- Definition: Agricultural production carried out according to an agreement between a buyer and farmers.
- Establishes conditions for production and marketing of a farm product.
- Farmer agrees to provide agreed quantities of specific product meeting quality standards.
- Buyer commits to purchase and may support production (inputs, advice).
- Benefits to Farmers:
- Guaranteed market outlet.
- Reduced uncertainty regarding prices.
- Often supplied with loans in kind (inputs).
- Benefits to Agribusinesses (Purchasing Firms):
- Guaranteed supply of agricultural products.
- Products meet their specifications (quality, quantity, timing).