Contract Farming: An Innovative Approach For Risk Management By Small Farmers

Contract farming has been in existence for many years as a means of organizing the commercial agricultural production of both large-scale and small-scale farmers. The approach has considerable potential in developing countries like India where small-scale agriculture continues to be widespread, as small-scale farmers can no longer be competitive without access to the services provided by contract farming companies. The present study was conducted in four districts of Karnataka viz., Tumkur, Kolar, Hassan and Koppal to study the economic status of farmers in contract farming and to know the problems and suggestions. Majority of the farmers practicing contract farming in the study were small and medium farmers with less than 5 acres of land and 5-10 acres of land holdings respectively. It is often difficult for small-scale farmers outside the contract-farming context to gain access to input and risk in quality production but the contractual arrangements involve considerable production support in addition to the supply of basic inputs and assist in risk management. Sponsors may also provide land preparation, field cultivation and harvesting as well as free training and extension, primarily to ensure proper crop practices in order to achieve projected yields and required qualities. Further, the results indicated that there was maximum per cent of increase in economic status of farmers from Hassan (12.12%), Tumkur (14.85%), Kolar (29.13%) and Koppal (18.34%) districts after adopting the contract farming in their fields respectively. Benefit-cost ratio of the four districts viz., Hassan (3.05), Tumkur (2.37), Kolar (2.76) and Koppal (6.18) gave positive signs towards the improvement of farmer?s economic status. Results also showed that majority of the farmers faced financial and situational constraints rather than technological and extension constraints. Financial constraints involve lack of financial assistance in agriculture for initial investments and situational constraints involve non-availability of inputs in time.