Issues of concern related to contract farming

As with any form of contractual relationship, there are potential disadvantages and risks associated with contract farming. If the terms of the contract are not respected by one of the contracting parties, then the affected party stands to lose. Common contractual problems include farmer sales to a buyer other than the one to whom the farmer is contracted (side selling or extra-contractual marketing), a company's refusal to buy products at the agreed prices, or the downgrading of produce quality by the buyer. Side selling by farmers to competing buyers is perhaps the greatest problem constraining the growth of contract farming. Contractors also may default by failing to pay agreed prices or by buying less than the pre-agreed quantities.

Another concern about contract farming arrangements is the potential for buyers to take advantage of farmers. Buying firms, which are invariably more powerful than farmers, may use their bargaining clout to their financial advantage. Indeed, if farmers are not well organised or where there are few alternative buyers for the crop or it is not easy to change the crop, there is a danger that farmers may have an unfair deal. Tactics sometimes used are changing pre-agreed standards, downgrading crops on delivery so offering lower prices, or over-pricing for inputs and transport provided. Strengthening farmer organisations to better access appropriate services such as credit, extension services and market information and improving their contract negotiating skills can redress the potential for exploitation of farmers and poorly formulated contracts and their enforcement.

Despite the typical problems listed above, contractual arrangements are gaining popularity as they are being used more frequently in agriculture worldwide.

Text 4

Practice 1. Choose the key sentence in each paragraph.

Practice 2. Read the text to find out the author’s main idea:

1. Investments in developed countries caused “non-traditional exports” of food from developing countries.

2. Latin America was the main focus of developed countries investments.

3. Market saturation in developed world caused the appearance of oligarchy there.

4. Asia is the main aim of developed countries investments.

Practice 3. Make a review of the text

Responses to Decreased Market Growth in Developed Countries

A profound shift occurred in the 1980s and 1990s in the patterns and extent of the transnational corporate penetration of the agrifood systems of developing countries. From the mid-1970s, per capita food consumption of basic staples in the developed world was reaching saturation, and overall growth suffered from the effects of the end of the baby boom. This led to a rapid process of concentration and development of oligopolies (where a few companies control a large portion of the market) as the key condition of continued growth.

This slowdown in growth in food purchases in the developed countries was partially offset by a number of new initiatives. The introduction of an increasing number of unprocessed specific varieties (instead of selling undifferentiated commodities), led to a truly unbelievable proliferation of processed food products, and a segmentation of markets. A new wave of investment promoted “non-traditional exports”—particularly seafoods, fruits, and vegetables, either off-season or exotic—from developing countries to metropolitan markets. There was also renewed attention to the potential of the domestic markets of developing countries where higher demographic growth rates and rapid urbanization were creating ideal conditions for food corporations to offset the slowdown in growth in developed country markets. In earlier periods, Latin American countries were the main focus of investments directed to domestic markets within the periphery. Now, attention was being redirected to Asia where many developing countries were experiencing sustained high growth rates.

Text 5

Practice 1. Choose the key sentence in each paragraph

Practice 2. Read the text to find out the author’s main idea:

1. Developing countries became major suppliers of meat, fruit and vegetables to developed countries.

2. There is the shift to a high animal protein diet in the developed world.

3. The Brazilian firm JBS is the world’s largest firm in the red meat sector.

4. Foreign investments caused the explosion of shrimp-based chains in developed countries.

Practice 3. Make a review of the text

The New Position of Emerging Countries in the Global

Agrifood Economy

As mentioned earlier, two broad tendencies transformed North/South relations since the 1970s. In addition to being a source for traditional tropical exports, developing countries became increasingly important in the supply of the components of what has been called the “nutritional transition”—the shift to a high animal protein diet (including seafoods) and the increasing consumption of fresh fruit and vegetables. This has provided opportunities for the expansion of domestic food companies in a few countries. Brazil and Argentina, together with Thailand, became major suppliers of animal feed and meat. Particularly in the white meats sector (poultry and pigs), this gave rise to domestic agribusiness firms—Sadia and Perdigão in Brazil, and the Charoen Pokphand Group in Thailand. More recently, there has been a similar surge of domestic firms in the red meat sector, with the Brazilian firm JBS/Friboi becoming the world’s largest firm in that sector. The Charoen Pokphand Group similarly embarked on regional foreign direct investment.

Foreign investment and increasing coordination have also transformed developing countries into major suppliers of seafoods, with a key driver being the explosion of shrimp-based restaurant chains in developed countries. This has involved new transnationals, such as the animal (and fish) feed company Nutreco, the entry into this sector of leading firms from the agricultural inputs and genetics sectors, such as Monsanto, and the emergence of domestic players.

Fresh fruit and vegetables have been piloted mainly by firms for which this previously unorganized market segment has become a key to establishing consumer loyalty. Early forays into the domestic markets of developing countries often had the character of enclave-type activities, with few or no linkages to their economies. Alternatively, they were aimed at a specific niche. Now, under the aegis of retail, the transnational objective has become corporate takeover of the domestic food systems of developing countries as a whole. In addition, this penetration now includes the large developing countries, often with strong states, with already consolidated agrifood companies, and with very distinct traditions and food habits. It also occurs in a context in which developing countries have become competitive suppliers in a number of markets, providing opportunities for the transformation of their leading domestic players into global actors.

Text 6

Practice 1. Choose the key sentence in each paragraph.

Practice 2. Re-read the text to find out the author’s main idea:

1.The retail sectors of Europe and the United States make up a substantial proportion of trade.

2.The role of multinationals increased in all phases of agrifood systems.

3.Large-scale retailers control traditional export.

4.Higher levels of concentration involve duopolies and even smaller market segments.

Practice 3. Make a review of the text.

Concentration in Global Food Systems

The changing global dynamics of demand and the acceptance of the “free market” liberal approach by developing countries led to an increasing presence of multinationals in all phases of agrifood systems. This now includes direct foreign investment in land and water resources, stimulated both by the moves to grow crops for agrofuel feedstocks and by concerns with food security in an increasingly uncertain environment for world commodity trade.

Significant concentration of control of food and agriculture had already occurred in most advanced capitalist countries. In the United States, concentration ratios for the top four or five firms have been calculated for the major upstream inputs (materials, resources, energy, fertilizers, etc.) and downstream outputs (farm products, processing, and sales markets). More recently, researchers have identified very high levels of concentration in the retail sectors of Europe and the United States. The major agricultural commodities that make up world trade are also subject to high levels of concentration—grains and oils, coffee, cocoa, and bananas. In addition, a substantial proportion of trade is now organized and coordinated by lead firms. This is particularly the case for the so-called non-traditional exports (seafoods, fruits, vegetables, and flowers), very often under the direct control of large-scale retailers. As much as a third of overall trade can be accounted for by purchases between the subsidiaries of the same firm, where prices are determined by fiscal (including tax) considerations.

In smaller market segments, there are even higher levels of concentration involving duopolies and even monopolies. Leading firms can adjust their respective behavior, creating an informal control over the market. The issue of market concentration, however, is not limited to individual markets. The major firms grow both horizontally (in like sectors) and vertically (integrating both downstream suppliers and upstream markets for a given industry)—leading to concentration and economic power that extends to broad sections of the agrifood system. This development is particularly noticeable in the agricultural inputs and primary processing/trade sectors.

Text 7

Practice 1. Choose the key sentence in each paragraph

Practice 2. Read the text to find out the author’s main idea:

1. More shoppers to buy themselves gifts at Christmas or to reward themselves for working hard during the year

2. Retailers, marketers target self-gifters with luxury items.

3. Some people are more "indulgent" self-gifters while others are more "impulsive".

4. People aged over 45 were much less self-rewarding, with only one in 10 buying themselves a gift.

Practice 3. Make a review of the text.