Question

Briefly explain contract farming​

Answer 1

Answer:

• Contract farming refers to varied formal and informal agreements between producers and processors or buyers.
• It may include loose buying arrangements, simple purchase agreements and supervised production with input provision, with tied loans and risk coverage.

• In this system for the production and supply of agricultural/horticultural produce are under forward contracts between producers/suppliers and buyers. The essence of such an arrangement is the commitment of the producer/ seller to provide an agricultural commodity of a certain type, at a time and a price, and in the quantity required by a known and committed buyer. Contract farming usually involves the following basic elements-pre-agreed price, quality, quantity or acreage (minimum/maximum) and time (Manage 2003). Contracts can range from oral deals to formal, registered written contracts.

Features

1. Creating New Markets

2. Efficiency and Economics of Scale

3. Ensuring Quality Standards

4. Facilitating Diffusion of Modern Technologies

5. Minimizing' Transaction Costs

6. Coping with Information Asymmetries

7. Price Volatility

8. Sharing of Risk

Explanation:

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Answer 2

contract farming can be defined as agricultural production carried out according to an agreement between the buyer and farmers which establishes condition for the production and marketing of a farm products.

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