Case Solution for Vegetable Procurement at Green Leaf Farms

VEGETABLE PROCUREMENT AT GREEN LEAF FARMS

CASE STUDY SOLUTION




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SYNOPSIS

Green Leaf, having been launched in 2000, grows, sells, and exports fruits and vegetables. The company
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procures most of its produce through contract farming. Contract farming with individual farmers has been
initiated after receiving orders from export customers and estimating the demand. However, the company
has faced shortages in its procurement of fruits and vegetables due to the diversion of produce to external
marketplaces by some contract farmers during the rise in open-market prices. The challenge for the
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company has been ensuring an uninterrupted supply of produce to meet the customers’ orders.
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OBJECTIVES

• Understand the situation of farmers and agriculture in emerging economies.
• Understand the model of contract farming.
• Understand the challenges that are faced in the production and procurement of fresh produce.
• Assess the role of formal contracts in contract farming in emerging economies.
• Understand the role of price and its impact on the diversion of fruits and vegetables.
• Understand the importance of building and managing relationships with suppliers.




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ASSIGNMENT QUESTIONS
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1. What is contract farming? Explain the production process that happens in contract farming.
2. What are the respective advantages of contract farming for farmers and companies?
3. Explain the situation of farmers in India.
4. What is the importance of procurement or production for Green Leaf?
5. Explain the growth of Green Leaf. Why has the company moved its production to different regions of
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India?
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6. What are the pros and cons of the different options that have been proposed?
7. What is the importance of Green Leaf building and managing relationships with farmers and the
community?
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8. If you prefer the option of linking the procurement price to the market price over the option of price
matching, should it be adopted for all the fruits and vegetables or only for a few?
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,ANALYSIS

1. What is contract farming? Explain the process of production that happens in contract farming.

Contract farming involves the outsourcing of agricultural production. Agribusiness companies involved in
food processing, the export and retailing of fruits and vegetables, and seed production procure freshly grown
fruits, vegetables, or seeds through establishing contract-farming arrangements with farmers. These
companies enter into formal or oral contracts with each farmer. In India, more than 20 state governments
have amended their Agricultural Produce Marketing acts to introduce contract farming. These acts mandate
companies to enter into formal contracts. In these states, usually, companies enter into formal contracts
with farmers whereas in other states they may continue with oral contracts.

Companies verify, screen, and select farmers for contract production before entering into the contracts. To




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, 6. What are the pros and cons of the different options that have been proposed?

Intense Monitoring and Lodging of Formal Complaints

Pros. The benefits of intense monitoring and lodging of formal complaints include:

 The quality of crops can be controlled.




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 Crop diversion can be controlled.
 The fear of lodging complaints (in areas where awareness is low) helps to reduce crop diversion.




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Cons. The downsides are as follows:

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The necessity of recruiting additional staff to conduct monitoring has a negative impact on profits.
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 The spread of farms across villages and the poor road network make monitoring infeasible.
 Controlling diversion with monitoring can lead to conflicts. It is not easy to control diversion by monitoring.
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