Facilitating Smallholder Farmers’ Market Access
In the OIC Member Countries
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BOX 10: CONTRACT FARMING OFFERS MULTIPLE BENEFITS FOR MALAGASY SMALLHOLDERS
In Madagascar, Lecofruit, a local firm, contracted nearly 10,000 Malagasy smallholders to grow high-value
horticultural crops for the European market during the lean off-season, when they cannot grow rice and
other major crops, and their sources of food and income decline sharply. Lecofruit offered a guaranteed price
for the produce (gherkins, French beans, snowpeas, asparagus, and mini-vegetables) and provided inputs
such as seed, fertilizer, and technical assistance. The arrangement has increased agricultural productivity,
shortened the lean season from 4.5 to less than 2 months, reduced risk, and yielded higher, more stable cash
incomes for farmers. The provision of inputs on credit, access to new technologies, and the ability to earn
income during the off-season are all major incentives for farmers to participate. Contract farming has also
had important positive spillover effects. For example, Lecofruit introduced composting—combining manure
with vegetable matter—to improve soil fertility and moisture retention on fields used for the contract crops.
Farmers then started using this sustainable practice for all of their other crops, including rice (the major
staple), which increased overall agricultural productivity and incomes. The new technologies and practices
are expected to yield additional environmental and social benefits over the long term. In particular, increased
employment and higher productivity of existing agricultural land will reduce the need to clear forests for
agriculture, reduce food prices, and benefit the poor, especially in rural areas.
Source: Authors, based on Minten et al. 2010.
Nor is contract farming suited to all crops and commodities. High-value horticultural
crops, some cash crops (such as sugarcane, cotton, oil palm, or rubber), dairy, poultry, and
aquaculture are more suited to contract farming than staple crops or other cash crops
such as coffee and cocoa. With these considerations taken into account, governments and
donors can facilitate contract farming in several ways, which are discussed in the
following chapter.
Invest in Rural Health and Education
A lack of investment or uneven investment in rural health and education will place
smallholder farmers at a disadvantage in adjusting to rapidly evolving agri-food markets.
In the process of structural transformation, investments in education and health also
enable the labor force to better adapt to changes and benefit from opportunities. A
healthy, educated rural population is in a better position to transition to work outside of
agriculture.