Contract farming refers to a system where a central processing or exporting unit purchases the
harvests of independent farmers and the terms of the purchase are arranged in advance through
contracts. The terms of the contract vary and usually specify how much produce the contractor will
buy and what price they will pay for it. The contractor frequently provides credit inputs and
technical advice. Contracting is fundamentally a way of allocating risk between producer and
contractor; the former takes the risk of production and the latter the risk of marketing. In practice,
there is considerable interdependence between the two parties, the nature of which is subject to
much debate as the review of the literature and the case studies will explore. The allocation of risk
is specified in the contract which can vary widely; some agree to trade a certain volume of
production; in others the contract specifies price (which can be market price; average price over a
period of time, difference between a basic price and market price etc.) but not amount.