Agricultural experts recently gathered in Tanzania to urge African government officials to adopt and improve contract farming in their countries. Government officials should consider heeding these calls as should smallholder farmers and the private sector. Contract farming presents a prime opportunity to achieve food security in Africa both by increasing productivity and reducing post-harvest loss.
According to the International Food Policy Research Institute, contract farming can encourage agricultural productivity by addressing a variety of constraints faced by smallholder farmers. By agreeing upfront to purchase a particular quantity of product at a particular price, buyers provide farmers with valuable market information that reduces the commercial risk of underproduction or overproduction. Buyers also can provide inputs (on credit), extension services, or other technical assistance to assist farmers who lack the liquidity or technical know-how to realize the full potential of their holdings. Ultimately, contract farming is an effective “tool to organize and link production capacities and market needs to increase and diversify the availability of products on local and global markets, and to improve value chain efficiency.”
With estimates that nearly one-fourth of available food in Sub-Saharan Africa is lost or wasted, post-harvest loss presents as daunting a challenge as increasing productivity. Furthermore, this loss has a negative impact across the entire value chain since it reduces the income of value chain actors by as much as 15% and potential consumers lose an average of 545 kilocalories per person per day. The Global Knowledge Initiative has identified improvements in contract farming as one of the top ten “potential big win opportunities” for reducing post-harvest loss in Africa. In particular, improving these mechanisms can “help mitigate the risks that can come from these arrangements, such as side selling (by farmers) and unbalanced leverage (by buyers).”
By increasing productivity and reducing post-harvest loss, contract farming addresses two fundamental pillars to achieving food security. It also presents a win-win-win for government, business, and smallholder farmers in a way that ultimately accrues to communities at large.