VERTICAL INTEGRATION IN AGRICULTURE AND CONTRACT FARMING

Abstract

It has been widely argued recently that agriculture is undergoing a process of vertical integration with allied industries. One of the worldwide ways of vertical integration in agriculture is contract farming. Contract farming is a continually evolving process. Worldwide applications of contract farming have shown that the terms of contracts are shaped by their own conditions and varied from product to product. Also, each country has its own experiences. Contract farming has many advantages for both producers/growers and integrators, besides some inherent disadvantages and failures regarding its implementation. Some measures, however, could be taken to outweigh these advantages for both sides. In this study, first of all, a brief history is presented along with an explanation of contract farming concepts. Secondly, the reasons behind contract farming are discussed. And, successes and failures of contract farming are analyzed based on several research works and articles. Finally a simplified model is presented for the success of private contractual arrangements in the light of evidence taken from the experiences on the world.

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