How does the contract farming operating model work?

Contract farming, also known as contractual agriculture or contract agriculture, is a new type of agricultural production and operation model that has emerged in recent years. Farmers arrange agricultural production according to contracts signed between themselves or their village organizations and buyers of agricultural products. It is an agricultural production and marketing model that adapts well to market needs and avoids blind production. Let's take a look at the operating models of contract farming below!

The basic concept of contract farming

Contract farming refers to agricultural product order contracts and agreements, also called contractual agriculture or contract agriculture. One party to the contract is an enterprise or intermediary organization, including brokers and transport-marketing households, and the other party is a farmer or a representative of a farmer group. Contract farming has market-oriented, contractual, expectational and risk-related characteristics. The quantity, quality and minimum protective price of the agricultural products to be purchased, as stipulated in the contract, give both parties corresponding rights, obligations and binding force, and neither party may unilaterally break the contract. Because the contract is signed before the agricultural products are planted or raised, it is a kind of futures trade, so it is also called futures agriculture. Farmers say: “With an order in hand, there is no worry in planting and raising.” However, contract performance involves a production process, and both parties may encounter the effects of market, natural and human factors, so there is also a certain degree of risk. But compared with the practice of planned economy and traditional agriculture of producing first and then finding a market, contract farming finds a market first and then produces, which can be called a product of the market economy and is also a kind of progress.

The operating models of contract farming

1. Farmers sign contracts with scientific research and seed production units, relying on scientific research and technical service departments or seed enterprises to develop contract farming.

2. Farmers sign agricultural product purchase and sales contracts with leading enterprises in agricultural industrialization or processing enterprises, relying on leading enterprises or processing enterprises to develop contract farming.

3. Farmers sign contracts with specialized wholesale markets, relying on large markets to develop contract farming.

4. Farmers sign contracts with specialized cooperative economic organizations and specialized associations to develop contract farming.

5. Farmers sign contracts through distribution companies, brokers and merchants, relying on circulation organizations to develop contract farming.

The basic characteristics of contract farming

1. Contract farming has a relatively high overall productivity, including relatively high land output rate and labor productivity. Agriculture becomes an industry with relatively high economic efficiency and market competitiveness, which is the most important indicator for measuring the level of modern agricultural development.

2. Agriculture becomes a sustainably developable industry. Agricultural development itself is sustainable and also has a good regional ecological environment. Production technologies and production models such as ecological agriculture, organic agriculture and green agriculture are widely adopted to realize the sustainable use of agricultural resources such as freshwater and land, achieve a virtuous cycle of regional ecology, and make agriculture itself a good recyclable ecosystem.

3. Agriculture becomes a highly commercialized industry. Agriculture mainly produces for the market, has a very high commodity rate, and allocates resources through market mechanisms. Commercialization is based on the market system. Modern agriculture requires the establishment of a very complete market system, including a modern circulation system for agricultural products. Without a developed market system, there can be no true modern agriculture. In countries with a relatively high level of agricultural modernization, the commodity rate of agricultural products is generally above 90%, and in some industries the commodity rate can reach 100%.

4. Realize the modernization of the material conditions of agricultural production. Based on relatively complete production conditions, infrastructure and modern material equipment, intensively and efficiently use various modern production input factors, including material inputs such as water, electricity, agricultural film, fertilizer, pesticides, improved seeds and agricultural machinery, as well as agricultural labor input, so as to achieve the purpose of raising agricultural productivity.

5. Realize the modernization of agricultural science and technology. Widely adopt advanced and applicable agricultural science and technology, biotechnology and production models, improve the quality of agricultural products and reduce production costs, so as to adapt to the development trend of market demand for agricultural products toward high quality, diversification and standardization. The development process of modern agriculture is essentially the process of widely applying advanced science and technology in the agricultural field, and the process of using modern science and technology to transform traditional agriculture.

6. Realize the modernization of management methods. Widely adopt advanced operating methods, management technologies and management means, form a relatively complete, closely connected and organically linked industrial chain from the pre-production, mid-production and post-production stages of agricultural production, and have a very high degree of organization. There are relatively stable and efficient channels for the sale and processing transformation of agricultural products, an organizational system that efficiently organizes scattered farmers, and an efficient modern agricultural management system.

7. Realize the modernization of farmers' quality. Having agricultural operation and management talent and labor with relatively high quality is a prerequisite for building modern agriculture and is also a prominent feature of modern agriculture.

8. Realize the scale-based, specialized and regionalized development of production. By realizing the scale-based, specialized and regionalized development of agricultural production and operation, reduce public costs and external costs, and improve the efficiency and competitiveness of agriculture.

9. Establish a government macro-control mechanism compatible with modern agriculture. Establish a complete agricultural support and protection system, including a legal system and a policy system.