This document is primarily a synthesis of the UNIDROIT/FAO/IFAD Legal Guide on Contract Farming. It is a comprehensive document that considers contract farming from the viewpoint of private law and seeks to provide guidance concerning the design and implementation of sound contracts, thereby generally contributing to building a conducive environment for contract farming. The publication does not intend to cover all possible agricultural contracts. Its scope is limited to the bilateral relationship between producer(s) and a contractor through contract farming. This involves parties entering into a contract that could be established for a fixed term, for one production cycle, for several or many cycles or years, or for an indefinite period. The document aims to provide advice to promote harmonious relations among all parties involved in contracts and those advising them.

Contract farming, broadly understood as agricultural production and marketing carried out under a previous agreement between producers and their buyers, supports the production of a wide range of agricultural commodities and its use is growing in many countries. Mindful of the importance of enhancing knowledge and awareness of the legal regime applicable to contract farming operations, the International Institute for the Unification of Private Law (UNIDROIT), the Food and Agriculture Organizatio n of the United Nations (FAO) and the International Fund for Agricultural Development (IFAD) have prepared this UNIDROIT/FAO/IFAD Legal Guide on Contract Farming. The Guide is a useful tool and reference point for a broad range of users involved in contract farming practice, policy design, legal research and capacity building. It can contribute as well to create a favourable, equitable and sustainable environment for contract farming.

FAO’s previous contribution to the development of contract farming saw the publication in 2015 of the UNIDROIT/FAO/IFAD Legal Guide on Contract Farming, which focused on the bilateral relationship between an agricultural producer and a contractor. This Legislative Study develops that research and focuses on the regulatory frameworks for contract farming, aiming to highlight different possible approaches for different contexts. Responsible contract farming can be a powerful tool for small scale farmers in developing countries to move towards larger scalecommercial production. It can create economic wealth, contribute to supply chain efficiency through the production of higher quantities of better quality products, and contribute to achieving domestic food security objectives. Maximizing these benefits while minimizing the inherent risks of contract farming is reliant upon the forging of an enabling environment, a key part of which is the domestic regulatory framework. This Legislative Study provides guidance to domestic regulators and other interested readers on how to appraise and potentially reform domestic regulatory frameworks to achieve responsible contract farming. Recognising that different countries and contextual realties may benefit from different regulatory solutions, this Study provides several examples, supported by representative case studies, on how contract farming can be regulated, without promoting a single solution as the most appropriate. Please visit FAO’s Contract Farming Resource Centre, http://www.fao.org/in-action/contract-farming/en/, which is a regularly updated website hosting a variety of material on contract farming both from FAO and from other recognized authors.

Contract farming has received renewed attention recently as developing economies try to grapple with how to transform the agricultural sector and its associated value chains. This book examines different contract arrangements for selected crops, applying both qualitative and quantitative approaches in order to examine how contract farming affects smallholders and value chain dynamics in Tanzania. Major themes covered in the book include: contract farming policy; contract farming and value chain dynamics; contract farming adoption decisions; contract farming and income diversification. The authors also discuss alternative aspects of contract farming such as trust, conspiracy, empowerment and corporate social responsibility. The book presents original research from case studies conducted in Tanzania on sugarcane, tobacco, sunflower and cotton. These crops have a history of trials and errors with contract farming involving smallholders. Furthermore, they are targeted in national strategies as some of the main crops for establishment and upgrading of agro-industrial activities in Tanzania.

This book encompasses a broad range of natural resource sectors, with discrete chapters on water, land, forestry, fisheries, mining, petroleum and agriculture. Given this broad range of areas, the focus of the publication is narrowed to provide an overarching holistic perspective that is supportive of a systems-thinking approach. Recognizing that there are many useful publications elsewhere that detail extensively the specific regulatory elements of sound laws in the respective areas, this book offers the specific prism of highlighting approaches that embrace the pillars of sustainable development, i.e. approaches that recognize and are informed by economic, social and environmental considerations and impacts.

Global agricultural production is undergoing a remarkable shift due to globalization and market liberalization (Setboonsarng et al., 2008). Food markets are transforming from a ‘non-programmed to programmed’ regime stemming from overwhelming changes in demand patterns happening concurrently with variations in production dynamics internationally (Oostendorp, 2018). This presents both the challenge and opportunity to change and adapt to this more structured world to reap benefits for both smallholder farmers and exporters (Setboonsarng et al., 2008).

Interest in contract farming is growing, especially in countries that previously had a central planning policy. The purpose of this guide is to provide advice to existing contract farming companies on how they can improve their operations and to those thinking of starting such companies on the preconditions of success.

Transcript of papers presented during a workshop held at Mussorie from 15-16 March, 2007.