Food processors going for contract farming to get what they need

Availability of quality agricultural products as per requirements and on-time delivery – this is what prompted many food processors to enter into contract farming to get production up and running.  

Similarly, farmers are benefiting too – they get paid fairly for their produce and they do not have to bother about a drop in market prices.

Bombay Sweets met with a crisis of potatoes, a raw material for producing chips, as most potatoes that farmers produce are not suitable for. Against this backdrop, the food processor went for getting its required quantity of "Courage" potato variety produced by contract farmers a decade ago – the first ever in Bangladesh. 

It now has several hundred such farmers catering to their demand for 12,000-13,000 tonnes of potatoes each year. 

Following in Bombay Sweets' footsteps, many others, such as Pran, ACI, Bashundhara, Bengal Meat, Brac and Akij, have started the practice of carrying out production of agriculture products they need.

Contract farming can be defined as agricultural production carried out on the basis of an agreement between the buyer and farm producers. Farmers agree to provide agreed quantities of a specific agricultural product.

Industry insiders say they are now focusing on contract farming to ensure supplies of quality raw materials in required quantities. 

Currently, there are two lakh contract farmers across the country, according to them, but there is no official data to support it.

Farmers earn at least 26% higher than that of others and products grown this way have 13% better quality, according to a study report by the International Food Policy Research Institute on the impact of contract farming on different stages of poultry production.

Khurshid Ahmad Farhad, general manager at Bombay Sweets and Co Ltd, told The Business Standard, "We provide quality seeds to farmers to ensure good yield, and we buy from them at a fixed price. So, they do not incur losses even if prices drop in the markets."

Pran Group, a big name in food processing, collects various agro-products, such as milk, rice, tomatoes, nuts, mangoes, lentils, and spices, from its around one lakh contract farmers across the country. The group supplies seeds to farmers and oversees farming through a supervision team.  

Kamruzzaman Kamal, director at Pran-RFL Group, told TBS that it is very difficult to collect crops having a similar standard. "We provide farmers with quality seeds and get what it requires to manufacture quality food products." 

There is no interference of middlemen as well, ensuring fair prices for farmers, he added. 

A few months ago, another industrial conglomerate Bashundhara Group stepped into production of ground spices – turmeric, chilli, cumin, and coriander. The group also sources such spices from contract farmers.

Jasim Uddin, chief operating officer (Brand and Marketing) of Bashundhara Group, said, "The advantage of contract farming is that we know raw product sources. We can also understand what quality of spices will be produced from the raw materials collected. On the other hand, farmers also get a good price."

Bengal Meat, a meat processor, has more than 1,000 contract farmers in its supply chain. Half of its 400 tonnes of annual meat supplies comes from them.

Bengal Meat CEO AFM Asif told TBS that they are trying to add more contract farmers in the supply chain.

Although Milk Vita operates on a cooperative basis with farmers, three other dairy food processors, Akij, Pran, and Aarong collect milk from contract farmers. Akij Food and Beverage Limited's supply chain has 9,300 farmers.