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Contract Farming - Economy UPSC notes

Contract farming is an agreement between a farmer and a buyer where the farmer agrees to grow a specific crop for the buyer under predetermined price.
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 Contract Farming – Meaning & Example

Contract farming is an agreement between a farmer and a buyer (company, exporter, or processor) where the farmer agrees to grow a specific crop for the buyer under predetermined conditions, such as price, quality, and quantity.

Key Features of Contract Farming:

Assured Market & Price: Farmers get a pre-fixed price for their produce.
Input Support: The buyer may provide seeds, fertilizers, and technical guidance.
Quality Standards: Farmers must meet the quality requirements of the buyer.
Risk Reduction: Farmers are protected from price fluctuations in open markets.

Example of Contract Farming:

🔹 PepsiCo & Potato Farming in India

  • PepsiCo India engages in contract farming with potato farmers in Punjab, Uttar Pradesh, and West Bengal.
  • It provides seeds, agronomic advice, and assured prices to farmers.
  • The harvested potatoes are used to manufacture Lay’s chips.

Thus, contract farming benefits both farmers (assured income) and companies (steady raw material supply).

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