Contract Farming

Contract farming is an arrangement in which a farmer agrees in advance to produce a crop or livestock product for a buyer, typically a processor, exporter or retailer, on terms fixing the price, quantity, quality and delivery timing before the growing season begins, often with the buyer supplying inputs, credit or technical advice. It gives the farmer a more predictable market and the buyer a more predictable supply, but it also shifts a significant share of production decisions and risk allocation from the farmer to the contracting firm.