Contract farming is rapidly gaining popularity as a win-win solution for agricultural producers and buyers. It is defined as an arrangement between producers/suppliers and buyers for the production and sourcing of agricultural produce under forward contracts. Buyers can be government bodies, individual entrepreneurs, or companies.
Contract farming can potentially increase income for farmers and buyers if efficiently organized and managed with Agtech tools. According to a McKinsey report, despite structural barriers, the Indian farmer can cater to domestic demand with a proportionate increase in yield. It further outlines how contract farming can benefit both parties compared to selling and buying produce in the open market.
Contractual agricultural production provides smallholder farmers access to a wide range of extensional, technical, and managerial services of modern agriculture. It ensures a guaranteed purchaser without intermediaries and reduces uncertainty regarding fluctuating prices, thereby shielding smallholder farmers from market failures.
The contract agreement often serves as collateral to arrange credit to fund inputs. Contract agriculture, in turn, assures the buyers or sponsors of quantity, quality, and on-time delivery. The sponsoring agency usually agrees to purchase all produce grown by the farmer if it meets the specified quality, quantity, grade, and variety parameters. However, this puts pressure on the farmers to achieve the target parameters as the entire production process depends on it.
Contract farming challenges that lead to missed targets
Each stage of agricultural production – pre-harvest, harvest, and post-harvest – needs careful monitoring and management of the twin targets of quantity and quality to be met. Hitting the target of the right quantity and yield quality is a risk-filled process. Inefficient farm operation management can impact agriculture productivity, leading to losses for the farmers.
Even a minor miscalculation can hamper the timing and sequence of production and affect efficiency. A slight delay in germination and sowing can delay the downstream agricultural production process, and the harvest may miss the high-demand period. Predictive intelligence supplemented by smart farming can enable sponsors and farmers to offset many of these risks.
Digitizing agriculture to drive efficiency in contract farming
Agtech platforms and farm management solutions can provide a real-time view to farmers and stakeholders at various stages of agricultural production. They enable field staff to capture farm-level data, including plots, farmers, and crops. The solutions provide managers with targeted information about everyday field operations. Organizations can configure smart farming solutions to suit their requirements and unique specifications. They can standardize processes, promote transparency, and enable farm-to-fork traceability.
Farm managers can caution their farmers about the risks they foresee, such as disease indications, climatic conditions, pest infestations, variations in inputs and irrigation, a slowdown in growth, etc. Individual farmers can benefit from the technological insights and information from their sponsors, implement data-driven decisions, and meet the quality and quantity standards outlined in their contracts.
Impact of technology in contract farming in terms of the outcomes
Yield estimation -determined based on historical data of crop, geography, etc., along with satellite imagery, weather date, etc.
Harvest planning & scheduling- ensure Agri-inputs are disbursed at the correct times and provide a timeline for harvest
Downstream planning- enables harvest collection, logistics and storage management, which ensures streamlined operations across food processing companies that are dependent on the contract
Farmer ledger- is necessary to protect the farmer's interests in the contract
Grading and QC- are crucial to assessing the crop quality
Benefits of digitization of contract farming with Cropin’s solutions
Cropin’s farm management solution- Cropin Grow (SmartFarm) is an end-to-end farm data management platform that monitors and manages production processes from sowing to harvest. It can geotag farm plots, monitor input usage, monitor crop health remotely, set pest and disease alerts, share weather-related advisories, manage alerts and activity logs, and set up workflows and tasks for the field team. Users can combine past and real-time in-season data to create reports to provide business and operational intelligence to make data-driven decisions to improve agricultural productivity and profitability.
This user-friendly and customizable solution leverages ground-truth data, weather advisory, and accurate insights based on satellite monitoring of crops to enable data-driven farm and business operations.
Cropin is a proven ideal partner to improve efficiency, traceability, and output predictability by tracking, managing, and monitoring every step on a unified platform.