The Practices of Contract Farming Among Fresh Fruit and Vegetable Suppliers in Malaysia

Abstract

<b>Problem statement:</b> Contract Farming (CF) concept is an agreement between buyers and producers, where by producers agree to produce and supply agriculture products according to the agreed quantity, quality, variety, grade, type of packaging and time of delivery. The two parties will mutually agree on the pricing of product, either on a contract price or a market price. Therefore, CF is seen as a tool for fostering smallholder participation in new high-value product markets and improving quality standards, thus increasing and stabilizing smallholder incomes. In Malaysia, CF has been identified as a system capable of stimulating agricultural production and was given a central role in the latest strategy by government to improve the vegetable and fruit production. <b>Approach:</b> The overall objective of this study was to examine CF as the new marketing practice among selected vegetable and fruit suppliers. The specific objectives of the study were: (1) to examine the respondents perception towards CF; (2) to identify respondents practices toward the CF and (3) to suggest a policy to ensure the sustainability of CF. <b>Results:</b> Out of 208 of the total respondents selected in the study, 41 suppliers were involved in CF. The data were analyzed using SPSS to describe the respondents profile and current supply chain practices. At present, the suppliers have a contract agreement with Federal Agriculture Marketing Authority (FAMA) and FAMA has a contract agreement with Hypermarkets. It is presumed that there is a new supply chain network but the contract was not according to the FAO definition. The production and marketing contracts exist in non-formal or mainly verbal agreement. The production contract respondents also did not follow the criteria of CF. <b>Conclusion:</b> Because of this, all the non-formal production contracts in this survey are categorized into marketing contracts. This study concludes with the absence of proper farming contract between farmers and hypermarkets

Comparative Study on Sustainable Agriculture Knowledge among Malaysian Contract Farmers

“…The prime advantage of a contractual agreement for farmers is that the sponsor will normally undertake to purchase all produce grown, within specified quality and quantity parameters. Contracts can also provide farmers with access to a wide range of managerial, technical and extension services that otherwise may be unobtainable (Man and Nolila, 2010). From the above, it is clear that contract farming actually gives much benefit to both parties-contract farmers and the buyers of the agricultural products.…”

Can Contract Marketing Motivate Farmers to Go Organic? Measuring the Moderation Effect of Contract Marketing

“…Currently, contract farming and contract marketing are being practiced to motivate farmer's transition to modern agriculture in both developed and developing countries (Wang et al, 2014). Contract marketing is a potential alternative in the agriculture system to establish a market linkage between smallholder farmers and the retailers (Man and Nawi, 2010;Kirsten and Sartorius, 2002). Motivation such as price premium for certified organic products, sales channel access capabilities, economic sustainability and valorizing the local development are among the main concerns for farmers' participation in organic farming (Peterson et al, 2012).…”