Presentation on theme: "POVERTY REDUCTION THROUGH CONTRACT FARMING LESSONS FROM SRAKAEW PROVINCE, THAILAND."— Presentation transcript:
POVERTY REDUCTION THROUGH CONTRACT FARMING LESSONS FROM SRAKAEW PROVINCE, THAILAND
POVERTY CIRCLE IN THE AGRICULTURAL SECTOR IN THAILAND Structure of land holding Small holders with small, irregular volume harvested Leased land farming Market accessibility Very limited or no direct access to wholesale markets Have to sell to middleman or venders at a relatively low price
POVERTY CIRCLE In sufficient income to meet farming and living expenses. Has to get loan. Small plot – small harvestable quantity. Limited or no direct market access have to sell to middleman or merchant who finance his farm operation. Has to sell at relatively low price.
POVERTY AND DOWNWARD SPIRAL Low income from farm can not cover Low income from farm can not cover living and farming expenses living and farming expenses Low standard of living, mostly on or Low standard of living, mostly on or slightly above subsistence level slightly above subsistence level One or a few crop failures forced them One or a few crop failures forced them to get loans to get loans They are caught in powerful downward They are caught in powerful downward spiral spiral
DOWNWARD SPIRAL Small and very small farm plots Small quantity in daily harvest, irregular supply Limited or no direct market access, due to high transport cost/unit Have to sell to middlemen or merchants who finance farm operation Have to sell at low price Not enough income to meet farm and living expenses Have to get loans. Additional debt financing burden In downward spiral, they can not pay back the loans – lose farmland Farming on leased landWage earners in the agriculture sector or take jobs as unskilled workers in the industrial sector
PREVAILING MARKET MECHANISM Wholesalers develop networks of regular suppliers and oblige to buy from them first Buy any excess at a low price, if at all. They give good price to any supplier only when there is a shortage of supply High degree of price fluctuation in the market Any losses from poor post-harvest, handling, and transportation systems are pushed back to growers.
CONTRACT FARMING Contract farming can be a powerful tool in breaking poverty circle It solve irregularity and small volume of supply by organizing small growers into well managed groups Farm production plan and combined farm produce provide sufficient volume for economical transport. Regular delivery meets buyers requirement Good farming practices improve quality and product safety of supply from farms Cost saving in buyers operation and production line lead to higher selling price Direct access to market is guarantee at minimum or no cost
CONTRACT FARMING IN SRAKAEW Contract farming of organic asparagus was organized in the year 2000. A small group with a total of 47 members entered into contract with Swift Co., Ltd. in early 2001. The combined planting area was 94 rai or 37.6 acre.
RAPID EXPANSION OF CONTRACT FARMING IN SRAKAEW Success of the first group lead to rapid expansion in late 2001 Many new areas are added in 2002, 2003 and the first half of 2004 From a modest beginning of 37.6 acres, the total acreage has been increased to 440 acres in early 2004.
RATE OF GROWTH Total acreage and number of growers YearAcreage (Rai) Number of Growers Rate of Growth Yr. On Yr.From Base Year Early 2001 9447 Base Yr. End of 2001 18090191 2002 361171200384 2003 660314182702 2004 1,1004931661,170 Early 2005 1,1525501041,225
FARM MAINTENANCE COST Conventional and organic farms/ cost per rai/one harvest Synthetic fertilizer Organic fertilizer Sub- strate Agro- chemical Approved organic Bio- products Total per harvesting crop Total/ year Conventional farming in Nakornpathom 1,424.0 920.016,032.0 2,179.0 0 6,126.2 24,504.8 Organic farming in Srakaew 01,900.0 240.00 356.0 2,496.0 9,984.0 The organic farm maintenance cost was 59.26 % lower than that of the conventional farm
CERTIFICATION Organic farms of the original group was certified under JAS standard by OMIC (Overseas Merchandise Inspection Co., Ltd.) in 2001-2002 In 2002-2003, OMIC was again the CB for a larger planting acreage of the original group In 2003-2004, BCS (BCS öko-Garantie) of Germany is the CB for EU and JAS standards The new additional farms will be certified as Farms in Transition to organic in early 2005
SUMMARY OF THE FINDING Organic farming was introduced to the potential members in the preparation period in the year 2000. Extensive training on organic farming guidelines and practices under JAS and EU standards. The willingness of members, the regular training, transfer of technology, and on-spot problem solving paid off handsomely. Average yield per acre is on par with that of conventional asparagus farming. Average maintenance cost per acre is less than half of that in the conventional farming.
CONCLUSION It is rational to conclude that contract farming is a powerful tool in breaking poverty circle, and hence poverty reduction. To be successful contract farming must be well designed. Careful and efficient implementation is needed. It is critical to built a strong and well disciplined core members and a strong pioneer small group.
ATTACHMENT KEY SUCCESS FACTORS IN ORGANIZING CONTRACT FARMING
KEY SUCCESS FACTORS GROUP 1 Good groundwork preparation Careful selection of members Sufficiently long contract term Organizing only one small group in the initial period Assist in designing organization structure and management of the group Development of relationship as partners
KEY SUCCESS FACTORS GROUP 2 Training and technology transferring Training and technology transferring Active participation in farm preparation and maintenance Active participation in farm preparation and maintenance Development of group collective responsibility Development of group collective responsibility On-spot problem solving in organic farming On-spot problem solving in organic farming Regular farm auditing by Swifts agronomist Regular farm auditing by Swifts agronomist
KEY SUCCESS FACTORS GROUP 3 Every party benefit fairly from the pricing policy of the company Price incentive reflects improvement in quality of supply Transparency in business transaction Equal treatment to all members On time payment Financial assistance and interest-free loan