Investors that plan to work with contract farming in developing countries face opportunities and risks. The investor provides a market outlet and often some inputs and training services to farmers;
the farmers promise the investor a regular supply of a quality product in a pre+harvest contract. A properly designed contract farming arrangement can create important wins for both farmers, investors, input dealers and service providers. Contract farming often implies shorter, direct chains between farmers and companies. This is often essential for traceability and quality upgrading.
However, contract farming is still quite exceptional in developing countries and many investors face severe problems in making the win+win arrangement work. How can you make a contract relation that creates benefits for the farmers and the company, and that is resilient to the forces of opportunism, competition and obstruction by other stakeholders? In this paper we highlight some
issues that are important in most contract farming relations. Investors and development
organisations thinking about establishing contract farming should check carefully whether their plans and projects are robust enough to handle these issues. It helps to refine strategies to source products from smallholder farmers in developing countries and make it a worthy collaboration for all.
