IFPRI - Workshop on Best Practices in Contract Farming: Challenges and Opportunities in Nepal - Contract Farming in Ginger: Implications on Smallholders in Nepal - Anjani Kumar

Contract Farming in Ginger: Implications for

Smallholders in Nepal

Anjani Kumar

International Food Policy Research Institute

IFPRI-South Asia Regional Office, New Delhi

B D Pant

D B Shakya

Madhab Karkee

IIDS-IFPRI, Kathmandu


The food marketing system in South Asia is undergoing a transformation.

Rising per capita income, urbanization, increasing market liberalization and

globalization of the food economy are attributed to spur this transformation.

Consumption baskets are changing in favour of high value commodities and

integrated food supply chains have emerged as one of the fastest growing and

most visible market phenomenon in India in the recent years.

The increasing dietary diversification accompanied by growing concern for

food safety and quality are accelerating this transformation in food marketing

system.

Traditional marketing channels with ad-hoc sales are being replaced albeit slowly by coordinated links between farmers, processors, retailers and others in

the value chain.

Background


Different models of LFTM

Co-operatives,

Farmers Producers Organizations (FPO),

Farmer Producer Companies (FPC), and

Contract Farming etc.

These models improve efficiency in production and marketing Speeding up commercialization of agriculture

Tremendous opportunities for enhancing social welfare

Challenges for smallholder and marginal farmers


Challenges to smallholders

small-scale enterprise,

low marketable surplus,

weak technical capacity,

lack of capital,

high vulnerability to risks and

inability to comply with emerging stringent food safety and quality standards,

Fight a multi-pronged battle

capacitating the smallholders,

creating conditions to standup to the competitive externalities

ensuring viable business opportunities for all stakeholders along the value chain.


Ginger in agricultural economy of Nepal

Time-period % share in

GCA

% share in

VOP

% share in

agricultural

exports (value terms)

TE 1987-88 0.04 0.47 5.84

TE 1991-92 0.08 0.94 9.32

TE 2001-02 0.19 1.74 6.99

TE 2011-12 0.36 3.05 2.67

Source: FAOSTAT (2014)


Area, Production and Yield of ginger in Nepal

Time-

period

Area

('000 ha)

Production ('000

tons) Yield (tons/ha)

TE 1987 1.4 13.3 9.3

TE 1991 3.4 31.7 9.4

TE 2001 8.7 80.4 9.2

TE 2012 19.1 227.4 11.9



Trade of ginger in Nepal (constant prices 2005 US$)

Time-period Export Import

tons 000 US$ tons 000 US$

TE 1987 2087 3540 5 5

TE 1991 2461 3270 0 0

TE 2001 8050 3014 554 601

TE 2011 24785 4872 5814 2445



Questions

Whether the contract farming is inclusive in Nepal?

Whether contract farming is more efficient?

Whether the contract farming promote good agricultural practices?

What are factors inducing farmers to participate in contract farming?

What are the key challenges?


Participation of small holders in contract farming in

ginger

District Contract Non-contract

Arghakhanchi 58.3 58.8

Palpa 67.4 83.0

Pyuthan 63.5 63.1

All 62.7 64.7


Economics of cultivation of ginger for Contract and

Non-contract farmers in Nepal

S. No. Heads of Economics of cultivation Contract Non-Contract

1. Cost of cultivation (NPR/ha) 217036 217752

2. Cost of production (NPR/q) 2385 2399

3. Value of output (NPR/ha) 529599 439174

4. Yield (Kg/ha) 9102 9076

5. Price (NPR/q) 5819 4839

6. Return (NPR/ha) 312563 221422

7. Return (NPR/q) 3434 2440

8. Return/holding (NPR) 140370 97244


Percentage quantity of ginger sold by contract and

non-contract farmers to various buyers-types


Average quantity and price of ginger sold to buyer-

types

Average quantity of ginger sold to different

types of buyer-types Nepal (quintal)

Average price of ginger received from

various buyer-types Nepal (Rs/kg)


Mode of supply of ginger by sample contract-farmers

in Nepal (% of contract farmers)


Provision of services and measures for quality improvement

S. No. Conditions of contract with contracting party

% of contract farmers

A. Related to Inputs:

1 Seed supply on credit by company 35.2

2 Extension for improved cultivation practices, including

mechanization 14.6

3 Extension for improved post-harvest practices 18.4

4 Supply of inputs on credit 15.3

7 Financial credit for operational purposes 9.2

8 Other services (please mention… 1.6

B. Related to Output and Prices:

9 Farmers have to wash/clean fresh ginger before supply 44.8

10 Farmers have to sort and grade fresh ginger before supply 28.6

11 Prices are fixed in advance for a stated quantity and quality of

produce 17.8

12 For sub-standard produce, either procurement does not take

place or a price lower than the fixed price is offered 27.3

13 Costs of credit and other services are adjusted in the final price

received by the farmer 2.9


Factors motivating farmers towards contract-farming

in Nepal

59.8

32.2

39.5

57.2

10.6 10.6

31.2

0

10

20

30

40

50

60

70

Selected options as % of noof respondent farmers


The risks and challenges faced by contract-

farmers in contract deal in Nepal (%) 54.6

44.7

23.4 23.4

37.2 35.5

0

10

20

30

40

50

60

Selected options as % of no of

respondent farmers


Good Agricultural Practices followed in Ginger

cultivation

S. No. Good Agricultural Practices GAPs followed (%)

Contract Non -contract

1. Are your farm and premises clear of litter and waste to avoid establishing

a breeding ground for pests and diseases? 54.8 58.4

2. Are the seeds treated with approved fungicides /pesticides, using

approved methods? 13.4 6.4

3. Are treated seeds differentiated (by colour or otherwise) to avoid

accidental use in feed or food? 40.8 45.2

4. Are seedlings, saplings, graft and buddings, cuttings procured from a

certified source? 7.5 3.2

5. Do you take preventive measures against pests and diseases? 29.3 16.0

6. Is the water (used for irrigation/fertigation) potable or free from harmful

contaminants? 26.8 27.8

7. Are you aware of common pests and diseases endemic to the area and

those that occurred on the crop during the past three crop seasons? 34.9 24.2

8. Do you follow the suggested IPM practices for endemic pests and

diseases? 26.5 5.0

9. Are prescribed maturity standards for the crops followed before

harvesting? 77.3 88.3

10. Are all substandard produce and all waste materials kept away from the

graded produce and suitably disposed of? 69.8 75.8


Good Agricultural Practices followed in Ginger

cultivation

S. No. Good Agricultural Practices

GAPs followed (%)

Contract Non -contract

11. Do you use the produce containers exclusively for produce? 52.3 58.4

12.

Do you consider hygiene procedure while handling harvested produce

and produce packed and handled directly in the field, orchard or

greenhouse?

29.9 26.3

13. Do you keep the collection/ storage /distribution point of field packed

produce in clean and hygienic conditions? 70.4 73.0

14. Have the farm workers received basic instructions in hygiene before

handling produce? 44.2 46.6

15. Do the farm workers implement the hygiene instructions for handling

produce? 45.5 47.3

16. Are the packages properly labelled and coded for unique identification

and trace back? 13.7 16.4

17. Do you control for temperature and humidity (where applicable) where

produce are packed and/or stored? 16.5 8.5

18.

Are the product store walls, floors and horizontal surfaces of any

storage, holding or reception facilities are cleaned and where

appropriate, are washed and insecticide treated prior to use?

20.2 21.7


Implications for smallholders

CF seems to be inclusive can’t afford to be exclusive

Enhancing income

Improving access to technology, inputs, markets

and capital

Improving adoption of good agricultural practices

Offsetting risk & uncertainty to a great extent

Governance, infrastructure and infusion of

competition is critical


Thank you

Education

IFPRI - Workshop on Best Practices in Contract Farming: Challenges and Opportunities in Nepal - Contract Farming in Ginger: Implications on Smallholders in Nepal - Anjani Kumar