Contracting to make easier the marketing of onions from small farmers

Contract farming is not a new concept.

It can be defined as a fixed-term agreement specifying the producers’ and buyers duties as business partners. From a legal point of view, the contract requires the sellers (producers) to respect the amount and qualities specified, and the buyers (processors/traders) to purchase the products and make the payments as agreed. Overall, it is a form of entrepreneurship where contractors aspire to make profits through more secure access to supplies and markets.

There are several contract farming models, more or less complex and more or less fitting to different contexts. The components specific to each model can also contribute to the establishment of “hybrid” models fitting to particular situations.

Our approach to contract farming

L’oignon qui rit focuses on small farmers, who are generally illiterate in the area of intervention. According to our analysis, to obtain satisfactory results in this context, there are at least two essential prerequisites:

• The arrangements must be beneficial to the producers and the company (win-win), as well as minimize the risks related to their respective activities, and
• Contractual agreements must be fair, simple, clear and negotiated on an equal footing between farmers and the company.

Once these conditions have been met, the commitments agreed between the parties must be strictly respected on both sides, because mutual trust is the primary reason for the success or failure of contracts.

The selection of producers

We have chosen to work with individual farmers. Indeed, we believe that the individual commitment of partner producers is an important success factor. In addition, the finding is that most of them have had very disappointing experiences of partnerships evolving within cooperative organizations.

We select partner producers according to the following criteria:

• Market gardening as the main economic activity
• Availability of land with a strong market gardening vocation
• Proven experience in the production of the most common vegetables in the zone
• Direct and constant involvement in field work
• Direct sale of products
• Availability of water for irrigation during the dry season (October to March) and adequate pumping facilities
• Enough financial capacity to ensure the supply of required inputs for the proper performance of the agreed job (fertilizers, work force, fuel, etc.)

The contract

L’oignon qui rit proposes to the shortlisted candidates:

• The supply of seeds of the “Violet de Galmi” variety. For the first two production campaigns the company provided them free of charge. The quantities were defined by the company according to the requests of each producer and the evaluation of their production potential. They can make it possible to exploit variable areas between 0.15 and 0.5 ha, depending on the case. The date of supply was also specified. Starting from the third campaign (2023-2024) seeds have been subsidized at 50%, and the quantities that can be supplied are increased (between 0.30 and 1.3 ha).
• Free technical assistance and close monitoring during the production phase (2 visits per week).
• To follow the technical advice provided by the company.
• To buy them 60% of the expected production at harvest, if they meet the required quality standard.
• Methods of measuring the quantities to be delivered: indeed, onions are sold by volume (bags), and the size of the bags as well as the filling methods can be different even within the same area.
• The establishment of a pricing mechanism linked to the market.
• Cash payment for onions on delivery.

The negotiations mainly focused on:

• The price setting mechanism: they ended up agreeing on a minimum guaranteed price 10% lower than the market price of the previous year at the same period, and the adjustment of this price according to the market: market at the time of the first deliveries + 10%
• The assessment of the quality of the onions to be delivered: It was agreed that the company would have assessed the degree of application of the technical itinerary proposed and compared the bulbs to be delivered by each producer, in particular with regard to the homogeneity of calibre, the level of maturity at harvest and the bulbs firmness.

L’oignon qui rit has chosen not to provide penalties for the defaulting party, if applicable. Indeed, the contract is drafted in written form more as a signed “reminder” than for its legal value. Our vision is that the non-renewal of a win-win partnership is itself a penalty.