Contract farming has received renewed attention recently as developing economies try to grapple with how to transform the agricultural sector and its associated value chains. This book examines different contract arrangements for selected crops, applying both qualitative and quantitative approaches in order to examine how contract farming affects smallholders and value chain dynamics in Tanzania. Major themes covered in the book include: contract farming policy; contract farming and value chain dynamics; contract farming adoption decisions; contract farming and income diversification. The authors also discuss alternative aspects of contract farming such as trust, conspiracy, empowerment and corporate social responsibility. The book presents original research from case studies conducted in Tanzania on sugarcane, tobacco, sunflower and cotton. These crops have a history of trials and errors with contract farming involving smallholders. Furthermore, they are targeted in national strategies as some of the main crops for establishment and upgrading of agro-industrial activities in Tanzania.

This book deals with an agricultural production and marketing system known as contract farming (CF). In this system, a public or private agency purchases the crops of independent farmers through contracts, often providing inputs, technical assistance and marketing. CF has a long history in developed countries and has spread to the Third World. The book uses case studies from North America, Latin America and Africa to assess the experience to date and provide guidelines for the use of CF in the future.

The majority of the poor and hungry people in the world live on small farms and struggle to subsist on too little land with low input - low yield technologies. At the same time, many other smallholders are successfully intensifying and succeeding as farm businesses, often in combination with diversification into off-farm sources of income. This book examines the growing divergence between subsistence and business oriented small farms, and discusses how this divergence has been impacted by population growth, trends in farm size distribution, urbanization, off-farm income diversification, and the globalization of agricultural value chains. It finds that policy makers need to differentiate more sharply between different types of small farms than they did in the past, both in terms of their potential contributions towards achieving national economic growth, poverty alleviation, and food security goals, and the types of assistance they need. The book distinguishes between smallholders that are business oriented, subsistence oriented, and at various stages of transition to the non-farm economy, and discusses strategies appropriate for assisting each type. The book draws on a wealth of recent experience at IFAD and elsewhere to help identify best practice approaches.

Interest in contract farming is growing, especially in countries that previously had a central planning policy. The purpose of this guide is to provide advice to existing contract farming companies on how they can improve their operations and to those thinking of starting such companies on the preconditions of success.

Key messages The participation of smallholder farmers in high-value and profitable value chains as well as contract farming remains low in Africa.  Farmers with limited land resources are more likely to devote a larger share of their land to low-value crops such as cereals while this pattern weakens with increasing land size and slightly reverses for high-value crops such as spices and herbs.  Smallholders in Egypt face a trade-off between ensuring food security to their house holds and maximizing profit, and land plays a major factor in moderating this trade-off.  Younger and wealthier farmers are more likely to participate in the cultivation of high value crops such as spices and herbs as well as contract farming.  There exist strong complementarities between participation in high-value value chains and contract farming.

The world’s population is expected to reach 9.8 billion in 2050. Meanwhile, concurrent rises in incomes and urbanization are driving increased consumption of meat, dairy, and biofuels. Meeting the demand for food, feed, and biofuel will require a global production increase of almost 50 percent relative to 2012. Production in South Asia and Sub-Saharan Africa—where 95 percent of farms are smaller than five hectares—must double at a minimum. A key element of policies to increase food production will be promoting improved food quality, as the health costs of too much, too little, and the wrong types of food become increasingly evident. Additional initiatives must address how to reduce food losses; globally, one-third of food production is lost or wasted at different stages in the food chain each year. Climate change is bringing further stressors. These challenges also present opportunities. Around the world, 450 million smallholder farmers are plagued by low productivity and poor access to inputs, technology, knowledge, financing, and markets. Agribusinesses are increasingly working directly with smallholder farmers in low- and middle-income countries to help secure a sustainable supply of key agricultural commodities while boosting rural incomes and economic growth. Sourcing directly from smallholders can expand a firm’s supply base, reduce margins paid to collectors and middlemen, facilitate improvements in quality and yield, and deliver premium prices for a certified fair-trade or sustainably produced product. Smallholders also represent a growing market for farm inputs, information, and financial services. Agribusiness firms can help smallholders to increase productivity and improve crop quality; access know-how to mitigate social and environmental impacts; develop farm management skills and combine their production with other farmers to achieve sufficient scale to be effective market players; and meet the growing demand for safe, sustainable food by improving practices and introducing traceability and certification systems. Working with Smallholders: A Handbook for Firms Building Sustainable Supply Chains shows how agribusinesses can develop more sustainable, resilient, and productive supply chains and illustrates the substantial impact of doing so on development. The book compiles innovative solutions and cutting-edge ideas to meet the challenges, and it incorporates a diverse collection of hands-on case studies from across the world that cover a variety of agribusiness sectors. This second edition builds on the lessons learned and provides updates in leading trends and technologies from those provided in the first edition published in 2014.

This study compares contract and non-contract growers of apples and green onions in Shandong Province, China in order to explore the constraints on participation and the impact of contract farming on income. We find little evidence that firms prefer to work with larger farms, though all farms in the area are quite small. Using a Heckman selection-correction model, we find that contract farming raises income even after controlling for observable and unobservable household characteristics. These results suggest that contract farming can help raise small-farm income, though questions remain regarding the number of farmers that can be brought into such schemes.