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Benefits of contract farming
Contracts are generally signed prior to planting and specify how much produce the company will buy at what price. Often the firm provides credit, inputs, farm machinery rentals, technical advice and retains the rights to reject the substandard produce

Benefits To firm
1. The companies know the acreage planted and is assured of the grower’s output thus reducing its supply risk.
2. The company is in control of the contract provision and stipulations that can encourage quality production through the terms of agreement.
3.The companies know their approximate cost of raw product in advance.
4. As better growers tend to contract with the same company over several years, some stability in company – grower relationship is attained.
5.Since, some of the crops have no/less domestic market (at present), the farmers have no option to sell their produce outside and the company is assured to get regular supply of the produce.

Benefits to farmers
1.There is an assured market of their produce, which will eliminate the risk of price fall during glut.
2.Information on market price is made available ex ante. This instills confidence among the contract farmers.
3.It saves the difficulties involved in timely transportation and eradicates the exploitation by the middlemen.
4.Farmer can receive assistance from the processor in the form of technical service and input supply on credit with / without interest cost.
5.Companies often provide credit to the farmers, which reduce the burden of selfexpenses to the farmer. This enables the farmers to escape from the evils of private moneylenders.
The farmer is assured of better returns compared to other field crops as the companies offer relatively better prices.

 
 
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