In the past three decades, contract farming has gained prominence as an institutional arrangement that has the potential to address some of the challenges confronted by small-scale producers as it often guarantees a reliable market for their produce and, depending on the contractual agreement, can also provide access to inputs, extension services and credit. Contract farming is one of the business models that has significant potential in promoting responsible investments in agriculture as evidence shows that under a ‘favorable environment’, contract farming has the potential to sustainably increase investments in agriculture whilst also safeguarding the livelihoods and incomes of small-scale producers. However, similar to other contractual relationships, there are potential risks associated with contract farming, such as, farmer indebtedness and reduced farmer autonomy. Therefore, in order to ensure that contract farming is conducted in a responsible manner that ensures mutual benefits for all, it has to be supported by relevant policies, regulatory and legal frameworks.

FAO has been responding to the growing demand for information, policy and technical support on contract farming by means of actions that include providing capacity building to farmers and the private sector on planning and implementation of contract farming operations and the development of guidelines, publications, and frameworks on conceptual, operational and legal aspects of responsible contract farming. 

Furthermore, FAO, under its Umbrella Programme “Supporting Responsible Investments in Agriculture and Food Systems” has been promoting critical discussions and policy dialogue on contract farming theory and practices with a view of encouraging the establishment of responsible value chains in-line with the Principles for Responsible Investments in Agriculture and Food Systems (CFS-RAI) and the OECD-FAO Guidance for Responsible Agricultural Supply Chains. As part of this work, on 08-09 November 2018, FAO, the Sam Moyo African Institute for Agrarian Studies (SMAIAS) and the International Institute for Sustainable Development (IISD) organized the International Symposium on contract farming and other inclusive business models. The objectives of the Symposium were to promote policy dialogue on contract farming and other inclusive business models, and bringing together buyers (private sector companies) and farmers in order to enhance discussions on how to improve contracts using the CFS-RAI and the Model agreement for responsible contract farming. The Symposium was attended by more than one hundred twenty (120) participants which included farmers, representatives of private sector companies, researchers, PhD students, civil society representatives and international organizations. The participants were drawn from 17 countries across Africa, Asia, Europe and Latin America. 

The Symposium participants came up with recommendations for promoting responsible contract farming, which include the need for: 

• developing the capacities of producer organizations through training on contract negotiation and basic legal issues regarding contracts; 
• promoting and supporting policies that encourage the participation of youth and women in responsible contract farming; 
• raising awareness about the model agreement for responsible contract farming and promoting its use: 
• developing simple guides that enable farmers to have access to information regarding contract farming;
• raising awareness about the CFS-RAI at the national, regional and global levels; 
• encouraging contracting companies to promote the production of food crops together with cash crops (diversification) in order to ensure household food security.

FAO is following up on these recommendations through concrete actions that include organizing capacity development workshops for small-scale producer organizations, civil society, and the private sector on responsible contract farming (e.g. contract negotiation, model agreement for responsible contract farming) and publishing briefs/guides on responsible contract farming for a wide range of stakeholders including farmers and policy-makers.

For more information:

Model agreement for responsible contract farming

UNIDROIT/FAO/IFAD Legal Guide on Contract Farming

The Principles for Responsible Investment in Agriculture and Food Systems

OECD-FAO Guidance for Responsible Agricultural Supply Chains

Contact: [email protected]