Understanding the Social Relations of Contract Farming

The central argument that the author makes is Contract Farming as an agrarian accumulation process should be seen as a structure of relations of production and exchange involving productive capital (both in agriculture and industry), mercantile capital, and finance capital; so, contract farming is more than just the market-contract between farmers and industrial companies. It is a way to increase the productive consumption of technologies in rural areas produced by agri-input corporations. An agri-input corporation (seeds, crop protection chemicals, etc.) makes its profit by selling products to CF farmers, just as a CF corporation makes a profit by buying products from these farmers, and not by getting involved with actual agrarian (capitalist) production, which is land-based and which is relatively risky. Corporations receive the benefits from financial corporations in the form of loans which are otherwise meant for farmers, as direct subsidies. For instance, the banks are mandated by the Reserve Bank of India to contribute towards priority sector lending. However, banks prefer to lend to a corporation (such as PepsiCo.) than a farmer. PepsiCo. makes use of the credit and pays, on behalf of the farmers, to the seed companies for supplying seeds to the farmers. PepsiCo. then recoups its payment during its commodity-transactions with the farmers.