DEVS 492 Contract Farming

What distinctive transformation processes of the agrifood systems around the world have led to the increase in contract farming?

•  industrialisation of world agriculture

• Rise of fast food 

• globalization of technology

• rapid rise of supermarkets

Answer explanation

Distinctive features of the agrifood systems leading to the increase of contract farming are "the “industrialisation” of world agriculture" and "the “rapid rise of the supermarkets”.... (which is) impacting agri-food chains internationally" (da Silva, 2005, pp.4)

True or false: Improved technical efficiency in producing, processing, and distribution, can be seen as one cause that brings about intensified competition and pressures in the global agrifood system?

• True

• False

Answer explanation

This is true! See da Silva, 2005, pp. 7

involves agricultural production being carried out on the basis of an agreement between the buyer and farm producers

True or false: contract farming is one of the alternative forms of horizontal coordination in which firms can engage in?

• True

• False

Answer explanation

False:  “contract farming is seen as one of the alternative forms of vertical coordination in which firms can engage,which can also be spot markets, full vertical integration and different forms of vertical alliances” (da Silva, 2005, pp.11)

The vertical coordination continuum refers to cases where a firm exercises centralized ownership control over two or more different stages in a chain. Ownership, of course, ensures complete power over decisions regarding product attributes, location and timing of delivery

What are the three widely used classifications of contracts?

• market specification

• resource providing

• exportation of production

• production management 

Answer explanation

For explanations of what each of these contracts refer to see da Silva, 2005, pp.11 

What products seem to be the better candidates for contract farming?

• low value crops

• livestock

• high value crops

• exotic fruits

Answer explanation

High valued crops and livestock, destined to processing or to export markets are better candidate for contract farming  because “these characteristics either generate mutual asset specificity or require close control over production and delivery processes, so as to ensure adherence to the intended quality and safety attributes and to facilitate logistical scheduling” (da Silva, 2005, pp. 24)

True or false, the term ‘outgrowers schemes’ is interchangeable with the term ‘contract’ farming

• True

• False

Answer explanation

True, outgrower schemes “are ‘a form of vertical coordination between growers and buyer-processors that directly shape production decisions through contractually specifying market obligations’” (Adams, 2019, pp. 1435)

What do agribusiness firms find in contract farming that is appealing to them?

• strategy to minimize transaction costs

• flexibility to seek alternative supply sources

• strategy to maximize transaction costs

• flexibility in inputs and of final products

Answer explanation

Agribusiness firms find contract farming appealing becuase it is a strategy to minimize transaction costs, primarily the ones related to assets specificity and uncertainty. (da Silva, 2005, pp. 19)

The disadvantages or negative aspects of contract farming for farmers mostly  comes from the fact that the relationship between individual farmers and the agribusiness firm is

Answer explanation

Refer to da Silva, 2005, pp. 17 for further clarification

Contract farming is beneficial for agribusiness firms because it allows buyers to capital investments, including investments in land

• Minimize

• Maximize

Answer explanation

The correct answer is minimize! See Guthman, 2017, pp.103