VERTICAL INTEGRATION OF CONTRACT FARMING V/S PROCUREMENT FROM TRADERS

Abstract

The rice export industry in India has traditionally relied on intermediary traders for the procurement of rice from local farmers. However, this study explores the hypothesis that vertical backward integration through contract farming can be a more profitable and sustainable option for rice export companies. The research involves a comprehensive analysis of the economic viability, quality control mechanisms, and supply chain transparency associated with both traditional trader-based procurement and the vertically integrated contract farming model. The study employs qualitative data collection methods. Financial analyses will be conducted to compare the profit margins of companies adopting vertical backward integration versus those relying on traders. Additionally, qualitative assessments will explore the quality assurance mechanisms, supply chain transparency, and long-term sustainability of each model. Preliminary findings should suggest that vertical backward integration offers export companies the advantage of direct control over the cultivation process, enabling them to enforce stringent quality standards. Furthermore, the elimination of intermediaries may result in cost efficiencies, potentially leading to higher profit margins