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Contract farming is a system of production and supply of agricultural products based on a forward contract between producers, suppliers, and farmers. Contract farming is practiced in many countries around the world, including India. Contract agricultural agreements for various crops, such as sugar cane, cotton, vegetables and coffee, tea, and cereals, are already in vogue. Contract farming is the relationship between a farmer and a processing company or cooperative. The farmer is required to supply the agreed quantity and quality of crops within a specified period. The processing company offers to buy the produce from the farmers at a given price.
Farmers have to sign and agree on a contract to sell their crops directly to the supplier in exchange for agricultural inputs, technical assistance, and financial assistance. A contract can only be successful if all parties agree to the terms and sign the contract, and believe they are in a favorable position to each other. What is contract farming? Contract farming is a contract agreement between cooperatives and farmers on supplying and producing agricultural products and goods. There are various Types of contract farming. Farmers face a new challenge of market access and total profitability. Therefore, contract farming has been introduced to the market to reduce this problem and maintain a balance of benefits for farmers and companies. Agricultural industries need adequate inputs for quality agricultural production. As a general rule, this is a detailed partnership agreement between farmers and processing companies. Farmers must deliver the agreed quantity and then the quality of the crop within a specified period. In return, the cooperative agrees to buy the harvest from the farmers at a predetermined price decided by the two. It can provide a link between agriculture and industry. The main reasons for the introduction of contract farming;
Contract farming begins with preseason contracts with farmers, allowing for a fair price commitment. The companies provide farmers with the highest quality seeds suitable for growing in specific climatic conditions for crop production. In general, there are three main types of contracts in agriculture; (i) First, the procurement contracts under which only the conditions of sale and purchase are determined, (ii) Subcontracts in which only contractors supply inputs and are produced at previously agreed prices, and (iii) Total contracts are the contracting company that supplies and manages all inputs. The importance of each type of contract varies from product to product, and these types are not mutually exclusive. It has reduced biodiversity and caused the destruction of forests and the promotion of wildlife. Contract farming, known as collective farming, helps farmers and agribusiness companies obtain a ready-to-use market, and products are sold at a pre-agreed price and time. Florists generally have great potential in India. The contract cultivation of flower crops is a labor-intensive industry. It is highly subject to deterioration due to quality parameters and price fluctuations. Also read: Positive Effects of New Technology on Agriculture in India
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