Buyers ink contract farming deals to hedge against global fluctuations
Jessica Lim, Straits Times 4 Sep 09;
SHAKEN by the price upheaval last year, food importers, including supermarket chains, have intensified efforts to ink contracts that guarantee a stable supply of food to Singapore at fixed prices.
Fish, live chickens and vegetables are the main staples that have come under contract farming, in which a farmer agrees to provide a set amount of produce in accordance with the delivery schedule and standards set by the buyer.
Farmers benefit because the buyers commit to the purchase of agreed amounts at agreed prices.
The Agri-Food and Veterinary Authority (AVA) estimates that, overall, Singapore buyers now have 20 contract farming agreements in place with farmers in countries such as China and Malaysia, up from five three years ago.
Now, 5 per cent of the vegetables that people eat in Singapore are grown under contract, compared with half as much three years ago.
About half of the 120,000 live chickens that come into Singapore daily from Malaysia are also bred under contract. Three years ago, none was.
Contract farming for fish is just taking off, with a local breeder now supplying a tonne daily to NTUC FairPrice.
Fewer buyers now head for wholesale markets in the wee hours of the morning, or find it necessary to liaise with more than 30 exporters to secure supplies that are subject to volatile market prices.
The farming contracts shield Singapore consumers somewhat from vagaries in agricultural prices arising from fluctuations in global supply.
There is no looking back for the FairPrice chain, which now brings in 170 products this way, up from 118 two years ago.
'Contract farming provides greater quality control, as well as price and supply stability,' said Mr Tng Ah Yiam, FairPrice's director of integrated purchasing. 'It also allows us to better manage the entire supply chain so as to ensure freshness and quality, and contributes to greater product traceability.'
Cold Storage brings in more than a dozen types of produce under contract farming, mostly vegetables such as lettuce and basil.
Giant has 15 products under contract and is working to secure others, while Sheng Siong is exploring the option.
Singapore's vulnerability as a country that imports more than 90 per cent of its food was underscored during a turbulent period early last year when global shortages sparked bidding wars. They affected the prices of many staples such as rice, soya beans, cooking oil and vegetables.
'Through contract farming, Singapore can assure supply even if there is a global shortage,' said AVA's head of horticulture, Mrs Lam-Chan Lee Tiang.
'We are particularly vulnerable. This will help us tackle the challenges that affect global food supply and demand in the future.'
To encourage contract farming, the government agency launched a fund in July that importers can tap for feasibility studies. It is also working to match farmers and importers.
'Such contracts allow us to plan ahead,' said Malaysian Ong Hock Beng, who owns Bright Floriculture, a 36ha vegetable farm in east Johor. 'I know how much to grow, and I feel safer growing more because I know there is demand.'
His contract buyer, vegetable importer Ore Yock Pin, is grateful for the yearly contracts he signs with Bright Floriculture.
'Supermarkets have shelves to fill,' said Mr Ore, who is also a grower, and the executive director of Oh Chin Huat Hydroponic Farms in Sembawang.
'If I cannot guarantee stable supply, large chains might not want to do business with me.'
