predefined agreements and price. As per noted agriculture is booming for a very long time, but nowadays farmers are facing a new problem of accessing the market and fully achieving profitability.
Contact farming will bring following advantages for Indian farming:
- Due to contract farming the risk of farmers is reduced at 80% whenever there is a pest attack, production got destroyed by rain and because of any other reason the company will bear it not the farmers, in fact, they will get their compensation hence 0%risk.
- The best part of contract farming is that there is no middleman in this contract the farmers will get to pay at the market selling price.
- Contract farming was introduced for the benefit of the farmer so they can get reasonable profits from their production.
- It is important to set a predefined amount of the production, to be paid to the farmers. Through Contract Farming the farmers get seeds and proper pieces of equipment to produce the crop.
The problems farmers have to face in contract farming are given below:
- The contract farming is more beneficial for large farmers in terms of production so the small earn less profit in comparison to large farmers.
- Basically In India there are no strict rules and regulations regarding the fulfillment of the contract, which results in the failure of the contract.
- The sellers (farmers) are many in comparison to corporate buyers. This results in a monopoly due to a lack of buyers.