1. Contract farming is an economic arrangement entered into by parties seeking mutual advantage. In some instances these
arrangements do serve poor farmers who would not otherwise be able to access remunerative agricultural markets.
2. Contract farming appeals to donors and governments because of its potential to link resource-poor smallholder farmers
with remunerative, high-value crop markets, and thus to help pull them out of poverty
3. However, certain technical, marketing, institutional, policy and legal conditions need to be in place for contract farming to
succeed – the ‘appeal’ factor is not sufficient.
4. A commodity that can be produced, processed, sold and purchased virtually by everyone is not amenable to contract
farming due to selling and buying on the side.
5. Governments and development partners need to think carefully before deciding whether it is socially and economically
worthwhile to use tax-payer funds to support contract farming. For example, with a crop like maize, which millions of
farmers can produce and which has many buyers, it is virtually impossible to satisfy contract farming conditions.
6. Governments should strive to provide a conducive environment (including legal protection and farmer organisation)
and to encourage self-regulation by firms and farmer organisations in order for contract farming to perform more
efficiently where conditions for it are promising.
7. Because interest in contract farming is due largely to poor performance of markets for seasonal credit and inputs,
governments need to promote policies and investments to improve the functioning of factor and product markets, as this
would eventually reduce the need for contract farming.
