Nelly Bassily | July 5, 2010
Contract farming provides an opportunity for small-scale farmers to gain a regular income. But it can have many pitfalls. It is a much-debated topic.
When contract farming is managed with positive regard for farmers, and has the right support, as in this story, farmers and businesses benefit. But contract farming is not for all small-scale farmers. It carries certain risks. It often works best when farmers are organized into associations or co-operatives, as in Zambia.
Zambian Breweries wanted to produce a value-for-money beer, using locally grown sorghum. But they were aware of the conditions in which farmers grew sorghum. For example, farmers often could not afford the initial investments needed. Local farming practices, coupled with reliance on rains, meant farmers that could not always guarantee the amount or quality level of sorghum needed. To support farmers, and therefore ensure their supply of sorghum, the brewery sought partnerships with agencies such as CARE International and CLUSA.
Other agro-industrial companies may not share this ethic, may not be reliable, or may exploit their monopoly position. If farmers rely on the contract as their only source of income, they put themselves in a risky position. For example, the firm may reject “low-quality” produce. They may choose not to renew the contract. In the worst case scenario, farmers may not be able to pay back loans, and may become indebted. As more farmers are contracted to produce the same variety of the same crop, crop diversity is reduced. This can have severe consequences, both on-farm and within a region.
The SABMiller Enterprise Development Report, which you can access here: “Making a difference through beer,” claimed in 2009 that many farmers in their smallholder programmes have moved from subsistence farming to small-scale agribusinesses, and now have more disposable income and more secure livelihoods.
Refer to these short publication for case studies and background reading on the debates surrounding contract farming:
-“Making contract farming work with co-operatives” from the Overseas Development Institute, UK.
-“Unlocking the potential of contract farming: Lessons from Ghana” from International Institute for Environment and Development, UK.
-“Contract farming: Partnerships for growth” from the UN Food and Agriculture Organization.
-“Contract farming offers fresh hope for Africa’s declining agriculture” from the World Agroforestry Centre.
FAO has also recently established an online “Contract Farming Resource Centre”: http://www.fao.org/ag/ags/contract-farming/en/
The full magazine article from which this story was taken can be read here: http://ileia.leisa.info/index.php?url=show-blob-html.tpl&p[o_id]=245270&p[a_id]=211&p[a_seq]=1
Here are links to Farm Radio Weekly news stories which tell how farmers have benefited from supplying beer companies:
–Rwanda: 5,000 farmers contracted to grow maize for beer (The East African)
–South Africa: Ancient brew has Eastern Cape buzzing with employment opportunities
–East Africa: Farmers earn better profits by selling directly to Coca Cola and East Africa Breweries
This radio script from Uganda tells the story of a farmer who plants a new variety of sorghum that is supplied by a beer company looking for local supplies:
–Sekedo, a drought resistant sorghum for Karamoja (Package 84, Script 1, August 2008).
Finally, here are some questions to begin a local debate on the merits and disadvantages of contract farming:
-Is contract farming common in your region? If so, what type of contract farming?
-Do the companies involved support farmers in any way beyond financial returns?
-Do the companies practice “corporate social responsibility”?
-How common are “fair trade” initiatives in your region?
-What are farmers’ experiences with contract farming?
-What have been the major difficulties? And the benefits?
-In what way do these experiences differ to farmers’ or farmer groups’ experiences with fair trade?