Nature of Contract Farming
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Abstract
Objective of paper are to review contract farming in term of various types of agricultural contract, benefits for farmers and smallholders, reasons for success in contract farming and governments role on contract farming in Thailand.
There were four types of agricultural contract including physical spot markets or cash markets, marketing contract, production contract and vertical integration. Farmers and smallholders earn some benefit from contract farming including; adoption of new enterprises, access to markets, access to credit, managing risk, access to information and access to insurance.
However, there were some reasons for success in contract farming such as profitable market and a strong market and farm groups. In the long run, farmers and smallholders would be able to collect skill in production and management, consequently improving their bargaining power. When increasing demand makes the market more competitive, contract farming may no longer be farmers’ best choice.
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