”Land grabs” and contract farming: A win-win situation?
SIMONE GOBIEN, KERSTIN NOLTE
Institute of African Affairs, German Institute of Global and Area studies, Germany
[email protected]
Paper prepared for presentation at the
“2016 WORLD BANK CONFERENCE ON LAND AND POVERTY”
The World Bank - Washington DC, March 14-18, 2016
Copyright 2016 by author(s). All rights reserved. Readers may make verbatim copies of this
document for non-commercial purposes by any means, provided that this copyright notice
appears on all such copies.
Abstract
Large-scale agricultural land transactions in developing countries still make headlines. Conservative
estimates assume 40 million hectares changed hands since 2000 (Land Matrix, 2016). It is evident that
this has very strong implications for the people in the target regions. It is however less clear whether
negative or positive aspects prevail. Contract farming schemes are often thought of as guaranteeing
positive implications. In these arrangements, smallholder farmers receive inputs at the beginning of the
season and in turn sell their produce to the large-scale farm. Hence, their harvest pays off the loan they
received in the form of inputs at the beginning of the season. The pros and cons of contract farming are
heavily debated in the literature but are said to be a success in the context of land acquisitions. It is
debatable whether the equation “contract farming equals positive implications for the local communities”
is correct.
Key Words: contract farming, outgrower schemes, land grabbing, large-scale land
acquisitions, large-scale agricultural investments, commercial agriculture, Land Matrix
Large-scale agricultural land transactions in developing countries still make headlines. Conservative
estimates assume 40 million hectares changed hands since 2000 (Land Matrix, 2016). It is evident that
this has very strong implications for the people in the target regions. It is however less clear whether
negative or positive aspects prevail. Contract farming schemes are often thought of as guaranteeing
positive implications. In these arrangements, smallholder farmers receive inputs at the beginning of the
season and in turn sell their produce to the large-scale farm. Hence, their harvest pays off the loan they
received in the form of inputs at the beginning of the season. The pros and cons of contract farming are
heavily debated in the literature but are said to be a success in the context of land acquisitions. It is
debatable whether the equation “contract farming equals positive implications for the local communities”
is correct.
-
Contract farming plays an important role in large-scale agricultural investments. Based on Land
Matrix data, we assume that about half of all deals have contract farming arrangements.
-
Contract farming can in general have diverse effects on participating farmers and communities.
On the one hand, participants in contract farming schemes may increase their productivity and
hence their income thanks to better access to inputs, credits and training. This can also affect noncontract crops and non-participants through spillovers. On the other hand, contract farmers may
face higher risks, for instance as they diversify less and become dependent on the powerful large
farm.
-
Empirical evidence on contract farming in conjunction with large-scale agricultural investments
is scarce. Drawing on the literature, most studies find positive effects for participants on income
and perceived well-being. However, these studies also warn that these positive findings depend
largely on the local context. For instance, an educated workforce is crucial. Moreover, such
inclusive business models face high challenges and costs in their initial phase.
-
Contract farming in the context of land investments can certainly foster positive implications for
smallholder farmers. However, it is wrong that land acquisitions that use contract farming
schemes automatically lead to positive outcomes for affected smallholder farmers. There are
several crucial aspects that need to be taken into account, including the power between the
investor and contract farmers as well as local context conditions.
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