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First ever legal guide on contract farming

Posted by daniela cuneo Tuesday, July 28, 2015

By Marieclaire Colaiacomo, Programme Officer ESA

©IFAD/David Alan Harvey
Today, the first ever Legal Guide on Contract Farming is being launched by IFAD, UNIDROIT and FAO.

The guide provides the framework within which smallholder farmers can participate in modern value chains, ensuring both sides to the contract, the producer and the buyer, operate in a fair and transparent manner.

The guide provides advice and guidance on the entire legal relationship, from negotiation to conclusion. Its aim is to promote more stable and balanced relationships and to assist parties in designing and implementing sound contracts.

IFAD designs many of its projects to include a value chain component. Access to markets means our target beneficiaries, rural smallholders, will be able to reach markets they could not access before. Most importantly, smallholders should be able to sell their produce at a good price.

Storage facilities, transportation, infrastructure, financing and information, or being part of an effective farmer organisation are all vital to smallholder participation in modern value chains. However,  we rarely speak about the most important instrument that can ensure all the above: the contract. Whether it is a simple oral promise or a written document.

Developing the guide

Developing the guide has been an intensive process bringing many different stakeholders to the table.
Over the past four years a group of internationally renowned experts, international financial institutions (IFIs) , civil organisations and private sector players have captured the essence of what an agricultural production contract should look like.

The working group received valuable input during public consultations held in Rome, Bangkok, Addis Ababa and Buenos Aires in 2014,  as well as through an online public consultation process.

Future implementation
I had the privilege of being a member of the working group that developed the guide.
This year I have worked on an implementation strategy that will turn the guide into simple, affordable and publicly available tools.

As part of my approach, I analysed hundreds of contracts, some available on the FAO Contract Farming Resource website, which show just how strong the imbalance of power can be between buyers and producers.

So I decided what was needed was a good deal of courage and yes, 4Ps (patience, perseverance, passion and a big push) and designed a grant that would address this imbalance.
IFAD will be financing a transformation of the Legal Guide addressed to policy and lawmakers, into contract templates, interactive tools and practical advice that can benefit millions of farmers around the world.

There is an enormous need out there on every level for legal tools which can demystify the legal process for the rural poor. 
Access to practical and useful tools will enable rural smallholders to negotiate on a level-playing field, establish long term arrangements and favourable pricing mechanism for their produce.

Download your copy of the Legal Guide on Contract Farming here.