25 Oct 2016
Olivier De Schutter, Co-chair, International Panel of Experts on Sustainable Food Systems (IPES-Food)
Improving small-scale farmers’ access to markets is vital for achieving food security and improved nutrition, but we must also improve farmers’ bargaining position in food chains. Photo: UNDP Georgia
It is increasingly common for big agribusiness firms to contract out the production of raw commodities to hundreds and thousands of smallholders, sometimes known as “outgrowers”. Through the contracts they negotiate with small-scale farmers, private investors are shaping agriculture in the developing world.
For example, the investment pledges gathered in the G8’s New Alliance for Food Security and Nutrition are primarily made up of plans by multinational and domestic agribusiness firms to source more widely from smallholders in a range of African countries. Yet what matters is precisely what is agreed between investors and small-scale farmers, and small-scale food producers have been largely neglected by agricultural policies to date. Understanding this situation is crucial to assessing the role of private investment in achieving the Sustainable Development Goals (SDGs).
In contract farming, farmers commit their output to processing or marketing firms at (generally) predetermined prices. Doing so can give them improved access to inputs and credit at one end, and easier access to markets at the other. Plugging small-scale farmers into new and lucrative market openings can help them to share the gains of globalisation.
Under certain conditions, contract farming can also help in the development of localized food chains, for instance by linking farmers’ co-operatives to the local food-processing industry or to fresh produce retailers serving urban consumers. …