Contract Farming: Theoretical Concepts, Opportunities and Challenges in Mid and High Altitude Areas of Northwestern Ethiopia

Course ID
Ethiopian Economics Association (EEA)
Ermias Abate

Worldwide, contract farming is becoming progressively an important aspect of vertical integration in agribusiness. Market liberalization and opening of international trade have become the main driving forces for expansion of contract farming. Population and income increment, progress in transport facilities and associated logistics, advances in information technology are among important factors that trigger contract farming directly or indirectly. Politically, contract farming is more accepted than other forms of production and market relation in developing countries like Ethiopia where the share of small-scale producers is extensive in agriculture. Contract farming supports development of the agro-industry and export trade in various ways. It introduces new technology and enables farmers to learn new skills that help diversify production and boost productivity. Contract farming arrangements motivate small-scale farmers to use improved and recommended agricultural inputs by guaranteeing market and price. Under contract farming new markets, that otherwise are not accessed by small-scale producers, are opened. For the agribusiness firm that works with small-scale farmers, contract farming overcomes problems of land constraints. Contract arrangement is also more reliable than open market purchases in terms of volume, quality and delivery time. Traceability is also simple with contract farming. In Ethiopia, as indicated in rural development policy and strategy document of the government, well-organized contract farming that offers better and cost effective input utilization, mechanization and extension service system is considered as strategic option to transform the subsistence agriculture to market-oriented commercial farming in the densely populated mid and high altitude areas of the country. Towards realizing this strategy, various attempts are being made in mid to high altitude areas of North Western Ethiopia. Reviewers of this paper have also participated in studies that were focused on assessing possibilities of establishing successful contractual farming between the small-scale farmers and various agribusiness firms. Favorable policy environment, expansion of irrigation infrastructure that allows production and year round availability of desired produce, suitability of the agro-ecology for production of diverse high valued produce, flourishing farmers cooperatives that can help as partners in contract farming, availability of public research and extension support etc are enabling environments for contract farming. On the other hand, lack of well organized institutional support, lack of experience in contract farming, inadequate transport and communication facilities, unavailability of seed or planting material specifically for high valued crops, unavailability guidelines and law enforcement mechanisms for contract farming etc are found to be some of the challenges of the emerging contract farming schemes

Corporate Author: Getinet Alemu, Demirew Getachew (editors); Ethiopian Economic Association. Bahir Dar Chapter
Publisher: Ethiopia Economics Association (EEA)
ISBN/ISSN: 978-999445413-6
Primary Descriptors:

Contract farming

Secondary Descriptor: Agribusiness firm
Geographic Descriptors: NW Ethiopia, Ama?ra kelel
Broad Subject heading: Small-scale farmers
Call Number: 330.963 PRO 2010
Serial Key Title: Proceedings of the First Regional Conference of the Amhara Regional State Economic Development
Publication catagory: Regional Conference
Content type: EEA Publication
Publication date: 2013-03-27 00:00:00
Forum or Discussion date: 2013-02-27 00:00:00
Edition: 1st
Conference Place: Bahir Dar, Ethiopia
Place of publication: Addis Ababa, Ethiopia
Type of material: Book
Current frequency: Annualy
Thematic area: Regional Conference of the Amhara Regional State Economic Development
Author: Ermias Abate, Akalu Teshome
Chapter conference: Amhara
Conference date: 2009

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