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The Ministry of Agriculture and Natural Resources is going to develop a contract farming law to allow farmers and investors to transact agricultural products via a contract agreement.
Assuming it gets 2/3 approval in parliament it should be approved just after the Ethiopian new year.
In contract farming, a specific product is cultivated after an agreement is made between a farmer and a buyer. The farmer must deliver the product in accordance to the agreed upon quality, quantity and time.
The buyer in turn must commit to purchasing the cultivated product and has to provide farming inputs including seeds, fertilizer and technical support.
A source close to the issue told Capital that contract farming will benefit the investors and the farmers.
“In Ethiopia one problem is that you don’t have guaranteed weather so a farmer will sell you a certain product at the price that you might expect, but when they there is a high demand from others they will forget you. However, when the price declines the farmers are forced to sell at a lower price. Contract farming helps solve this problem because the price is based on the consensus of both parties.”
The draft proclamation explained that the law would allow the increase of agricultural production and productivity and enhance economic development.
Agricultural produce that will be included in the contract farming proclamation or allowed to be embedded under the new law and will include commodities traded under the Ethiopian Commodity Exchange.
In the definition the proclamation states that agricultural produce means all produce, whether processed or not, of agriculture, apiculture, sericulture, horticulture, floriculture, aquaculture, animal husbandry, or forestry as well as products directly derived from this produce including milk, honey, and silk.
The draft proclamation indicates that a contractor is obliged to provide appropriate agricultural inputs and other support to the producer as agreed in the contract, while the producer is responsible for producing and delivering the product.