Online Reporter
Obert Chifamba
Agri-Insight
THE current conversation among farmers across the breadth and width of the country – at dip tanks, seedbeds or social gatherings- is undoubtedly fixated on mobilising resources for the forthcoming 2026/27 cropping season.
And despite the possible super El Nino blow the weather people have forecast, Zimbabwean farmers have always been known to prepare for every season with the same fervour and are justifiably doing so goaded by the hope that they may salvage something with the right preparations.
Those producing crops under contract arrangements are ostensibly engaging their contractors to ensure everything is in place.
It is the self-financing group that should be going through bountiful anxious moments, as to where they will get inputs and at what prices.
Inputs are usually expensive at the start of every season with retailers pushing to tap into the huge demand by farmers.
There is also this group that leaves everything until the last minute and seems to struggle every season to decide whether to go the contract or self-financing way.
Eventually, they will be forced to make hurried decisions against the run of time and by so doing, they face the risk of making costly errors that will come back to haunt them, come harvesting and pay-back time.
These sign contracts because neighbours have done so and do not take time to read and understand clauses binding them to the agreement and their implications.
This is where the problems begin. Also, this does not necessarily mean contract farming is bad but the idea that some risks are not understood until it is too late become the talking point here.
Generally, there are three areas in every agricultural contract where farmers lose the most.
The fact that most of them are not written in bold and are buried in the middle pages and presented in legal language makes them difficult for farmers to understand, let alone spend time trying to read and understand them.
It is usually such clauses that decide who owns the crop, who sets the price, and who carries the loss when the season goes bad.
The first port of call should be the price and marketing clause.
This forms the heart of the agreement, because it answers the most basic question: what will I be paid?
Yet in most cases, it is the least clear part of most contracts offered today. Instead of a fixed figure, many agreements refer to a price that will be determined later.
The language sounds reasonable. It will say the crop will be bought at prevailing market rates, less transport and administrative costs.
To a farmer under pressure, that sounds fair. The market is the market.
The trouble starts at the depot. Market price is not one number. It is a range, and the company decides which number applies.
By the time they deduct for transport from a remote area, for bagging, for a management fee, and for interest on inputs, the price has moved far from what the farmer expected.
Let us cite the example of a soya bean farmer who produces the crop expecting a price of US$480 per tonne but fails to get that exact amount because of various deductions – such a farmer can easily walk away with US$410.
On the one hand, a paprika grower can deliver a bright red crop that can unfortunately be downgraded for moisture he had no way to measure on the farm.
Worse still, there is always the exclusivity section placed next to the price clause dictating that most contracts prohibit side marketing.
The farmer cannot sell even one bag to a neighbour or to Grain Marketing Board (GMB) if the price is better. The penalty for doing so is severe. Some companies demand two or three times the value of the inputs provided.
In the recent past, a number of farmers have been dragged to court not for failing to produce, but for just selling 10 bags of maize to off-set a school fees debt with the company citing breach of contract and winning the case.
This means that before farmers sign any contracts, they need to know the figure, not an estimate and not a promise too. The number.
If the contractor cannot give a fixed price, then the farmer should insist on a floor price and a clear formula.
He also needs to request to see the grading sheet now and not in March next year.
This done, the farmer must ask what happens if the company does not come to collect the produce.
He also needs to know if he can sell elsewhere after a certain period of time. If the answer is no, then they are not in a partnership.
The farmer is in a trap.
The second area that causes pain is the input and debt clause.
This is where the contract stops being about farming and starts being about finance.
Every input provided, seed, fertiliser, chemicals and fuel, is recorded as a loan.
The contract will state that these inputs remain the property of the company until the debt is fully paid.
This, effectively, means that the contractor legally owns the farmer’s crop until he has settled the debt.
Ordinarily, such a debt can be manageable if it is clearly stated to the farmer. The inputs are seldom billed at shop price.
A bag of Compound D that costs US$38 at the depot may appear on the farmer’s statement at US$45.
Interest will then be added and so will extension plus transport fees and insurance deductions.
A farmer who received US$1 200 worth of inputs can easily owe US$1 600 by harvest.
And because the company controls what is planted and when, the farmer has little room to cut costs.
The ownership clause also becomes critical when things go wrong. If the crop is poor, the company can still claim the entire harvest to recover its debt. If the farmer tries to harvest and sell a portion to cover labour, the company can stop him.
Before signing, a farmer must ask for an itemised statement of all inputs with both cash price and contract price. He must do the math and if the effective interest rate is above what a bank would charge, then the contract is expensive credit, not support.
The performance and penalty clause also comes into play. It focuses on weather risk versus production outcome.
Agriculture has in recent times become a gamble with rain yet most contracts are written as if rain is guaranteed.
The standard contract language says the farmer will deliver a specific tonnage per hectare but is silent on what happens if the rains fail.
It does not say what happens if armyworm attacks the crop yet the obligation to deliver remains.
In legal terms, the risk of production sits entirely with the farmer, while the risk of marketing sits with the company creating some kind of imbalance between the two parties.
A debt from one bad year follows farmers into the next. Some companies are now offering insurance but farmers must ask what the insurance actually covers.
A fair contract must acknowledge that farming is not manufacturing. There must be a clause that allows for rescheduling or waiver of debt in the event of certified crop failure.
