An alliance of production, processing and consumption for agricultural products: a key element for enterprises and farmers

Agricultural products are mostly purchased by private traders

Signing the contract of agricultural product consumption is probable but not easy

In 2002, Prime Minister issued decision 80/2002/QD-TTg regulating the incentive policy of the contractual consumption for agricultural products. This enhanced the cooperation towards agricultural product consumption at certain points. The contract signing of the consumption has changed the awareness and business approach for enterprises and farmers. Enterprises are attempting to expand their manufacturing capability, actively seek their raw materials and improve their competitive ability. Producers are enabled to have access to investment and technical supports and suitable price. Hence, farmers feel secured to continue their production. However, the implementation is not simple and faces many disagreements between enterprises and farmers. For example, farmers would unilaterally break the contract with enterprises and sell products to others whom they suppose to give them immediately higher income and better benefit. There were several farmers intentionally selling their products to others to evade their paying responsibility for any advance investments in the contract. Meanwhile, many enterprises would fail to respect farmers’ benefits and contractual terms. Some may supply low-quality materials and even perform the unilateral termination of the contract and underestimate the investment into raw material zones, etc. Several enterprises make most use of their monopoly to lower the procurement price of agricultural products. They can request the products of extremely high quality to reduce the buying price, or delay the procurement during peak harvest time by plunging the quality of products, etc. and the contract termination regularly happens.

Workshop “the cooperation between enterprises and farmers in production, investment and consumption stages” held by Department of Agriculture and Rural Development in association with provincial Farmers’ Association.

The cooperation will be an indispensable solution

According to a research on a variety of goods, the common result is reflecting the fact that farmers are those who gain fewer benefits and more risks and cost than processing and procurement enterprises. Therefore, it is impossible to create the sustainable development which can neutralize the benefits between producers and enterprises to seek the equality of risk-taking and benefit share among partners. According to Mr. Vu Duy Hung (the Institute of Policies and Strategies for Agricultural and Rural Development), due to diminutive and scattered production, and each household’s low agricultural products, the demands for the cooperation among farmers and between farmers and enterprises is not considerable. In the cooperative chain among 4 factors, enterprise plays a key element to establish, sustain and develop it. However, the market is now mainly run with the model: enterprises – private traders – farmers. Although, in recent time, private traders have played important role in consuming agricultural products, this model is not appropriate in a long run. The reason is that private traders can not take care of and monitor farmers’ production process, product quality and origin. Based on the international experience, the model of enterprises – farmers’ organizations (cooperatives, associating groups and clubs, etc) – farmers, has proved to work properly. However, the fact shows that the competency of current cooperatives can not meet requirements. Meanwhile, the establishment of cooperatives and associating groups is just a few and there is no preferential treatments supporting policies for them.

Apparently, in order to strengthen the production development and elevate the value of commercial agricultural products, the cooperation is considered as a surviving factor. In a short term, it is necessary to form the horizontal cooperation among farmers in the form of cooperatives, associating groups, associations, unions and clubs, etc. developed from the original model (enterprises – farmers’ organization – farmers). This will contribute to tightening the relation between enterprises and farmers, which helps to boost up the competitiveness for agricultural products on the market and raise farmers’ income.

Reported by Ba Thong, Translated by Minh Minh