CONTRACT FARMING IN AFRICA: critical elements and success factors May 2000

1

BYSOTONYE ANGAAGRIBUSINESS EXPERT AND STRATEGISTEMAIL: anga4000@yahoo.com

05/13/2000sotonye anga

PREFERRED FARM BUSINESS MODEL

• Let us approach contract farming as the preferred and alternative farm business model that delivers solid linkage between FARM AND

05/13/2000

2

sotonye anga

that delivers solid linkage between FARM AND MARKET.

• It is a ‘win win’ for parties to the contract.• Encourages specialization.• Viable for both parties when structured

properly.• A platform for team work.

THE PLACE OF FARMING IN AFRICA

• Farming is a means of livelihood for over a hundred million people in Africa.

• Over 80% of African farmers just farm or grow

05/13/2000

3

sotonye anga

• Over 80% of African farmers just farm or grow crops without guaranteed market.

• Whenever there is an upset in the commodity market there means of livelihood becomes threatened.

WHAT IS CONTRACT FARMING

• Contract farming is an agribusiness system that is focussed on the production and marketing of agricultural commodities based on forward

05/13/2000

4

sotonye anga

agricultural commodities based on forward contracts between farmers(producers) and Buyer.

ESSENCE OF CONTRACT FARMING

• Contract farming is meant to promote firm commitment between parties to the contract (farmers and buyers).

05/13/2000

5

sotonye anga

(farmers and buyers).• That the farmer will grow or produce

agricultural commodity of a specific type, quality, quantity, price and at a time such as is required by the buyer.

CONTRACT FARMING AND PRE-ARRANGEMENTSIn contract farming to a great extent every aspect

of the business is PRE-AGREED.PRE-AGREED PRICE.

05/13/2000

6

sotonye anga

PRE-AGREED PRICE.PRE-AGREED QUALITY.PRE-AGREED QUANTITY (as in what makes

for minimum or maximum).PRE-AGREED TIME.

DEFINING ROLES (FARMER)

• Provides land ( not in all cases).• manpower (farm hands).• Knowledge and expertise in farming.

05/13/2000

7

sotonye anga

• Knowledge and expertise in farming.• Security for farm.• Follows good agricultural practice (GAP).

DEFINING ROLES (BUYER)

Successful farming requires high quality input.• Provides Seed.• Provides Agro chemicals.

05/13/2000

8

sotonye anga

• Provides Agro chemicals.• Provides Technical assistance/advice(through

experts).• Financial support/soft loans(optional but can be

arranged through banks).• Buys the commodity at harvest.

BENEFITS OF CONTRACT FARMING (FARMER)• Guaranteed a fixed income as agreed.• Farmer can concentrate on his area of core

competence.

05/13/2000

9

sotonye anga

competence.• Farmer need not bother about

marketing(commodity sold in advance).• Enjoys safeguard from price fluctuations.• Can plan and make profit.

BENEFITS OF CONTRACT FARMING (BUYER)• Timely supply of raw materials.• Control over seed origin.• Uniformity of commodity.

05/13/2000

10

sotonye anga

• Uniformity of commodity.• Can effectively plan operations and logistics.• Can plan and make profit.

CONTRACT FARMING OPPORTUNITIES

IT CAN WORK FOR: • ROOT CROPS: ginger, cassava, potato, turmeric,

yam etc.

05/13/2000

11

sotonye anga

yam etc.• GRAINS: sorghum, maize, rice, beans etc.• FRUITS & VEGETABLES: tomato, peppe, onion,

garlic, banana, sugarcane etc.• TREE CROPS: cashew, cocoa, shea, rubber, oil

palm. Etc.• The list goes on and on.

THE BEAUTY OF CONTRACT FARMING

• Lies in the fact that it encourages demand-driven farm production.

• African farmers need guaranteed markets for

05/13/2000

12

sotonye anga

• African farmers need guaranteed markets for there farm produce.

THANK YOU FOR LISTENING!!!05/13/2000

13

sotonye anga