5 Things You Should Know About Contract Farming
Do you know that as a farmer, you can sell your farm produce without marketing?
That is Contract Farming!
Love the idea?
Don’t proceed until you’ve read these 5 things you should know about contract farming.
First of all, what is Contract farming?
Contract farming is the partnership between a farmer and a processing firm.
This firm makes a guaranteed purchase of the farmer’s produce and also offers additional support such as professional advice or machinery support while you supply your agricultural products at an agreed price.
A contract document, which stipulates the quantity and quality of products, price, and delivery date must be signed before going into contract farming. This will avert all future arguments or misunderstandings.
The duration of the contract is an important factor to be considered because contract farming can either be long term or short term.
Before finalizing the duration, take into consideration the risks that may occur within this period and map out a plan to minimize the risk and losses.
You may ask, why should I consider contract farming?
Contract farming gives you access to knowledge, technology, funds, and helps you to trade at a low cost. It also assures you of a ready market for your products and you get to minimize risk on production and price.
But that’s not all, one last thing you should know are the business models associated with contract farming. They are;
Centralized model — This is when the processing firm has direct contact with the farmer and is completely in charge of processing and marketing.
Nucleus model is when buyers train the farmers with the necessary skills on technical and managerial aspects of farming through a demo to ensure that the farmer is using quality products for planting and has the technical know-how on the crop.
Multipartite model is a joint partnership between the government, companies, and farmers, more like a joint venture.
Informal Model is the agreement between buyers and sellers based on the season.
While in the Intermediary model, there is a middleman who handles the agreement for the trading between the buyers and the farmers.
Interested in contract farming?
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