Contract farming in
Thailand:
Contracts force farmers to purchase expensive supplies
By Jon Fernquest
During
the agricultural
price boom of 2008
many wondered why farmers never seemed to benefit by higher prices for
the crops that they grow (Read article #1, #2, and #3). Restrictive and exploitative contracts that farmers don't fully understand may be one reason that farmers can't benefit from higher crop prices. This is what today's article is about.
Today's article raises several questions:
1.
Why are farmers limited to one exploitative agribusiness firm?
2. Why isn't there more competition in contract farming markets?
3. Could groups of farmers collectively bargain for better contract terms?
4. Couldn't contract clarity be regulated and enforced using something similar to the Uniform Commercial Code (UCC) ?
2. Why isn't there more competition in contract farming markets?
3. Could groups of farmers collectively bargain for better contract terms?
4. Couldn't contract clarity be regulated and enforced using something similar to the Uniform Commercial Code (UCC) ?
The article begins after the vocabulary:
contract
farming - when a farmer produces agricultural products for a
company under a contract with a fixed price (See the many
possible definitions of "contract farming")
agricultural price boom of 2008 - the period in 2008 when commodity prices of agricultural products (rice, sugar) and oil shot up temporarily
exploitative - treating unfairly, using a person's work but giving little in return
agribusiness firms - companies with revenues from sales of agricultural products or sales to agricultural producers
collectively bargain - when a group of people gain strength by bargaining together (labour unions are the most common example)
contract clarity - when a contract is well-explained and easy to understand
Uniform Commercial Code (UCC) s- the set of laws that harmonizes commercial transactions and contract law in the United States across all 50 states (See Wikipedia)
agricultural price boom of 2008 - the period in 2008 when commodity prices of agricultural products (rice, sugar) and oil shot up temporarily
exploitative - treating unfairly, using a person's work but giving little in return
agribusiness firms - companies with revenues from sales of agricultural products or sales to agricultural producers
collectively bargain - when a group of people gain strength by bargaining together (labour unions are the most common example)
contract clarity - when a contract is well-explained and easy to understand
Uniform Commercial Code (UCC) s- the set of laws that harmonizes commercial transactions and contract law in the United States across all 50 states (See Wikipedia)
(Photo on right of well-fed pigs relaxing on the farm)
AGRICULTURE
Contracted farmers struggle with debts
PENCHAN CHAROENSUTHIPAN23/09/2009
Agricultural firms are under pressure to do more to help contract farmers who are heavily in debt because of restrictive conditions in their contracts.
By tying themselves to agro-firms to raise produce or animals, the contract farmers are forced to buy expensive fertilisers and medicines from the firms, Sukhothai Thammathirat Open University economists said in a research paper released yesterday at a Bangkok seminar.
under pressure -
being forced or made to do something
contract farmers - farmers who grow their crops under a contract with a larger company
restrictive conditions in their contracts - contracts force certain action (here: buying expensive supplies)
Sukhothai Thammathirat Open University - one of the two open universities in Thailand (See Wikipedia)
open university - a university that uses distance learning
distance learning - a school that teaches students over the internet (or in the past with mail) (See Wikipedia)
contract farmers - farmers who grow their crops under a contract with a larger company
restrictive conditions in their contracts - contracts force certain action (here: buying expensive supplies)
Sukhothai Thammathirat Open University - one of the two open universities in Thailand (See Wikipedia)
open university - a university that uses distance learning
distance learning - a school that teaches students over the internet (or in the past with mail) (See Wikipedia)
Porpan Ouiyanon, of the university's faculty of economics, said the farmers struggle without success to control their production costs.
Agro-firms promise to buy produce from contract farmers at a guaranteed price provided specific farming methods are followed and only approved brands of materials such as fertiliser are used. Farmers complain they have no say over the contractual terms and conditions, which effectively hand over control of their farms to the companies, he said.
faculty of economics
- the department of a university where the subject of economics is
taught
control their production costs - prevent employees from spending a lot of money
Agro-firms - same as "agribusiness firms" above
guaranteed price - a promised price
have no say over Y - what they want and their opinion cannot influence Y
contractual terms and conditions - the details of the contract
effectively hand over control - what they did was like or resembled giving control to someone else
control their production costs - prevent employees from spending a lot of money
Agro-firms - same as "agribusiness firms" above
guaranteed price - a promised price
have no say over Y - what they want and their opinion cannot influence Y
contractual terms and conditions - the details of the contract
effectively hand over control - what they did was like or resembled giving control to someone else
Such tight restrictions make it hard for the farmers to earn enough to pay off loans they have secured to get their farms up and running. Farmers typically invest between 500,000 and 1.5 million baht in their businesses.
"We have no freedom. We are at the mercy of the companies," said a pig raiser at the seminar, who declined to be named.
He said he had to build and maintain pig pens, pay for electric fans to be installed and foot the bill for animal feed.
He said his contract stipulated he must cover the costs himself.
X at the mercy of Y - what
will happen to X completely determined by what Y does (not good)
pig pens - the fenced areas where pigs are kept and raised
foot the bill for animal feed - pay for animal feed
stipulated - say clearly that something must be done (in a contract)
pig pens - the fenced areas where pigs are kept and raised
foot the bill for animal feed - pay for animal feed
stipulated - say clearly that something must be done (in a contract)
The pig farmer said he spoke for many who wanted their agreements nullified. But they were forced to continue to farm under contract because of the debts they had built up, often with money from loan sharks.
Mr Porpan said while contract farming helped farmers avoid fluctuating product prices, they must and be check the small printwary of the investment risks.
He and other academics at the seminar urged the agricultural firms to do more to help the struggling farmers by making the contracts fairer.
wanted their agreements nullified
- wanted their agreements cancelled
build up debts - borrow more and more money (so that total amount owed grows)
debts they had built up
loan sharks - offer loans at high interest rates often backed by violence or blackmail (See Wikipedia)
fluctuating product prices - product prices that go up and down
check the small print - read and understand the complicated parts of the contract (where important details are hidden)
X wary of Y - X does not trust Y so is careful in dealing with Y
build up debts - borrow more and more money (so that total amount owed grows)
debts they had built up
loan sharks - offer loans at high interest rates often backed by violence or blackmail (See Wikipedia)
fluctuating product prices - product prices that go up and down
check the small print - read and understand the complicated parts of the contract (where important details are hidden)
X wary of Y - X does not trust Y so is careful in dealing with Y
(Source: Contracted farmers struggle with debts, PENCHAN CHAROENSUTHIPAN, 23/09/2009, link)
