Contract Farming: 4 Ways to Facilitate Management and Smallholder Participation

By Vijay J. | 18 May 2020



The adoption of farm management systems by leading agribusinesses has been haralding the digitalization of the agriculture industry since the past decade. Contract farming companies are also among the agribusinesses that have embarked upon the journey towards a technological transformation of their business operations.

FarmERP is a leading farm management platform that can simplify the complexities of digitizing agricultural supply chain management. This article features how the contract farming module of FarmERP’s agriculture management system can help stakeholders not only to optimize their contracts, but also boost smallholders’ participation in business in order to magnify productivity and profitability.

With the increasing demand for agricultural commodities, especially in large agricultural firms, a mounting number of agribusinesses have resorted to contract farming as a dominant approach to managing agricultural supply chains. A significant rise in growth of the contract farming landscape is indicating the potential growth in the number of smallholder farmers getting involved in contract farming arrangements.

However, with the increasing number of farmers come more and more difficult challenges for contract farming businesses to manage their value chains as well as supply chains. Consequently, an effective farm management platform has become indispensable for contract farming businesses to prevent pervasive market failures by efficiently managing smallholder participation and contribution in contract farming arrangements.


Diversification in High-value Agriculture through Farm Management Technology

Contract farming has always been considered as one of the most effective ways to get access to desired yield in terms of both quality and quantity. In recent years, the equations needed to be modified for contract farming firms as the food basket of global consumers can be seen to be changing rapidly. Fast-growing urban population and steadily improving discretionary buying powers of consumers have triggered a substantial rise in demand for high-value food products.

As a result of such market dynamics and ever-changing macro- and microeconomic factors, contract farming companies are considering diversifying their high-value product portfolio while managing smallholder participation.. While this strategy appears to be a plausible option for mitigating various production and marketing risks, ensuring farmers’ access to inputs, technology, services, and credit, and availability of market for risk-oriented fruits & vegetables and high-value cash crops can be a big challenge for contract farming businesses.

FarmERP’s agriculture management platform enables contract farming companies to capitalize on advanced ERP technology for farm management in order to reduce losses and boost productivity for demand-driven growth in high-value agriculture. Versatile features of FarmERP’s crop management system can streamline supply chain management for managers of contract farming companies while it enables smallholders with the access to input goods, services, as well as technologies.

Here are the top five areas where FarmERP’s agriculture management platform can empower contract farming businesses with advanced technologies. These features can help agribusinesses to easily digitalize their supply chain operations across all their smallholders’ farms, which is emerging as an inevitable move - especially in the wake of the worldwide outbreak of COVID-19. Let’s dive in!


1. Automate the Process of Farmer Registration for Efficiently Managing their Profiles

Farmer registration is one of the initial processes that contract farming companies must carry out, way before establishing a contract with smallholders. Having a complete portfolio of farmer partners, which includes all the details about their farms such as plot area, crops harvested, and plot history, can prove beneficial for making important decisions. However, this can be a tedious process, especially when the number of farmer partners of contract farming businesses continues to grow.

FarmERP’s farm management system automates this entire process of farmer registration. Once all the details have been fed to the system, it creates and manages farmer profiles according to their unique identification numbers. FarmERP also assigns these farmers to different collection centers where field supervisors can track their farming practices while managing these farms.


2. Create Farmer Contracts with a Feedback Loop for Better Decision Making

After the creation of farmer profiles, FarmERP enables managers of contract farming companies to set the elements of each contract such as - yield category, pre-agreed price, quantity or acreage of the yield, quality standards, and a definitive time frame. While creating contracts, FarmERP’s agriculture management system intelligently extracts important data through farmer profiles that gives explicit information about crop and plot details along with plot history.

Based on these data points, field supervisors and managers of contract farming firms can make informed decisions about what type of contracts to sign with suitable farmer profiles. FarmERP’s farm management technology also empowers contract farming companies with top ranked profiles of farmers to further improve the success rate and probability of incurring profits at the end of these contracts. The feedback loop created in the agriculture management system also enhances the smallholder participation in the process, which ultimately helps boost productivity of the entire contract farming activity.


3. Manage Resource Sharing while Issuing Goods, Services, and Technologies to Farmers

In most contract farming operations, resource sharing operations involve the provision of inputs in terms of goods such as fertilizers, seeds, and pesticides. Many contract farming companies also offer value addition services such as extension advice, farm management intelligence, and these offerings can also include a range of other services such as crop spraying and ploughing.

Leading contract farming companies are also taking an initiative to give their farmer partners complete access to their farm management technology assets to further boost productivity and profitability. However, all these inputs are offered on credit in most cases. FarmERP’s agriculture management system keeps complete track of which inputs are offered free of cost and which services are chargeable. Based on this data, the system manages the entire cost component of each contract.


4. Streamline Crop Procurement Processes by Linking all Details back to Contracts

FarmERP’s agriculture management system does not only take care of the contractual formalities, making it simpler for field supervisors to track progress, but it also completes the loop with managing crop procurement operations. Along with contract management, FarmERP also streamlines procurement from all the smallholder farmers. It enables field managers to take note of all the details about crops that have been procured, including weight, plot area, quality, important dates, and rates.

With the help of these features, it becomes way simpler for contract farming businesses to ensure both quality and quantity of the yield procured from farmer partners. Based on these parameters, the contract management function also allows companies to rate farmer profiles, and this is one of the important features that contributes to boosting smallholder involvement in various procedures, encouraging them to constantly improve their farming practices. This way, FarmERP helps contract farming businesses to commence the digital transformation of their operations vis-a-vis contract management as well as agriculture supply chain management.