Contract farming refers to agricultural production that is carried out under the terms of a contract between the buyer and the producers. Typically, the buyer specifies the quality and price desired, with the farmer promising to supply at a later date, generally at a predetermined price.
According to Precise Consult, contracting parties can take advantage of contract farming to reduce investments and time taken for land acquisition for estate farming, ensure reliable input compared to purchasing from traders which can be erratic, exercise more standard quality control measures on the products which is difficult to do in open markets in developing countries, and reduce seasonal price fluctuations and save costs by offering a fixed rate prices for farmers.
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