Categorizing the market inefficiency into price inefficiency and technical inefficiency, Shirzad went on that the price inefficiency occurs because of the high cost of the production factors including (labor force, storage, transportation…), while, the technical inefficiency is due to the crop wastage. Contract farming boosts the productivity of the labor force, the wholesale and the retails sale with no effect on the quality.
“The high marginal value, meaning the low share of the farmers of the Crops’ final value, should be controlled in the level that no parties (producer and consumers) bear any loss. The official data prove that livestock products, crops, and horticulture products bring about for the producer the minimum market margin accompanied by the maximum share of the final products, respectively. Therefore applying the contract farming for the horticulture sector appears as an essential axiomatic.
It seems natural that some crops show more flexibility to be produced under the contract farming regime. In 2018, about 90% of poultry products, 68% of the pig-raising products, 90% of tobacco and sugar beet have been produced by the contract farming in the USA, while these figures are 25% and 23% for soybean and wheat, respectively. In conclusion, the statistical data prove the increasing trend of contract farming in Europe, Africa, and the USA”, he added.
Citing the global experience, Shirzad referred to the direct relationship between the size of farms with the yield of farming, going on that in 2008, more than 70% of USA large farm, earning at least 1 million US. $ were working under contract farming while this figure for the small farms was 7%.
Furthermore, conducting a bi-step similar survey in Brazil, Chile, Peru, and Argentina demonstrates identical results, in 2010 and 2011.
The results of the long term studies, as well as thematic analysis, prove that the contract farming aid farmers to reduce the risks due to the price fluctuations and guarantees the crop sale. Notwithstanding, it could bring negative consequences including unpredictable risks such as deformation of the agricultural normal structure due to increasing the consumers’ purchasing power.
There have been many innovations in the financing of contract farming. Contracts revitalize indoor and overseas capital rising because they guarantee the crop production for few but target-oriented customers, as well. The Iran experience in the 70s on asparagus farming in the Khuzestan agro-industry companies bears out the above-mentioned result”, the official added, adding that for as much as the contract farming can balance the financial portfolio and capital risk portfolio.
” The comparative study of contract farming throughout the world teaches us that first, applying this system needs a supportive Legislative Power that respects the private ownership too. Contract farming should focus on large and integrated farming systems like RPCs, agro-joint stock companies, and agro-industry corporations. Contract farming in the broiler and egg-laying hens industries of European and American countries is pioneer, and third, contract farming links the national value chain and overseas markets through securing financial affairs “Shirzad added.
Citing to the evolutionary trend of India’s legislative system for contract farming, Shirzad asserted these Rules and Regulations should protect the interests of the farmers, as the weaker of the two parties entering into a contract.
Finally, Shirzad concluded that considering the status quo, RPCs, agro-joint stock companies, and agro-industry corporations possess the most appropriate structure for contract farming; however, we always should apply the experience of the pioneer countries in the field of contract farming to understand the obvious and hidden governing rules. Having a prosperous agriculture system requires to use the global experience to approve the Rules that adopt a unified approach in policymaking, procedures, and designing.

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In a meeting of agro-economist and CEO of the national unions of agro-cooperatives on ” necessities of the contract farming “, Hossein Shirzad who is also the CEO of the Central Organization for Rural Cooperatives of Iran (CORC), said since CORC enjoys the appropriate legal capacity, organizational chart and technical background for contract farming, it can be used by the rural and agricultural network to create a symmetric symbiotic between agriculture and industry.

Referring to the outstanding achievements of using contract farming in Europe, Latin America, North America, and the Middle East, he said that contract farming can bring about mutual profit, fair sharing of costs and risks incurred by marketing, storage and selling of the crops for both parties. Noting to the experience of India, Ghazaghestan, and France in applying contract farming, the official asserted that improving contract farming, however, requires making fundamental changes in the banking mechanism, including the interest rate, loan-giving procedure, and guarantee.
“Nowadays, the dichotomy of subsistence farming and industrial farming has diminished by the aid of contract farming throughout the world.

The largest trade partners of rural cooperatives union in the developed countries are the association of the grain exporters, big chain-stores, hypermarkets, and food multi-national corporations and startups.” Shirzad added.
Today 82% of Cucumis Sativus, 41% of Basmati rice, 38% greenhouse tomato and red pepper, 25 % of peanut and 37% of hazelnut are produced throughout the world by the contract farming. Meanwhile, the world huge production of Durum wheat and more than 69% of certified seeds is due to improving contract farming.

In the Eurasia district, contract farming means to select appropriate farms, employing professional labor force, using qualified seeds, professional machinery and applying accessible and economical inputs and transportation system. Accompanied by the supportive pricing mechanism, applying these factors will lead to boosting farmers’ income and improving their living standards”.

The development of contract farming is dependent upon to develop a modern pricing body that adopts an appropriate pricing policy based on the cultivation pattern and land-use systems. Currently, the national farming system suffers from a lack of such a reference body.

Hence the crops are perishable in their very nature, accessing emerging and sustainable markets necessitate creating a close link and cooperation among farmers, food processors, and exporters.

Elaborating the advantages of the contract farming, Shirzad added by contract farming t, farmers have no concern about price fluctuations, they can focus on boosting yield, therefore the long term capital raising and mid-term risk distribution will be facilitated. However, the agriculture system needs a supportive judiciary system as well as an insurance system. We ask the parliament to support all stakeholders by approving supportive Rules and Act for farmers.

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