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What Are The Advantages And Disadvantages Of Contract Farming

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According to the dictionary definition, contract farming is described as, “a system for the production and supply of agricultural products under forward agreements, frequently at predetermined prices (Gale, 2006).” Contract farming has been used as a means of organizing commercial agricultural production for both large and small-scale farmers. Contract farming has been increasingly becoming popular due to the liberalization of markets with the removal of marketing boards. Changes in consumers buying habits have also caused a shift towards more convenient food, pushing for an expansion of globalization for fresh and processed products, as well as exotic fruits and vegetables. Advantages for Producers and Marketing Firms: Contract farming use has been rising steadily in the past several decades because of the increased attractiveness of the potential benefits from the contract use. One of the most alluring characteristics of contract farming is the fact that the contracts assure the farmer of an income. Since contracts are created in the terms of what the agricultural commodity’s price is at present value, rather than future value, farmers have the potential to reap more rewards. If prices are to fall after the contract is signed, the farmer still sells the agricultural commodity for the prices outlined within the contract and therefore earn more profits. Farmers also benefit from an increase in the amount of inputs that are available. According to research studies,

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