Contract farming is relatively an emerging phenomenon in the Ethiopian agriculture sector. Yet it is the best solution to create linkage between smallholder farmers, markets and firms.
According to a recently launched book ‘Contract Farming in Ethiopia: Concept and Practice’, firms that often use agricultural inputs find it difficult to starting their own farm as green field investment takes more time and resource. In several cases, while acquiring land proves tough, still investors fail to develop their land resulting in their licensees be revoked. To the rescue, contract farming is a better fit to companies’ needs than any option can deliver.
Contract farming is still not well developed in Ethiopia despite it’s over 20 years in practices. However, if well executed, besides reducing market uncertainty, farmers can be acquainted with new ways of agricultural priorities and will have secured market.
As contract farming is an agreement between unequal parties − strong companies and economically weaker farmers, its critics argue that it is risky for farmers to giving power to the companies to obtain cheap labor and to transfer risks to growers. If managed properly, it reduces risk and uncertainty for both parties compared to the traditional open market
There has to be a legal framework to enforce contract farming which many companies identify as a major constraint, says Ayele Gebreamlak, Agricultural Transformation Agency Director for Commercial Contract Farming. Establishing the legal frameworks is vital to protect both producers and businesses companies and preparation of legal guideline is underway on how to move forward with contract farming.
Many companies need stable supply of better quality products. The best option to do so is contract farming and firms should invest on the farmers for the latter to be able to grow and supply products in the right quality, adds Ayele.
Firms should give training for farmers to produce agricultural products the way the firms want to. “There is lack of experience among the farmers in growing the needed cereals,” he says. It is very important that farmers have the knowledge of growing technologies that a buying company need.
Contract farming best suits smallholder farmers as they know who to sell their product to prior to production. Contract farming will also help farmers to use the technology and insights for growing other productions, says, Gerrit Hotland editor of the book.
There is a growing interest from companies to get into contracts with smallholder farmers to meet demands for adequate ingredients used to produce their respective products. One of such is Heineken brewery. The company uses barley for its beer production. Heineken has currently got into contracts with 25,000 farmers for they supply barley for malt production.
“We want to substitute imported barley with local ones. The country has good ecology and strong farmers,” says Tarekegn Garomsa Heineken Breweries S.C Raw Materials Development Manager. “All what we need to do is to give farmers the necessary finance and training for quality supply of barley. This has now solved shortage of barely supply and farmers have been able to have reliable market access and generate more income as part of the contract.”
[ethpress.gov.et]