New Decisions Farmers Must Make in Contract Farming

Excerpts: Contract farming is not a new way of doing business. Rather it is an adaptation to agriculture of methods and techniques commonly used in other sectors of our economy. Properly prepared production contracts help farmers "nail down" the future. With a good production contract, a farmer may more confidently obligate himself for labor, credit, or other items needed to produce the kind and quantity of goods specified in the agreement. Use of the contract as a business tool is as much of an innovation in farming as adoption of a new machine or a new insecticide. The technological revolution in agriculture is working a relative hardship on farmers who have not been able to participate in the technological changes. The competitive position between farmers who can innovate and farmers who cannot innovate is widening. I submit that this is also true with respect to our economic revolution. Farmers who cannot innovate in their ways of doing business will become less and less able to compete with farmers who do innovate. Contract farming is one form of innovation that will increase in importance.