1.9. Impact of Globalization: Contract Marketing

The macro level changes due to the New Economic Policy have had a direct impact in the field of agricultural marketing. So the impact of globalization has been highlighted here. As a result of globalization substantial investments in new ventures are being made by national as well as international corporations. A number of foreign companies are slated to enter the Indian market through collaborations with the well known Indian companies like Eagle Agro-farms, Maxworth Orchards, etc. It is clear that the wholesaler in the fresh products market as well as the processor will prefer contract marketing tie-ups with the farmers for sourcing his supply requirements.

The concept of contract farming is not new to India. Several years back, contract marketing was successfully tried in respect of "Hima peas". 'MARKFED' of Punjab also operated a scheme of contract marketing for green peas, Agrecotec proposes to setup country-wide retail network of shops for fresh fruit vegetable marketing. Direct marketing to consumer is already being done by the Mother Dairy through its outlets in Delhi. The successful integration of production and marketing under Apni mandi scheme in Punjab and the marketing managements of 'FRESH' in Hyderabad are clear signs that contract marketing is going to be increasingly resorted to in the years to come. “Pepsi Foods" also an another example of contract farming of potatoes and tomatoes. Under this farming farmers will be producing specific varieties or qualities tailored to meet the requirements of the processor or the fresh produce market.

The potential benefits of the contract marketing are:

♤ Producers can reduce the market risk,

♤ Post harvest losses can be reduced,

♤ Technology can be transferred to the producers,

♤ Contract serve as a security for increased access to credit by both producers and processors,

♤ Contract may create a greater sense of common interest among the producers and induce greater involvement in group activities etc.

Common problems may be:

♤ Volatility in market price,

♤ There is risk that the processors may manipulate the quality standards,

♤ Coordination problems may be there regarding delivery of inputs or produce,

♤ Processors may lack the competence or capacity to deliver the require technical assistance,

♤ Producers may become tied to a contract relationship by virtue of debt, specialization, or the disappearance of other markets and may be unable to adjust their production activities to changing conditions etc.

Many of these problems of contract farming will not arise where goodwill and credibility exist between the farmers and the concerned company.