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 an interview when Iran deputy minister, Dr. Shirzad was asked What the definition of contract farming is, what its
components are, what the meaning of this lexical composition is, and why it has not so far received the
general favor of the farmer community in view of all its advantages, he said, “ Contractual agricultural
status is understood as every phenomenon of public acceptance in the context of conditions and
situations of possibility and refusal. In simple agricultural terms, a contract is a legal contract that binds
the buyer to the producer through a binding contract (a UIFA) and specifies the quantity and quality of
the type of goods to be produced. In fact, contractual production, or custom production, is a form of
agricultural production that is concluded by a written contract based on the sharing of interests
between the producer and the seller and between the real or legal buyer. Contractor including the
document of the quality of sex, quantity, price, form, method of production, date of delivery of the
product which covers the subject of the contractual production and is signed between the parties.
Perhaps in a more precise definition of contract farming is defined as an economic position that is the
distance between spot markets and vertical integration, and a kind of intermediary entity that responds
to market failures and reduces transaction costs.”

He added, “On the other hand, agriculture is a systematic and purposeful contract of exchange of
money-flow in agriculture, whereby producers sign a contract with a local firm or company in order to
exchange a particular product or high-value product for the contracting party. To this end, the farmer or
agricultural firm agrees to provide the conditions required by the contractor. If the farmer fails to meet
the terms of the contract, the firm may reject the crop without payment or reduce payments to the
farmer.

Contract farming is a mechanism that coordinates the relationships between agriculture and
the related industries of conversion, complementary and even maintenance in the chain, leading to the
strengthening of the activities of the processing and conversion industries. This process has led to
positive developments in the food supply chain and highlights its role as an effective strategy. There
have been experiences of using this approach for decades to develop crops such as oilseeds and sugar
beet (by specialized companies) in the country. This approach has been successful in the early stages of
product development called “cash crops” but for many reasons so far, there have been no generalizable
models in line with current conditions and, in turn, agricultural sector policies have led to the
elimination or inefficiency of such companies.”

Shirzad said that currently the conventional cultivation method is used by some private companies (such
as tomato paste producers, medicinal plants) in a limited and often semi-formal manner. The sugar
chain in our country has a long history and has been based on conventional agriculture, but at this
historical juncture, there is room for agronomic chains to be analyzed, redefined and pathologized, and
examined in more specialized workgroups.

When he was asked whether there are any specific historical records in our country of contract or
similar farming, which crops are cultivated under contract farming and what effects it had, Shirzad
relied, “Yes, we have at least two cotton and sugar beet crops in written, substantiated and almost
comprehensive historical records of contract farming with the help of foreign businessmen and
companies operating in Iran.

From a historical point of view, in fact, after Nassereddin Shah’s third visit
to Europe in 1889, a large group of European investors had a keen desire to conclude cultivation and
export contracts and invest in beet cultivation, the establishment of sugar factories, the development of
sugarcane and sugar beet cultivation, cotton. And they even showed up. Russian businessmen were
active in developing conventional cotton cultivation and promoting its high-quality seed in Khorasan,
financing farmers and establishing the first Iranian cotton clearing plant in 1902 in Mazandaran Bar.

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