“There is no alternative to commercialization of agriculture in Nepal”, said Jaya Mukunda Khanal, Secretary, Ministry of Agriculture, Nepal Government at the recently concluded Nepal Economic Summit (NES), 2014. Resonating with his views were the agriculture experts, academicians, representatives from donor organizations and most of the participants in the Summit who thought that in a country where agriculture has been long hailed as the do-gooder for the poorest of the poor, the key to transformation lies in commercialization. And one of the many ways which could help Nepal commercialize in agriculture was proposed in the form of contract farming.
For long, what has been largely discussed as being a challenge to the possibilities of commercialization has been the characteristic of land holdings in Nepal—scattered and small land holdings. As it is, small land holdings have been a characteristic of any developing country not just Nepal and the truth remains that this isn’t going to change any time soon. The only way to progress is to work with what we have and make the most of it. In this context, contract farming can play a vital role; and as cooperatives have, so far, been working effectively with smaller communities, it would reap many benefits if contract farming were to be done through cooperatives. And such has been practiced in other developing countries and have yielded good results. In Senegal, Africa, food processing companies work with small land holding farmers (each 0.2-0.5 hectors). A Thai company works with small holders in Vietnam. Such pro small-farmer contractual arrangement has worked for the benefit of the farmers and hence larger economic growth in both the given examples.
In a competitive market scenario there exists a pressing need to increase production and add value to products to meet both national and international demands. While the world continues to struggle with the needs, the inability of small farmers to reach the markets with finished products; let alone that, to not be able to fit in the value chain due to lack of access to capital and other inputs (seeds, fertilizers) puts the small farmers in the back seat with them being unable to bring about any significant change in their living standards—poverty ridden one generation after the next, they remain thus. Adding to the woes of such small farmers is the inability to mechanize—cost of mechanization is too high for a lone farmer to bear. What a cooperative model does is that it allows for these loopholes to be covered—right form the phase of access to inputs to the post production phase whereby, farmers, unlike at present, are not only able to meet their own subsistence needs but also make profits as a result of fair prices courtesy access to free and competitive markets.
In the wake of the reality that commercialization has been long talked about and now has gone on to be realized as a priority for Nepal’s agriculture sector, contract farming is a step forward and definitely worth the go.