Agribusiness and farmers in Mexico: the importance of contractual relations

Abstract

In recent decades contract farming as a mechanism that integrates and subordinates agricultural production to export oriented agribusiness has expanded in Third World countries. In Mexico contract farming dominates the production of horticultural crops for processing and export. It is also used for barley and to grow some varieties of wheat for Cargill. The contract farming labour agreement represents an institution that links local and global processes where agribusiness is the key actor that integrates local farmers to national and world markets. The purpose of this paper is to analyse the implications of contract farming for productive relations by examining its impact upon farmers and firms. The study found that despite the disadvantages of contract farming for growers, and the disproportional risks born by producers, they enter into contract farming labour agreements because they lack alternatives for financing, technical assistance and access to markets. The experience of contract farming in Mexico and several Third World countries shows that its growth is related to the implementation of neo‐liberal policies that are accompanied by the withdrawal of state support and regulation of agricultural production. In this context, contract farming represents a livelihood strategy for many Mexican growers.

Farmer organization, collective action and market access in Meso-America

“…This is particularly the case with changes in the retail system due, partly, to the growth and increasing concentration of supermarkets (Reardon 2005 In general, there has been a trend away from supermarkets occupying only a small niche in capital cities and serving only the rich and middle class, to spreading well beyond the middle class in order to penetrate deeply into the food markets of the poor (Reardon 2005). To ensure quality and consistent supply of perishable goods, supermarkets are pushing the food marketing system toward more vertical coordination, allowing retailers to standardize quality, improve bargaining power, and achieve economies of scale (Gulati et al 2007; Boehlje 1999; Echánove and Steffen 2005). The growth of supermarkets has seen a shift from exclusive reliance on spot markets toward the use of specialized wholesalers (Berdegué et al 2007;Shepherd 2005), contracting (Stockbridge et al 2003;Key and Runsten 1999), and the growth of private quality and safety standards as well as private enforcement of public standards (Pingali et al 2005).…”

Beyond sustainability criteria and principles in palm oil production: addressing consumer concerns through insetting

“…In simplified terms, there are three kinds of smallholders: those who are directly contracted by large estates, produce for the estates, and might receive investment and management support from them; independent smallholders who sell to mills either directly or through agents; and, smallholders contracted to large estates who keep some independent production. Contract farming provides the smallholder with greater production efficiency, income stability, market security, and access to capital (credit) and technological advances (Echánove and Steffen 2005). Thus from an agronomic perspective, it can be considered more sustainable because it supports intensification.…”

“…Thus from an agronomic perspective, it can be considered more sustainable because it supports intensification. However, it does come at the price of loss of autonomy (Dolan 2010, Echánove andSteffen 2005). Also, a number of studies have pointed out that the livelihood outcomes of contract farming are highly variable and depend strongly on farmers ability to negotiate favorable contract conditions as well as the investors support during planting stage (McCarthy 2010, McCarthy andZen 2010).…”

Agribusiness and Contract Farming: the Case of Small-Scale Cucumber Producers in Mexico

“…Despite the great variety of agreements or contracts existing between producers and buyers, it is common for the former to provide land and labor, while the latter supply seeds, chemical supplies, and/or technical advice on credit (Raynolds 2002:784;Echánove and Steffen 2005). Product prices are not always established up front in the contracts, however, what is inherent in contract farming is that buyers directly or indirectly control agricultural production processes (Watts 1994:26-28;Raynolds 2000:441), which differentiates it from other types of contractual relationships, such as sharecropping and purchase-sale agreements.…”