8. Contract Farming as Price Risk Mitigation
8.1. Introduction
Contract farming is a contractual arrangement between farmers and the processor,
whether oral or written, specifying one or more conditions of production and/or marketing of an agricultural produce. Many types of contract farming arrangements exist, based on the nature of risk sharing and contract specifications. They can be classified into 3 broad categories.
First, is the market specification contract, where the contract is a pre-harvest arrangement that binds the firm and grower, to a particular set of conditions governing the sale of the crop. These conditions often specify price, quality and timing of delivery of the produce. These types of contracts are common in the case of orchards.
The second one is the
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