Contract (and Corporate) farming - Good or Bad

Contract (and Corporate) farming - Good or Bad

"Their hands are tied not by ropes but by the greed of the intermediaries that the system has generated, who eat up the farmer’s income while it is on its way into his hands."- Faraaz Kazi.

Droughts, indebtedness, lack of credit and irrigation, intermediaries, etc. are plaguing Indian agriculture. Contract or Corporate farming is being seen as the new norm. With benefits both to the cultivator and the buyer, it is being sought after by even the marginalized farmers. However the critics are all over this new concept citing variety of valid reasons. However the economic and other benefits are what is making this type of farming more attractive and so it is on the rise nowadays. Both sides present valid arguments as follows.

Yes it’s good -

1. Farmers are facing problem of credit and income; and this is a way out for them.
2. They become economically stable and also get agricultural credit.
3. They get seeds, fertilizers, modern equipment, etc. through the company for farming which is difficult to get when pursuing farming on their own, owing to their poor economic condition.
4. There is skill development among the farmers which can be useful when they pursue farming on their own later on (if they choose to).
5. There is infrastructure development due to contract and corporate farming as the company takes care of transporting and storing of the produce.
6. The farmer no longer is dependent on the volatility of the market. Also the exploitation of farmers by the intermediaries is removed by direct contract with the company.
7. Contract farming can open up new markets which would otherwise be unavailable to small farmers.
8. In India, land holdings are getting smaller and smaller. The companies can convince many farmers and bring many of them together under contract to have a continuous stretch of land for farming. This will help in mechanization of agriculture and help increase the per head income of the farmers themselves.
9. Many sell land or keep it uncultivated as agriculture is seen as a non-profitable profession nowadays. Such innovations can turn people towards agriculture again and give it a business oriented and profitable outlook.
10. This is also profitable for the sponsors as they get a consistent quality and production.

No it’s bad -

1. This is similar to indigo cultivation done by British where the farmers produced under an obligation. There physical force was used; here they use economic force and enticement trying to encash on the poverty and need of the farmers.
2. Traditional varieties are going extinct due to negligence towards them. Companies force the farmers to use seeds given by the company itself.
3. Economically the farmer becomes dependent on the companies. It becomes sort of a laborer who is working for a master and the farmers no longer have a feeling of ownership of land. Some corporations actually buy agricultural land and employ the previous owner-farmers as workers in the land. (This is similar to estate farming.)
4. There is feeling of alienation among the farmers as they hold no right over the produced crop. The product of their efforts is not theirs; just like Karl Marx said about the industrial workers where they get wages and have no right over the product of their labor.
5. They have to work as per strict rules laid down by the company which may contradict their social customs and culture. A feeling of subservience might creep up in the farmers.
6. Sponsoring companies may be unreliable or exploit the farmers. If they are the only buyers it creates a monopolistic situation which can be exploited by them. Who will be responsible in such scenarios?
7. If a company denies purchasing the produce owing to low standards reason, the loss falls on the head of the farmer itself. Who will be responsible in such cases of dishonoring the contracts?
8. The companies are a stronger group; a fight with whom, the farmers cannot afford. Currently the government has no role in this type of farming. This is between the company and the farmer as per the contract. So there is no use going to the government on dishonoring of the contract by any parties. There is no grievance redressal forum for such cases.
9. Indebtedness and over reliance on advances are other problems. Farmers may start to rely heavily on the advances given by the company and may not be able to get out of the contract even if they want to.
10. Sometimes land which traditionally is under food crops might be selected by the company for their crops.
11. Due to high mechanization in corporate farming lot of work is done by machines alone and that can increase unemployment. In India agriculture employs a considerable amount of people.
12. Due to use of chemical pesticides and fertilizers there is soil degradation. The farmer cannot stop the use of chemical inputs as they are necessary for high yield. Thus there is land degradation.

No system is perfect. In this globalized world it is essential to find a solution for cons of the methods we employ. Well managed contract farming is an effective way to develop agriculture and help the farmers. Though it is an agreement between unequal parties, by suitable intervention by the government many drawbacks and concerns can be removed. It is beneficial to both farmers and the companies. When efficiently organized and managed, contract or corporate farming can work wonders for poverty alleviation in countries like India.